> ## Documentation Index
> Fetch the complete documentation index at: https://docs.decibel.trade/llms.txt
> Use this file to discover all available pages before exploring further.

# Liquidations

> How liquidations work on Decibel and what to expect

Liquidation happens when your account equity falls below your maintenance margin requirement. Decibel uses a two-stage liquidation process that's fully transparent and on-chain.

## When Liquidation Triggers

Your account becomes eligible for liquidation when:

```
Account Equity < Maintenance Margin Requirement
```

Account equity includes your total collateral plus unrealized PnL (including accrued funding). Maintenance margin is calculated based on your total position notional.

## Two-Stage Process

Decibel liquidates positions in two stages, attempting to recover as much value as possible for the trader.

### Stage 1: Market Disposition

When your account falls below maintenance margin:

1. The system generates a market order to close your positions
2. The order is bounded by a maximum slippage parameter
3. If equity is restored above maintenance margin, the process ends
4. Any remaining collateral stays in your account

Stage 1 tries to close positions through normal market orders. If the orderbook has enough liquidity to fill at reasonable prices, liquidation completes here.

### Stage 2: Backstop Liquidation

Backstop Liquidation triggers when Account Equity falls below the backstop maintenance margin (²⁄₃ of MM):

1. The entire account is transferred to the Backstop Liquidator Vault
2. All positions are marked-to-market and PnL is crystallized at current mark price
3. The Backstop absorbs any remaining deficit
4. No socialized losses to other traders

The Backstop is a protocol-owned vault that takes over underwater accounts. This ensures that even in extreme market conditions, losses aren't spread across other users.

## Auto-Deleveraging (ADL)

Beyond liquidation, Decibel has a final circuit breaker called [Auto-Deleveraging (ADL)](/for-traders/auto-deleveraging). ADL activates in extreme scenarios when the Backstop accumulates irrecoverable losses. It's rare, fully transparent, and ensures protocol solvency without socializing losses.

## Transparent Execution

Unlike some exchanges that quietly "turn off" accounts or internalize liquidations, every Decibel liquidation is:

* **On-chain.** Verifiable in the transaction history
* **Public.** Anyone can see liquidation events
* **Atomic.** Completes in a single block
* **Non-custodial.** Protocol doesn't hold your funds, just executes rules

You can monitor liquidation state through the API and receive alerts before reaching the threshold.

## Avoiding Liquidation

To stay above maintenance margin:

1. **Monitor equity.** Watch your account equity relative to MM requirement
2. **Use less leverage.** Lower leverage means more buffer before liquidation
3. **Add collateral.** Deposit more USDC to increase your margin
4. **Reduce positions.** Partially close positions to lower MM requirement
5. **Set stop losses.** Automatically close before reaching liquidation

### Warning Thresholds

Consider setting alerts at these levels:

| Threshold            | Action                         |
| -------------------- | ------------------------------ |
| Equity \< 150% of MM | Consider reducing position     |
| Equity \< 120% of MM | Strong warning, add collateral |
| Equity \< 105% of MM | Critical, liquidation imminent |

## Related

<CardGroup cols={3}>
  <Card title="Auto-Deleveraging" href="/for-traders/auto-deleveraging">
    The final circuit breaker after liquidation
  </Card>

  <Card title="Margin" href="/for-traders/margin">
    How margin requirements are calculated
  </Card>

  <Card title="Funding Rates" href="/for-traders/funding-rates">
    How funding affects your equity
  </Card>
</CardGroup>