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Margin Trading on ADAFi Swap
ADAFi Swap provides a safe and transparent environment for people to perform margin trading, and down the track, futures trading. Margin Trading will only be available for assets that support a decentralized price feed, as liquidations are triggered through a decentralized price feed via oracles. This makes it the first truly decentralized liquidation process in the industry.
To keep leveraged positions open, traders will be required to hold a certain percentage of the value of the position as collateral (105%). If this is not fulfilled, the position will be liquidated. With Cross Margin - any deposits, withdrawals, and trades can impact your collateralization level and thus your liquidation level.
Margin requests are filled by liquidity providers (lenders) on ADA Finance. People can manually select to borrow orders on ADA Finance at the DeFi section (lending) or on ADAFi Swap directly at the best possible lending rates. By taking the margin through ADAFi Swap, there is a possibility that the duration of the lending contracts are mixed. The margin trading fee will be 0.4% which get distributed as follows:
  • 0.3% liquidity providers ADAFi Swap
  • 0.1% ADA Finance development fund
The debt (D) is being calculated with the open loan amount and by time duration with the lending ratio. Once a lending contract starts, it automatically calculates for the first 30min (1800s).
D= [(loan x ratio) / 86400] x t + borrowed amount
Liquidations happen by the platform when there the risk / threat hits 95%
R = D / AV
Liq price = (current asset price x R) / 0.95

Liquidation process

Liquidation events are only triggered by the Decentralized Price feed from the Oracle and involves automatically using collateral in the position to buy back the borrowed asset to repay principal + interest. The remaining amount is returned to the trader, minus a 10% liquidation fee which gets distributed as follows:
Figure 8: Liquidation fee distribution
Last modified 1mo ago
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