Skip to main content

Liquidation

Overview​

Liquidation in the Chromatic Protocol is triggered by keepers at each oracle version's price update. It occurs when the unrealized Profit and Loss (PnL) of a position is calculated, and either the taker margin cannot cover the position's loss or the maker margin cannot cover the position's profit.

Liquidation Process​

The liquidation process involves the following steps:

  1. Unrealized PnL Calculation: At each oracle version update, the unrealized PnL of positions is calculated. This calculation compares the entry price of the position with the current price feed.

  2. Check for Margin Coverage: If the taker margin is insufficient to cover the position's loss or the maker margin is insufficient to cover the position's profit, liquidation is triggered.

  3. Exit Price Determination: The exit price for the liquidation is set as the oracle price at the current version.

  4. Claim Position: The liquidation process follows the same steps as the claimPosition function, where the user can claim the tokens associated with the closed position.

  5. Keeper Fee: In case the position results in a profit, the keeper fee is paid from the maker margin. Conversely, if the position incurs a loss, the keeper fee is paid from the taker margin.