Adaptive Pooling Model
MoneySwitch's adaptive pooling model monitors, updates, and manages the status of each participant, ensuring correct and efficient liquidity management.
Adaptive Pooling refers to MoneySwitch's liquidity framework—a transactional-based system built upon smart contracts and operating within a distributed ledger environment. It actively monitors and updates the system's state, while meticulously retaining and calculating the status of each participant involved.
Adaptive Pooling incorporates a single liquidity pool, which we refer to as the MasterPool. This provides a single source of deep liquidity for borrowers, whilst offering maximum credit risk diversification for depositors.
Instead of interacting directly with the MasterPool, depositors interact with FeederPools, which act as intermediaries. The MasterPool treats FeederPools as individual depositors, eliminating the need to directly engage with actual depositors. Similarly, each FeederPool focuses solely on the depositors who have interacted and deposited funds with them.
From the borrower's perspective, once authorized to use the liquidity pool, as long as there is enough liquidity, they can access the required funds. This approach reduces uncertainty regarding timing and completion of the borrowing process.
From a lender's perspective, as FeederPools can have different behaviour and customisations, we can adapt FeederPools to better meet the needs and preferences of our depositors. As there are is no limit on how many FeederPools can connect to a MasterPool, the approach is designed to be highly scalable.
Learn more about advantages vs. alternative paradigms.
Liquidity Flow for Adaptive Pooling Model