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Margining
This section explains how equilibrium calculates margin for user accounts when they borrow and trade on the DEX

Margining

In Equilibrium both borrower and bailsman sub-accounts may hold multiple assets and liabilities and thus are subject to collateralization requirements (margin levels). At any point in time user account's current margin is calculated the following way:
current_margin=total_collateral_value  total_debt_valuetotal_collateral_valuecurrent\_margin = \frac{total\_collateral\_value \ -\ total\_debt\_value}{total\_collateral\_value}
, expressed in %
These levels apply both to borrower and bailsman sub-accounts, and work both for money market and the DEX. When trading on the DEX, active user orders in the order book also affect margin requirements as explained in detail here.
Margin
Value%
Description
Initial margin
20%
If current margin < initial margin, users may not borrow more
Maintenance margin
10%
If current margin falls below maintenance margin, a user has 24 hours to top up their accounts' current margin to initial margin level or higher. Otherwise user will default and his portfolio will be liquidated.
Critical margin
5%
If current margin falls below critical margin level, system liquidates user's portfolio and distributes his assets and debts to the bailsman pool. There is an implicit penalty of 5% for liquidation.

Portfolios

One of the most important features that distinguishes Genshiro from traditional money markets and classical stablecoin protocols like Parallel and Acala, is the fact that instead of using single collateral positions, Genshiro allows users to work with portfolios. There are obvious benefits to such approach:
  • A well diversified portfolio of assets may reduce risks associated with user's portfolio and lead to reduction in interest fees.
  • Diversification in turn allows to significantly reduce margin requirements and allow for competitive leverage which is much higher than theoretical limit of 2x (given 150% collateralization requirements) or less with such protocols as Acala or Parallel.
  • Flexibility and the absence of the need to keep multiple "collateralised debt positions" in different assets.
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