Liquidation Model

Liquidation Trigger

A position is liquidated when collateral equity falls below the Maintenance Margin (determined by minCollateralFactor).

minCollateralFactor	Equivalent Max Leverage
1%	100x
0.5%	200x

On MegaEth Testnet, all markets use 1% minCollateralFactor (i.e., 100x max leverage).

Liquidation Fee Structure

The liquidation fee is calculated as a percentage of your total position size (not just your collateral). This fee incentivizes keeper bots to maintain the protocol's solvency.

Liquidation Fee = Position Size × Liquidation Fee Factor

Fee Factors by Market Type

Market Type	Liquidation Fee Factor
Crypto Markets (ETH, BNB)	0.20% - 0.30%
Synthetic Markets (XAU, CSPX)	0.30% - 0.45%

The exact fee per market is configured by governance in the DataStore.

Fee Distribution

When liquidation occurs, the fee is split between:

Recipient	Share
Fee Receiver (Protocol Treasury)	37%
Liquidity Pool	63%

The pool portion helps compensate for potential losses from the liquidated position.

Example Calculations

Example 1: ETH Long Position

Position Size:  $100,000
Leverage:       10x
Collateral:     $10,000
Fee Factor:     0.30%

Liquidation Fee = $100,000 × 0.30% = $300

If liquidated, $300 is deducted from your remaining collateral, plus any unrealized losses.

Example 2: BTC Long Position

Position Size:  $500,000
Leverage:       50x
Collateral:     $10,000
Fee Factor:     0.45%

Liquidation Fee = $500,000 × 0.45% = $2,250

If liquidated, $2,250 is deducted from your remaining collateral.

Important Notes

• Fee is taken from remaining collateral: You cannot lose more than your initial margin in cross-margin mode; your entire USDC balance backs all positions.

• Fee is fixed per market: It does not change based on leverage level, though higher leverage makes the fee larger relative to your margin.

• Oracle-driven liquidation: Liquidations occur at fair market prices, protecting traders from unfair liquidation prices.