#Collateral & Margin

This guide explains how collateral and margin work on Exolane.

#Key Concepts

#Collateral Account

Exolane uses a unified collateral account system:

┌─────────────────────────────────────────┐
│           Your Collateral Account        │
├─────────────────────────────────────────┤
│  Total Balance: $10,000                 │
│  ├── BTC Position Margin: $3,000        │
│  ├── ETH Position Margin: $2,000        │
│  └── Free Collateral: $5,000            │
└─────────────────────────────────────────┘

#Benefits:

• Deposit once, trade all markets
• Unified view of your capital
• Efficient capital utilization
• Easy margin management

#Depositing Collateral

#Steps:

1. Connect wallet
2. Click "Deposit"
3. Enter USDC amount
4. Approve USDC (first time only)
5. Confirm deposit

#What happens:

• USDC transferred from wallet to protocol
• USDC wrapped to internal EXU token
• Balance appears in collateral account
• Ready for trading

#Withdrawing Collateral

#Steps:

1. Click "Withdraw"
2. Enter amount (max: free collateral)
3. Confirm withdrawal

#Restrictions:

• Cannot withdraw margin allocated to positions
• Cannot withdraw if it would under-collateralize positions
• Must leave minimum account balance if positions are open

#Initial Margin

The minimum margin required to open a position.

Initial Margin = Position Value × Initial Margin Rate

#Example (BTC/USD):

Position: 0.1 BTC at $100,000 = $10,000 value
Initial Margin Rate: 10%
Required: $10,000 × 10% = $1,000 minimum

Your collateral of $1,000 → 10x leverage
Your collateral of $2,000 → 5x leverage

#Maintenance Margin

The minimum margin required to keep a position open.

Maintenance Margin = Position Value × Maintenance Margin Rate

#Example (BTC/USD):

Position: 0.1 BTC at $100,000 = $10,000 value
Maintenance Margin Rate: 8%
Required: $10,000 × 8% = $800 minimum

If your margin falls below $800 → Position can be liquidated

#Initial vs Maintenance:

The gap between initial and maintenance margin provides a buffer before liquidation.

#Margin Calculation

Your position's effective margin:

Effective Margin = Collateral + Unrealized PnL

#Example (Profitable Position):

Collateral: $1,000
Unrealized PnL: +$200
Effective Margin: $1,200

#Example (Losing Position):

Collateral: $1,000
Unrealized PnL: -$300
Effective Margin: $700

#Margin Health

Your margin health indicates how close you are to liquidation:

Margin Ratio = Effective Margin / Maintenance Margin

#Adding Margin

To reduce risk on an existing position:

1. Click on position → "Add Margin"
2. Enter amount to add
3. Confirm

#Effects:

• Leverage decreases
• Liquidation price moves further
• Margin health improves
• Free collateral decreases

#Example:

Before: $1,000 margin, 10x leverage, Liq @ $90,000
Add: $1,000
After: $2,000 margin, 5x leverage, Liq @ $80,000

#Removing Margin

To free up collateral from an existing position:

1. Click on position → "Remove Margin"
2. Enter amount to remove
3. Confirm

#Restrictions:

• Cannot exceed maximum leverage
• Must maintain above maintenance margin
• Cannot make position liquidatable

#Effects:

• Leverage increases
• Liquidation price moves closer
• Free collateral increases
• Higher risk

#Cross-Position Effects

Since collateral is shared:

Scenario: $10,000 total collateral

Position A: $3,000 margin, $500 PnL
Position B: $2,000 margin, -$200 PnL

Free Collateral = $10,000 - $3,000 - $2,000 + $500 - $200 = $5,300

Profits from one position can help margin other positions (within the same market's collateral).

#Automatic Collateral Reserve & Rebalancing

Exolane uses an intent-based execution model where a keeper (relayer) executes your trades on-chain. Every action — opening, closing, modifying margin, placing stop-losses — requires a small keeper fee paid from your collateral account. If your collateral account balance is too low to cover this fee, the transaction will fail.

To prevent this, the protocol automatically rebalances collateral behind the scenes so you can keep trading without interruption.

#How It Works

┌──────────────────────────────────────────────────────┐
│          Automatic Rebalancing Flow                  │
│                                                      │
│  1. You place a trade / stop-loss / take-profit      │
│  2. SDK checks: Is collateral balance < $0.30?       │
│     ├── YES → Find safest market to pull from        │
│     │         Pull up to $3.00 back to collateral    │
│     │         Prepend transfer to your trade batch   │
│     └── NO  → Proceed normally                       │
│  3. Everything executes atomically in one tx         │
└──────────────────────────────────────────────────────┘

#Key Thresholds

#Where Does the Collateral Come From?

The SDK picks the safest market to withdraw from using a two-tier priority system:

Tier 1 — Markets with no open position (preferred)

• All collateral in that market is "free" — no liquidation risk
• The market with the highest free balance is chosen

Tier 2 — Markets with an active position (fallback)

• Ranked by health ratio = free collateral ÷ maintenance margin
• Higher ratio = safer to withdraw from (pulling a small amount barely affects margin health)
• Protects your positions from being pushed toward liquidation

A market must have at least $0.60 in free collateral to be eligible (enough to cover the rebalance transfer's own keeper fee plus the next action's fee).

#What You'll See

Rebalancing is invisible in normal usage. Your trade executes as expected — the collateral pull and your order are bundled into a single atomic transaction. You may notice:

• A small decrease (~$3) in one market's margin
• Your collateral account balance topping up before a trade

This is normal and by design.

#When Rebalancing Is Triggered

#What If There's Not Enough Collateral Anywhere?

If no market has sufficient free collateral to pull from and your collateral balance is below $0.30, the SDK will reject the trade rather than submit a transaction that would fail on-chain. You'll need to deposit more USDC to continue.

#Reserve Guard

Even outside of rebalancing, the SDK enforces a $2.00 minimum reserve in your collateral account. Outgoing transfers (when depositing collateral into a market for a trade) are automatically capped so your balance never drops below $2.00. This ensures you always have enough to cover several future keeper fees without triggering a rebalance.

#Minimum Collateral

Positions below minimum collateral may be closed or blocked from trading.

#Collateral Asset

Only native Arbitrum USDC is supported — no bridged USDC.e.

#Best Practices

1. Deposit more than minimum — Buffer protects against volatility
2. Monitor margin health — Don't let it fall to danger zone
3. Keep free collateral — For emergencies or opportunities
4. Use stop-losses — Better than relying on margin alone
5. Understand leverage — Higher leverage = faster margin depletion

#Next Steps