Margin Segregation

Margin Segregation is the practice of separating a user's collateral for different purposes or positions to ensure clarity and safety. By creating distinct buckets for collateral, a protocol can ensure that funds intended for one strategy are not inadvertently used for another.

This protects the user from unintended risks and makes it easier to audit the account's health. In decentralized finance, this is often implemented through smart contract architecture that restricts the movement of assets based on their assigned role.

It is a fundamental principle of risk management that enhances user control and transparency. While it may reduce the flexibility of cross-margin models, it provides a higher level of security for users who want to compartmentalize their risk.

This approach is essential for institutional users who require strict separation of funds. It demonstrates the ability of smart contracts to enforce complex financial rules automatically.