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What Is “Liquidation” in a DeFi Perpetual Futures Contract?

Automatic forced closure of a leveraged position by a smart contract when collateral drops below maintenance margin to maintain protocol solvency.
Greeks.Live22.11.25

What Is “Liquidation” in a DeFi Perpetual Futures Contract?

Liquidation in a DeFi perpetual futures contract is the automatic forced closure of a leveraged position by the smart contract when the collateral value drops below the required maintenance margin. This process is typically performed by liquidators who receive a fee, ensuring the protocol remains solvent.

The goal is to prevent the protocol from incurring bad debt.

What Is a Liquidation in the Context of a Leveraged Derivatives Trade?
How Does a ‘Margin Call’ Differ from an Automatic Liquidation in Leveraged Trading?
What Is the Risk of ‘Liquidation’ in Leveraged Futures Trading?
How Does Liquidation Occur in a Leveraged Perpetual Futures Position?

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