✨No Liquidation Fees
As discussed previously in Peer-to-Pool Perp Model (and the risks as a Liquidity Provider), liquidations are not as important as they are on order-book based DEXs.
Let's unravel the details and why we can have zero additional fees for liquidations (the usual position closing fees is taken, as if you closed manually).
On Adrena, if you get into liquidation territory, we will simply close the position for you and take the usual close position fee. That's all, no extras.
Seems weird? Well, it is actually pretty logical.
Liquidation fees, accepted by most traders, exist because they are essential to incentivize timely decentralized liquidation on ORDER-BOOK based DEXs.
Since these platforms are PvP, if liquidation do not happen when they should, someone must be paid with the missing funds, thus accruing bad debt.
For order-book based DEXs, the high liquidation fee makes sense, as it allows the platform to run smoothly and for everyone to be paid.
Now... On an asset backed Perp DEX, it is PvE. Traders borrow funds from the Liquidity Pool to leverage their trades. They pay an open and close fee in addition to a borrow fee as the position is kept open overtime. The optimal state for Liquidity Providers is to have positions open and close as much as possible and to lend all of the available liquidities.
If a liquidation does not happen timely, worse case is the loss of the fees. Though this is not desirable, it is not as detrimental compared to order-book based DEXs.
As such, we do not think it is justifiable to kick a dead body by adding a substantial liquidation fee to losing traders.
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