Liquidated? What happens next, and why you still get PAPER

What a liquidation does

Each position has its own isolated margin. When the Hyperliquid mid price crosses your liquidation price, the position is closed and that margin is lost. Nothing else in your balance is touched. At 1000x the trigger is only about 0.05% away from entry, so it can happen within seconds; the liquidation calculator shows the exact distance for any leverage.

The protocol charges a 2% fee on liquidations, but it is taken from the pool's side. Your loss is never larger than your margin.

What you get back: PAPER

The lost margin flows into the liquidity pool, and the protocol mints PAPER to your account. PAPER cannot be bought from the protocol: losing closes and liquidations are the only way it is created.

Why the amount varies

Minting follows an on-chain emissions curve: each dollar of eligible loss mints a fixed share of the current PAPER supply. While the pool is below zero, the part of a loss that refills it counts up to 5 times, with the bonus rising over the first three days below zero. Check the LP and Queue figures in the terminal to see which state the pool is in.

Put your PAPER to work

1. Open the terminal and connect your wallet. The PAPER panel shows your unstaked balance.
2. Click Stake and sign with your wallet. No gas is needed.
3. Staked PAPER earns half of trading fees and any LP surplus above $5M, in USDC. Click Claim whenever you like.

At launch PAPER cannot be transferred, so staking is how it pays. Unstaking is instant if you change your mind.

Before the next trade

• Lower the leverage. At 100x the liquidation distance is about 0.95%, almost 20 times more room than at 1000x.
• Size so that one liquidation is a small part of your balance.
• Read the risk management rules for 100x–1000x positions.