Compounded Pool
Last updated
Last updated
The Compounded Pool is an integral part of the DEIN system, designed to enhance liquidity and provide additional support for DEIN's whitelisted Policybooks. It functions as an extension to contracts, fueled by a combination of DEIN Native Staking (40%) and DEIN LP Staking (10%) tokens which together establish the Compounded Liquidity.
The Compounded Pool serves as a reserve that is only liquidated as a last resort, and the likelihood of such an event is extremely low.
The Compounded Liquidity is shared by all of DEIN's whitelisted Policy Books, allocating funds on a first-come, first-serve basis. Additionally, there is a limit on how much funds each Policy Book can reserve at any given time.
The maximum Policy duration when using the Compounded Pool's funds is 5 epochs.
Think of "Compounded Liquidity" as extra Collateral. To tap into it, users have to initially buy policies for the available Collateral (reduce Capacity to 0). Once that's exhausted, and the Collateral isn't sufficient for their Policy, users can then purchase Policies using Compounded Liquidity.
The "Compounded Pool share" can be simplified as a shared allowance for all whitelisted Policy Books. It determines the percentage that Policy Books can reserve to sell policies using the Compounded Liquidity.
The Compounded Liquidity Release triggers in the following cases:
If Underwriter provides Collateral to the Policy Book X,
When a Policy against Policy Book X, which reserves Compounded Liquidity, ends.
When a Payout funded by Compound Liquidity occurs against Policy Book X.
If any of the above conditions are met, the Compounded Liquidity reserved by the Policy Book X releases, and the current Compounded Liquidity distribution is re-calculated.
Compounded Liquidity: 1,000 USDT
Compounded Pool share: 60%
Current Reserved Compounded Liquidity: 0 USDT
Therefore, each Policy Book in the DEIN system can reserve up to 60% of the Compounded Liquidity as additional funds, which equals to up to 600 USDT.
When a user decides to purchase a policy from Policy Book A using the Compounded Liquidity, a value of 600 USDT is reserved.
Suppose another user chooses to purchase a policy from Policy Book B using the Compounded Liquidity, with a value of 400 USDT.
Now, let's suppose an Underwriter provides 500 USDT to Policy Book A, which releases a portion of the reserved Compounded Liquidity that can further serve as additional Collateral.
Premium pricing is determined based on the Capacity, taking into account the risk profile of the Policy Book and the impact of the Compounded Pool.
The pricing considers the contribution of the Compounded Pool to reflect the potential riskiness of a Policy Book.
Purchasing a Policy using Compounded Liquidity can be more cost-effective, particularly for new pools or those with limited funds accumulated. This supplies potential Policy Holders with competitive premium rates.
DEIN ensures accurate and fair premium pricing that takes into account the unique characteristics of the Compounded Pool and the liquidity of the Policy Book .
