PvPool (PvP) Trading Mechanism
Auto-Deleveraging(ADL) is a risk management mechanism in perpetual contract trading if a position is closed with negative equity.Due to the high delay and poor blockchain performance, the risk of triggering auto-deleveraging on the blockchain is greater, so designing a mechanism that will not trigger auto-deleveraging under any circumstances is necessary.
YFX's PvPool Trading Mechanism eliminates the risk of triggering auto-deleveraging.
The leverage ratios for traders and liquidity providers are different on YFX. Traders' leverage is generally ten times that of liquidity providers. Suppose a trader pays a margin of 100 USDC, opens a position with 10x leverage, and the total market value of the position is 1000 USDC. If liquidity providers borrow funds with 1x leverage and add the funds to the pool, the pool will freeze 1000 USDC as a margin to fill the trader's order.
The maximum profit limit for either traders or liquidity providers to earn is the margin committed by the counterparty. In the above example, the trader's maximum profit limit is the 1000 USDC margin committed by liquidity providers, and the liquidity providers' maximum profit limit is the 100 USDC margin committed by the trader.
This mechanism eliminates the risk of triggering auto-deleveraging by setting a maximum profit limit for both parties, even when the market is volatile, or the blockchain is experiencing high delays.