To keep leveraged positions open, traders will be required to hold a certain percentage of the value of the position as collateral (115%). If this is not fulfilled, the position will be liquidated.
What happens if I get liquidated?
Liquidation involves automatically using collateral in the position to buy back the borrowed asset to repay principal + interest. Whatever is left over after this will be returned back to the trader, minus a liquidation fee of 5%.
For example, if you have $112-worth of collateral assets and $100-worth of borrowed assets, then your account is not collateralized by at least 115%. Then any other account can repay your $100-worth of borrowed assets in exchange for $105-worth of your collateral. This would leave your account or position with $7-worth of assets remaining.
Can I participate in liquidations?
Yes, anyone can liquidate a risky account or position. The easiest way to get started is to check out our open-source liquidation bot at github.com/dydxprotocol/liquidator.
In the case of multiple people attempting to liquidate the same account in-full, it is first-come, first-served.