Understanding Mark Price
Mark price is a critical concept in perpetual futures trading. Rather than using the last traded price (which can be manipulated through large orders), mark price is calculated using external data sources and formulas designed to reflect the true fair value of the contract.
The mark price serves two primary purposes: 1. Calculating unrealized profit and loss (PnL) 2. Triggering liquidations when positions become undercollateralized
Most perpetual DEXes calculate mark price using a combination of the spot price from oracle feeds and the funding basis. This prevents "hunting" attacks where malicious actors briefly manipulate the exchange price to trigger liquidations.
For RWA perpetuals, mark price typically relies heavily on oracle data from traditional market feeds. The quality and reliability of these oracles is crucial—if the mark price deviates significantly from reality, it can lead to unfair liquidations or arbitrage opportunities.
Traders should understand the difference between mark price and the last traded price, as their positions are valued at mark price for margin and liquidation purposes.