# 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.


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