Pool-to-Peer Mechanism

Vela Trade utilizes a pool-to-peer liquidity model, ensuring seamless trade execution by matching orders directly against a shared liquidity pool. This design allows traders to enter and exit positions instantly at real-time oracle-based pricing, without the need for an order book.

There are two key participants in this system:

1. Liquidity Providers (LPs)

Liquidity Providers supply assets to the Vela Trade Liquidity Pool (VLP), which acts as the counterparty to all trades on the platform. In exchange for providing liquidity, LPs earn a share of the fees generated from trading activity, making it a passive yield-generating opportunity.

2. Traders

Traders use the protocol to long or short assets available in the liquidity pool with their chosen level of leverage. To open a position, they provide collateral, which allows them to gain price exposure to assets without directly holding them.

Trade execution is powered by real-time price feeds from Pyth oracles, ensuring that positions are opened and closed based on accurate market data. This model enables deep liquidity, fair pricing, and instant execution, making Vela Trade an efficient and scalable environment for perpetuals trading.