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How Is Leverage Managed in Decentralized Perpetual Swap Protocols?

Managed by smart contract-enforced collateral, initial margin, and automated liquidation.
Greeks.Live21.11.25

How Is Leverage Managed in Decentralized Perpetual Swap Protocols?

Leverage is managed through collateral and liquidation mechanisms enforced by smart contracts. Users deposit collateral, and the protocol calculates their maximum allowed leverage based on the collateral value and the initial margin requirement.

If the collateral value drops below the maintenance margin level due to adverse price movement, the smart contract automatically liquidates the position to prevent the protocol from incurring bad debt.

What Is ‘Initial Margin’ and ‘Maintenance Margin’ in the Context of Perpetual Swaps?
What Is “Initial Margin” and “Maintenance Margin” in Perpetuals?
Define ‘Variation Margin’ and Its Relationship to ‘Initial Margin’
How Does Increasing Leverage Affect the Required Initial Margin for a Perpetual Contract Position?

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