3. Liquidation

Written by the Phezzan team

It is important to note, even LP can get liquidated. LP is essentially the counterparty of traders.

On Phezzan's LP page, you can see your "Impermanent position". That is the position the Phezzan AMM automatically opened for you, as you are being the counterparty for traders. (When a trader open a long position, if you provide liquidity in the price range that trade is in, you are likely to have a short position.)

If your impermanent position is in net a long position for any token A:

liquidation price of token A = index price - ((account value - total position value * mmRatio) / ((1 - mmRatio) * position size of tokenA))

If your impermanent position is in net a short position for any token A:

liquidation price of token A = index price - ((account value - total position value * mmRatio) / ((1 + mmRatio) * position size of tokenA))

You will notice these two formula are the same for both traders and LPs. This is because Phezzan Protocol uses cross margin model.

In the future, Phezzan Protocol might add explicit liquidation price for LP positions on our web page, as we can't expect users to make these calculations themselves.