In Cryptocurrency Derivatives, How Does Throughput Affect Liquidation Efficiency?
High throughput is crucial for liquidation efficiency in cryptocurrency derivatives platforms, especially those offering high leverage. When the market moves sharply, a high volume of margin calls and liquidations must be processed immediately.
Low throughput can lead to liquidation backlogs, causing the platform to fail to close positions fast enough. This can result in "socialized losses" where the exchange's insurance fund is depleted, and losses are spread across other users.
Glossar
Cryptocurrency Derivatives
Function ⎊ These financial instruments derive their valuation from an underlying cryptocurrency, enabling sophisticated risk transfer and speculation without direct asset ownership.
Liquidation Efficiency
Mechanism ⎊ Liquidation efficiency within cryptocurrency derivatives represents the speed and completeness with which leveraged positions are closed following margin calls, directly impacting systemic risk.
Throughput
Capacity ⎊ ⎊ Throughput, within cryptocurrency and derivatives markets, fundamentally represents the rate at which a system processes transactions or data, often measured in transactions per second (TPS) or orders per millisecond.