When liquidating and selling an account's assets, price slippage may occur. Slippage is the difference between the actual execution price and the current market price.  Slippage varies based on the liquidity of different tokens. Tiered collateral weight is set based on the liquidity and the size of open positions of different tokens to minimize losses due to higher than expected slippages when closing positions are liquidated. Click this link to see more information.

Subtle differences between collateral value and net asset value should be noted: 

1. Not all assets can be used as collaterals: In users' margin accounts, there may be some tokens that are not eligible assets for collaterals. Therefore, these assets cannot be used as collaterals or included in collateral value calculation.

For example, if a user holds 1 BTC with a nominal value of 10,000 USDT, 1,000 XYZ with a nominal value of 1,000 USDT, and the BTC is an eligible collateral asset whereas the XYZ isn't. In this case, this user's collateral asset value is 10,000 USDT (the value of BTC only) without considering . any discounts the tiered collateral discount might apply to the value of BTC itself.

2. Not all assets of an eligible collateral currency are used as collateral. In a margin account there is a maximum cap for each currency that's allowed to serve as collaterals . The amount in excess of the maximum cap isn't included in the collateral value calculation, neither would the excess amount be liquidated and sold when a liquidation event occurs.

Assume a user holds 10,000 ETH and 1 ETH is worth 10 USDT, and the tiered collateral weights of ETH are as follows:

Then this account's collateral value is 10,000 USDT = = 10000 * 1 + （100000-10000） * 0 , instead of the nominal 100,000 USDT.

3. Collateral value does not necessarily equal the nominal value: the nominal value is equal to the product of the collateral asset quantity multiplied by the latest price, but the possible slippage at the time of liquidating positions may cause the collateral value to be adjusted based on the tiered collateral weights.

Assume a user holds 10,000 ETH and 1 ETH is worth 10 USDT, and the tiered collateral weights of ETH are as follows:

Then this account's collateral value is 50000 * 1 + （80000-50000）* 0.8 + （100000 - 80000）* 0 = 74000 , instead of the nominal 100,000 USDT.

4. Not all assets will be liquidated: Only the assets that are included in the collateral value calculation are liquidated. The assets not included in the collateral value calculation will not be sold during a liquidation.

To continue the previous example, in addition to the previous 10,000 ETH, this user has transferred to their account 10 ABC, a non-collateral asset. And assume a liquidation is triggered and 8,000 ETH need to be sold, then the remaining 2,000 ETH and 10 ABC stay unaffected as they weren't previously included in the collateral value calculation.