Isolated Pools
Velocity’s isolated pools allow users to trade or provide liquidity with specific risks confined to a particular pool. Each isolated pool is segregated, meaning that the risks associated with one pool do not impact other pools on Velocity.
Not to be confused with an Isolated Insurance Fund (a per-market insurance backstop). Isolated pools are segregated collateral pools.
What’s the difference between Isolated and Cross-collateral pools?
Cross collateral (default accounts for Velocity) shares a single collateral pool across multiple positions, allowing all assets in the account to back each other. This method spreads risk and increases margin efficiency but exposes the entire account to liquidation if risks are not managed. Isolated pools, however, keep collateral and risk confined to a single pool or position. Losses or liquidation in one pool do not impact the rest of the platform or the user’s other positions.
| Feature | Cross Collateral | Isolated Pools |
|---|---|---|
| Risk Sharing | Shared across all positions | Confined to a single pool |
| Account Health | Determined by total account collateral | Customized per pool |
| Liquidation Impact | All positions at risk if account health fails | Only the affected pool is liquidated |
| Margin Efficiency | High (collateral supports all positions) | Low (collateral is pool-specific) |
| Use Case | Suitable for traders/stakers managing multiple positions and want to optimise capital efficiency | Ideal for stakers/traders who are only focused on one position and containing risk to a limited set of tokens |
Example - Cross Collateral Pool
- Deposit Collateral: Deposit 1000 SOL into your account.
- Open a BTC Long Position: Use some of the SOL as collateral to open a leveraged BTC long position.
- Open a USDT Borrow Position: Simultaneously borrow USDT using the same SOL collateral.
- Risk Management:
- Both positions rely on the same SOL collateral.
- If SOL’s value drops significantly, both the BTC and USDT positions may face liquidation.
Example - Isolated Pool
- Choose an Isolated Pool: Select an isolated pool for the asset pair you want to trade.
- Deposit Collateral: Deposit collateral into the pool.
- Open a Leveraged Position: Borrow against your deposit and swap into the collateral asset to increase exposure. You can earn higher yield on your initial deposit through this leveraged position.
- Risk Management:
- If the collateral asset’s price drops, only this pool’s position is at risk of liquidation.
- Other pools or positions you hold remain unaffected. At the same time, you’ll not be able to use the token deposited in the isolated pool for other positions.
- Isolated pools can potentially offer higher LTV as the risk exposure is contained
Supported Pools
| Pool | Assets |
|---|---|
| JLP Isolated Pool | JLP, USDT |
How to deposit into an isolated pool
Navigate to isolated pool markets
Find the isolated pool markets at the bottom of the borrow/lend page
Select Deposit into the isolated pool
Enter the amount and select deposit and create account
You have now created an Isolated pool account, and can borrow and lend within the isolated pool
Reminder: Please take note of account health and risk of liquidation while exposed to isolated pools