Science Popularization Topic: What is ADL and why do some people love it while others hate it The market is starting to bleed again, and many people have quietly withdrawn their leverage. The 1011 tragedy is still vivid in my memory, and the survivors of that disaster may have overlooked a detail, which is that ADL actually secretly protected some people, but also 'plundered' some people. ADL is not a common thing, but when it appears, there is a high probability that something will go wrong. Let's dive in! ⬇️ Auto Deleveraging ADL is a risk emergency mechanism mainly used for futures and contract platforms to protect the overall assets of the platform in the event of extreme market conditions. The next step for ADL is forced liquidation. When the user's position fluctuates and the margin is insufficient, and the platform's insurance/treasury is not enough to cover it, ADL will intervene forcefully and automatically reduce the positions of high leverage and high profit parties to balance the losses. What the hell? Does it sound like robbing the rich to help the poor? Yes, you read it right. To be more precise, it's about taking high leverage and high profit positions. Whether one is wealthy or not depends on the specific situation. So it cannot be arbitrarily said that ADL is just killing big players and saving small players, although this is often the case in actual execution, because the behavior of those whale accounts is usually more in line with ADL standards. ADL exists in both CEX and DEX, and the ADL rules of Binance, Bybit, Hyperliquid, edgeX, and Backpack are actually very interesting. ADL is expected to be more of a value than a technology, that is, the choice or standard of "who to kill first" becomes "reasonable". / When delving into the technical details of ADL, it is necessary to first understand the basic terminology, which is something you often see but may not understand clearly, and is very useful. The mathematical model of ADL is mainly used to calculate the ranking priority of profitable positions. The model is usually based on unrealized gains and losses, leverage ratio, and nominal value, and generates a ranking index through product or ratio formulas. I have searched for some information and referred to my actual operation of @ edgeX_exchange. Taking it as an example, I will organize it: Unrealized PnL: Unrealized profit and loss=(current marked price - entry price) x position x direction (long+1, empty -1) Position Notional: nominal value=position x marked price Account Balance: Account Balance=Initial Margin+Implemented PnL Account Value: Total Account Value=Account Balance+Unrealized Profit and Loss Effective Leverage: Effective leverage=nominal value/(account balance+unrealized gains and losses) PnL% | Profit%: Profit/Loss percentage=(unrealized profit/loss/benchmark value) × 100% After ranking calculation, the system generates a queue, and high ranking positions are reduced first. The reduction amount is equal to the bankruptcy loss amount multiplied by (selected position size/total queue size), and executed at the bankruptcy price. Although edgeX has not released a detailed announcement, it can be inferred that ADL will not randomly reduce positions, but will select high-risk profitable positions based on ADL queue priority ranking. Ranking calculation considers two core factors: leverage yield, the product of leverage ratio of profit position and price deviation. Simply put, high leverage+high profit=higher priority. They are generally scored based on two indicators and executed according to the score. From this perspective, the basic calculation methods of ADL are similar, and the differences among them lie in whether they are fair and transparent. EdgeX introduces zero knowledge proofs to cover the entire process, and each step is transparent and verifiable. In the 1011 tragedy, Hyperliquid triggered the first ADL, but edgeX ran smoothly, so what should we say? Don't wait until the fire breaks out to think about buying a fire extinguisher. What should individuals pay attention to in ADL? Simple, adjust the actual leverage, preferably within 5x, and pay attention to the margin balance in a timely manner. Of course, it is best to pay attention to the clearing rules and ADL priority queue rules of different platforms. When you have a large amount of PnL and high leverage, be careful that you may have already been queued by the ADL algorithm. / Author: Anymose | A Soft Core Science Popularization Writer This article is for educational purposes only and does not constitute any investment advice. Always remember DYOR!