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When your margin ratio falls below the maintenance margin ratio, your position gets liquidated. Here’s the mechanics.

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When Liquidation Happens

Condition: Margin Ratio < Maintenance Margin Ratio Your margin ratio = Total Collateral / Total Position Notional. If it drops below the required maintenance level, the system liquidates you to protect the protocol and other users.
Leverage magnifies risk. A small adverse move can trigger liquidation. Monitor your liquidation price and use stop-losses.

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How It Works

Perpetra uses decentralized liquidations. Unlike CEXes that market-sell into the book (causing cascades), positions are transferred to liquidators at a discount.
  1. Your position becomes undercollateralized
  2. Liquidators can claim your position at a discount
  3. You lose remaining margin; liquidators earn a fee
  4. Your position is closed
Anyone with an account can act as a liquidator—no whitelist. The protocol is permissionless.

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Liquidation Tiers

Low tier (BTC, ETH): Liquidators take a ratio across multiple symbols. Can’t claim just one. High tier (others): Liquidators can claim a single symbol. Useful for targeted liquidations on alt positions.

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Fees

MarketUser PaysLiquidator Gets
BTC, ETH, SOL0.60%0.30%
Others1.20%0.60%
The fee is taken from your remaining margin. If margin can’t cover the fee, the Insurance Fund steps in.

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Insurance Fund & ADL

If liquidators don’t take positions (e.g. extreme volatility), the Insurance Fund absorbs them. The fund is funded by liquidation fees and protocol reserves. $PETRA holders can also stake into the Insurance Fund Pool to earn a share of liquidation fees—see Insurance Fund Staking for details. In rare cases, Auto-Deleveraging (ADL) may run: profitable positions are offset against Insurance Fund positions to restore solvency. ADL is a last resort.

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Avoiding Liquidation

  1. Monitor liquidation price — It’s shown in the UI. Know it before you open.
  2. Use stop-losses — Automate exits before you hit liquidation.
  3. Lower leverage — Less leverage = more buffer.
  4. Add margin — Deposit more USDC to improve your ratio.
  5. Reduce size — Close or reduce positions to lower notional.
Mark price (not last price) triggers liquidations. That reduces manipulation from wicks—flash crashes are less likely to liquidate you unfairly.