Flash Trade Liquidity Pools aim to enhance the efficiency of resolving orders within the Flash Trade protocol, trying to solve various challenges related to liquidity placement across different networks and collateral capital inefficiency.
When aiming to become a resolver, one may encounter challenges such as:
Placing liquidity in various networks requires not only collateral but also the allocation of liquidity across diverse networks.
Storing liquidity in different assets can lead to potential losses due to price fluctuations in various tokens.
Collateral capital is often inefficiently split for different networks, with only a portion (locked for the receive network) used during swaps, leaving the rest unused.
Flash Trade Pools introduce multi-chain pools that allow borrowing over-collateralized debts. Resolvers can borrow assets in any network where liquidity providers have deposited to the pool. Resolvers must pay a small fee for using pools, thus motivating Liquidity Providers to hold their liquidity there and earn extra income.
Flash Trade Pools enable more efficient use of collateral capital. With it, the collateral can be used not only to insure a user’s funds during a swap but also to borrow funds from the pool to pay the user in the destination network. In the receive network, one part of the collateral is taken from the user, while in the send network, liquidity is borrowed from the pool in debt for the previously unused collateral.
Initially, it is planned to support only stablecoins. The support for stablecoins enhances security, minimizing price fluctuations and reducing losses during possible liquidation.
Flash Trade Pools serve as a powerful tool for effective liquidity management, and despite incurring higher gas costs, it eliminates the need to store a significant amount of liquidity in different networks. Resolvers can access liquidity from pools when required.
Overall, with multi-chain support and a focus on stablecoins, these pools serve as a critical component in the Flash Trade ecosystem for optimized liquidity management and efficient collateral usage, ensuring a high level of security for both liquidity providers and resolvers.