🚀VirtuSwap Technology

Introduction to Reserve-based Trading via Virtual Pools

Reserve-Powered Pools are the key innovation of VirtuSwap, eliminating inefficiencies currently present in all DEX trades in which direct pair between two tokens does not exist or is not deep enough.

To demonstrate how virtual pools work, enabling more efficient trades, let's assume that a user would like to swap USDC for MATIC, but there is no MATIC-USDC pool in the system.

We also assume that WETH-MATIC and WETH-USDC pools do exist, thus the desired swap can be performed through a triangular trade, as illustrated in Figure 1.

Figure 1: Illustration of a triangular trade

A crucial difference between VirtuSwap and all other DEXes is that on VirtuSwap, in addition to two native assets, every pool allows accepting reserves of other assets. Think of several safe deposit boxes attached to the pool — each allowed to hold one particular asset — but which are empty at first, when the pool is established. For example, the WETH-MATIC pool can accept reserves of USDC, USDT, DAI, and WBTC, and WETH-USDC pool can accept reserves of USDT, DAI, WBTC, and MATIC. (These lists are just for the sake of an example; in reality pools can accept and hold reserves of many more assets.) Figure 1 describes the virtual-pool-based architecture.

Figure 2: VirtuSwap pool architecture

So now, when our trader wants to swap USDC for MATIC, she goes to the WETH-MATIC pool (i.e. the pool that contains the asset she wishes to acquire) and just deposits her USDC as a reserve (i.e. to the appropriate safe deposit box) of the WETH-MATIC pool, as in the following picture:

Reserves are kept in the pools for a limited amount of time, exchanged back for the pool’s native assets from other pools’ reserves.