Liquidation Process

Liquidating a portfolio

When the Maintenance Margin Rate (MMR) explained in Standard Margin of a specific portfolio surpasses 100%, signifying insolvency, the account becomes eligible for liquidation by an external liquidator.

To restore balance, all outstanding debt and unrealized loss within the portfolio account will be settled and returned to the AMM by the external liquidator in the form of $USDC. Simultaneously, the external liquidator can withdraw an equivalent amount of debt and unrealized profit in the form of whitelisted assets.

During the liquidation process, all open positions are closed, restoring the account to a stable state where the health rate is normalized. In addition, a fixed liquidation fee on the total portfolio size will be applied. The liquidation fee will be divided between an incentive for the external liquidator and the IVX protocol.

Remaining funds not involved in the liquidation process will remain in the trader's portfolio. However, if the trader's debt surpasses the trader's balance, the difference is deducted from the trader's account to ensure the solvency of the AMM.

Liquidation fee

A fixed fee on the total debt and unrealized losses is deducted from the portfolio account. This fee is divided among two entities, 65% of the fees will be shared with the external liquidator, and 35% will be shared with the Fee Splitter contract as described in the next section.

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