Liquidation
Futures are a leveraged instrument, increasing both potential profit and losses. With vAMM you virtually borrow additional funds to increase you position size. Leveraged trading is a highly risky activity, with the possibility of being liquidated.
For example, if you open x3 leveraged position with 200 USDN, you initial position is worth 600 USDN, and 400 of them is borrowed. The collateral of 200 USDN will be fully utilized if you total position worth decrease by about 30%.
Liquidation is a mechanism used to close positions that are underwater (unable to maintain minimum margin requirements). A sharp move in price could put the exchange at risk, as the losses could exceed the margin. Therefore, the exchange imposes a minimum margin ratio requirement to help in liquidation during adverse market conditions.
A maintenance margin ratio of 8.5% is used by Tsunami to trigger liquidation. If the margin ratio goes below 8.5%, the position size will be liquidated, leaving the collateral in vAMM as profit for opposite side traders.
Liquidations are performed by a liquidator bots. Initially, Tsunami team will run liquidation bot, later they will be open sourced and become accessible for community to run a bot.