What is the difference between the liquidation price for borrow positions and the margin level in traditional margin trading? A:

• ​Borrow Liquidation:
  • The liquidation price ensures that the collateral, when sold in the pool, covers the debt ​after accounting for slippage.
  • Collateral value is calculated based on the ​average execution pricewhen liquidating the position in the pool (impacted by liquidity depth).
  • Designed to guarantee that pool liquidity can absorb the sale without protocol losses.
• ​Margin Level:
  • Margin requirements typically use the ​real-time market price (e.g., oracle price) to calculate collateral value, ​ignoring slippage.
  • Focuses on maintaining a threshold (e.g., 150%) without considering liquidity depth.

Key Difference:
Borrow liquidation prices are ​liquidity-dependent (slippage-adjusted), while margin levels of margin buy/sell rely on ​instantaneous pricing (slippage-ignored).

Borrow liquidation prices are liquidity-dependent (slippage-adjusted), while margin levels for margin buy/sell rely on instantaneous pricing (slippage-ignored). What is the purpose of this design?

The reason borrow liquidation prices are liquidity-dependent (slippage-adjusted) is to prevent arbitrage in pools with relatively shallow liquidity, where borrowing could yield more tokens compared to selling. The liquidateBurn function essentially repays the debt by performing a swap through our own pool, which is entirely dependent on the pool's liquidity.