Skip to main content
ADL is the final circuit breaker. It’s triggered when the Backstop accumulates irrecoverable losses that threaten protocol solvency.

​
When ADL Triggers

ADL is armed per market by an adl_trigger_threshold parameter. The protocol tracks the Backstop Liquidator’s PnL drawdown from its high-water mark in that market — realized PnL since the mark, plus unrealized PnL — and ADL becomes eligible only once that drawdown is negative and its size reaches the market’s threshold. When ADL triggers:
  1. The system identifies the most profitable opposing positions
  2. These positions are force-closed at the market’s current committed mark price
  3. Total open interest in the market is reduced
ADL is rare and only occurs in extreme scenarios. If your position is closed by ADL, your profit is realized at the mark price used for the settlement.

​
How Positions Are Selected

ADL targets positions based on profitability and leverage. Positions with higher unrealized profit relative to margin used are selected first. This means highly leveraged profitable positions are more likely to be ADL’d than lower-leverage positions with similar profit.

Liquidations

The two-stage liquidation process before ADL

Margin

How margin requirements work