How Is Margin Managed in a Smart Contract-Based Derivatives Platform?

Margin is managed by the smart contract itself, which holds the collateral (usually cryptocurrency) in escrow. When a trader opens a position, the required initial margin is locked in the contract.

The contract constantly monitors the position's margin ratio against the maintenance margin requirement using real-time oracle price feeds. If the margin ratio falls below the maintenance level, the contract automatically triggers a liquidation process, selling the collateral to cover the loss.