# Liquidations and ADL

## What is Liquidation

Liquidation occurs when a trader’s position no longer has sufficient collateral to support its exposure.

This happens when the trader’s equity falls below the required maintenance threshold, putting the system and liquidity providers at risk.

### How Liquidation Works

* Each position has a liquidation price determined by:
  * collateral
  * leverage
  * fees and funding
* When this threshold is reached:
  * The position is force-closed
  * Remaining collateral is used to cover losses
* Liquidations are executed by keepers using oracle-based pricing

### Early Liquidation (Prevention Layer)

To reduce the risk of bad debt, GSOL may trigger early liquidation before a position becomes fully insolvent.

* Activated when equity approaches critical levels
* Closes positions earlier than the absolute liquidation point
* Ensures sufficient collateral remains to cover losses

This mechanism prioritizes system safety over maximum trader exposure

### Auto-Deleveraging (ADL)

In extreme market conditions, GSOL may activate Auto-Deleveraging (ADL) as a secondary protection layer.

* Triggered when:
  * trader profits become disproportionately large relative to vault liquidity
  * or system risk exceeds predefined thresholds
* The system will:
  * reduce or partially close profitable positions
  * rebalance exposure to protect the liquidity pool

ADL acts as a last-resort safeguard to maintain protocol solvency

### Liquidation Fees

When a position is liquidated:

* A liquidation fee is charged
* Used to:
  * incentivize keepers
  * support protocol stability