> ## Documentation Index
> Fetch the complete documentation index at: https://docs.limora.finance/llms.txt
> Use this file to discover all available pages before exploring further.
# Protocol Overview
> Technical overview of the Limora protocol architecture
Limora is a decentralized leveraged trading protocol built on Base. This document provides a technical overview of how the protocol works.
***
## Architecture
The Limora protocol consists of several interconnected components:
```mermaid theme={null}
graph TB
subgraph "User Layer"
T[Traders]
M[Matchers]
end
subgraph "Application Layer"
UI[Web Interface]
API[API Services]
end
subgraph "Protocol Layer"
TC[Trading Contract]
MC[Matching Contract]
VC[Vault Contract]
end
subgraph "Infrastructure"
O[Oracle]
BC[Base Chain]
end
T --> UI
M --> UI
UI --> API
API --> TC
API --> MC
TC --> VC
MC --> VC
TC --> O
VC --> BC
```
***
## Core Components
### Trading Contract
The Trading Contract handles all trade-related operations:
* Opening new positions (long/short)
* Closing existing positions
* Liquidating undercollateralized positions
* Processing stop-loss and take-profit orders
### Matching Contract
The Matching Contract manages liquidity provision:
* Depositing collateral from matchers
* Matching pending trades with available liquidity
* Tracking matched positions and interest accrual
* Processing withdrawal requests
### Vault Contract
The Vault Contract serves as the secure storage layer:
* Holds all deposited collateral
* Manages fund transfers between traders and matchers
* Enforces access controls and security policies
***
## Trade Lifecycle
A typical trade follows this lifecycle:
Trader submits a trade request with: - Trading pair - Direction (long/short)
* Collateral amount - Leverage - Optional stop-loss/take-profit
Trade enters pending state, waiting for a matcher to provide liquidity.
A matcher deposits funds to match the trade, locking both parties'
collateral.
Position is now active: - P\&L calculated against oracle price - Interest
accrues to the matcher - Stop-loss/take-profit monitored
Position closes via: - Manual close by trader - Stop-loss/take-profit
trigger - Liquidation if margin insufficient
Final settlement: - P\&L calculated at closing price - Funds distributed to
both parties - Interest paid to matcher
***
## Position Mechanics
### Long Positions
When a trader opens a long position:
* Trader profits if the asset price increases
* Matcher profits if the asset price decreases
* Liquidation occurs if price drops below the liquidation threshold
**Example:**
```
Collateral: 100 USDC
Leverage: 10x
Position Size: 1,000 USDC
Entry Price: $50,000 BTC
If BTC rises to $55,000 (+10%):
Profit = 1,000 USDC × 10% = 100 USDC (100% return on collateral)
If BTC falls to $45,000 (-10%):
Loss = 1,000 USDC × 10% = 100 USDC (100% loss, near liquidation)
```
### Short Positions
When a trader opens a short position:
* Trader profits if the asset price decreases
* Matcher profits if the asset price increases
* Liquidation occurs if price rises above the liquidation threshold
***
## Collateral and Margin
### Initial Margin
Initial margin is the collateral required to open a position:
```
Initial Margin = Position Size / Leverage
```
### Maintenance Margin
Positions must maintain a minimum margin level to avoid liquidation:
```
Maintenance Margin = Position Size × Maintenance Margin Rate
```
### Liquidation
When a position's margin falls below the maintenance margin:
1. Position is flagged for liquidation
2. Liquidation bot executes the close
3. Remaining collateral distributed:
* Liquidation penalty to protocol
* Remaining to appropriate party
***
## Interest Model
Interest accrues continuously on open positions:
```
Hourly Interest = Position Size × Hourly Interest Rate
```
The interest rate is determined by:
* Utilization rate of the matching pool
* Market conditions
* Protocol parameters
Interest is paid from the trader to the matcher for the duration of the position.
***
## Security Model
### Smart Contract Security
* All contracts are audited by reputable security firms
* Upgradability follows strict governance procedures
* Emergency pause functionality for critical situations
### Oracle Security
* Multi-source price aggregation
* Deviation checks against historical data
* Staleness protection to reject outdated prices
### Access Control
* Role-based permissions for administrative functions
* Time-locks on critical parameter changes
* Multi-sig requirements for sensitive operations
***
## Protocol Parameters
Key configurable parameters:
| Parameter | Description | Default |
| --------------------- | ----------------------------------- | ------- |
| Max Leverage | Maximum allowed leverage | 50x |
| Liquidation Threshold | Margin level triggering liquidation | 80% |
| Opening Fee | Fee charged on position opening | 0.1% |
| Closing Fee | Fee charged on position closing | 0.1% |
| Base Interest Rate | Minimum hourly interest rate | 0.001% |
***
## Network Details
Limora is deployed on the Base network:
| Property | Value |
| ------------ | ------------ |
| Network | Base Mainnet |
| Chain ID | 8453 |
| Native Token | ETH |
| Block Time | \~2 seconds |
***
## Further Reading
Learn about transaction memo format.
Understand the price oracle mechanism.
Find deployed contract addresses.
Explore the API documentation.