Liquidation
Each position has a fixed liquidation price set at open; reaching it forfeits the entire margin.
Liquidation price#
The liquidation price is fixed when a position opens and does not change afterwards. It sits slightly inside the price at which the margin would be fully lost:
- Long: base = entry − entry ÷ leverage, then moved toward the entry price by a buffer
- Short: base = entry + entry ÷ leverage, then moved toward the entry price by the same buffer
- Buffer: approximately 4.76 bp of the base price for BTC and 4.81 bp for ETH
long : liq = (entry − entry ÷ leverage) × (1 + buffer)
short : liq = (entry + entry ÷ leverage) × (1 − buffer)
buffer: BTC 0.000476041580087574 · ETH 0.000481304050180130
← Scroll sideways for long formulas
Trigger and outcome#
When the signed index price reaches or crosses the liquidation price, the position can be liquidated and the entire margin is forfeited. A close that executes at or beyond the liquidation price is also settled as a liquidation.
Liquidation is a public function: any address can call it with a valid signed price. The protocol operates its own liquidator. There is no liquidation bounty.
Fees and SPAPER#
While the payout queue is empty, a 2% LP-side fee is taken from the forfeited margin. The liquidation mints SPAPER on the margin net of that fee. Positions funded from queued balance are liquidated without a fee.
Price gaps#
If signed prices stop, for example during a Binance outage, no position is liquidated during the gap. Positions that crossed their liquidation price are liquidated at the first fresh price, and any shortfall is borne by the LP.
Example: a 100× long is liquidated#
Alice opens a 100× BTC long with 100 USDT margin at 80,000; the price later falls to her liquidation price while the payout queue is empty.
| Item | Value |
|---|---|
| Base price | 79,200 |
| Liquidation price | ≈ 79,237.70 |
| Margin forfeited | 100 USDT |
| LP-side fee (2%) | 2 USDT |
| Net to the LP | 98 USDT |
| SPAPER minted to Alice (98 × 100) | 9,800 SPAPER |
base = 80,000 − 80,000 ÷ 100 = 79,200
liq = 79,200 × (1 + 0.000476041580087574) ≈ 79,237.70
fee = 100 × 2% = 2
LP = 100 − 2 = 98
mint = 98 × 100 SPAPER per USDT = 9,800 SPAPER (net LP below 2,000,000 USDT)
← Scroll sideways for long formulas
A decline of about 0.95% from entry liquidates the position; Alice loses the full 100 USDT and receives 9,800 SPAPER.