Liquidation

Liquidation automatically closes a position when it reaches the protocol’s risk threshold. The mechanism protects shared Vault liquidity from positions approaching insolvency.

When Liquidation Happens

• Long positions can liquidate when the oracle price moves to or below the liquidation threshold.
• Short positions can liquidate when the oracle price moves to or above the liquidation threshold.

What Changes the Threshold

Liquidation risk is determined by collateral, leverage and the current protocol risk configuration. Adding collateral usually moves the liquidation threshold farther away; removing collateral moves it closer.

Liquidation Flow

1. Atlas detects that the price condition is met.
2. The action enters the market execution path.
3. The validator checks price, accumulated borrow fee and liquidation conditions.
4. The position moves to pending payout.
5. Vault settlement finalizes accounting and any positive remaining payout.

After Liquidation

Borrow fees settle to the Vault and reserved liquidity is released. If positive equity remains after price PnL and borrow fee, settlement can return it to the position owner. Liquidation closes the entire position.