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The key difference for Sentiment from a lenders perspective, is the isolation of pool risk between lending pools. Originally in Sentiment v1, a lender of pool A was exposed to the risks of lending pool B as well as all collateral types supported within the system. While this lead to maximum efficiency for borrowers, this was insecure and led to suboptimal risk-adjusted returns for lenders.

Sentiment improves security, solvency and risk-adjusted returns for lenders by isolated lending pools to a discrete set of collateral assets and borrower actions.

While isolated pools are superior from a security standpoint, they may lead to increased fragmentation of liquidity and poorer UX for both lenders and borrowers. For this, Sentiment comes equipped with a module named Super Pools. Super Pools aggregate lending assets of the same type, and distributes them to Base Pools.

Base Pools

Base Pools serve as the fundamental lending modules within the system, managing debt, collateral types, and interest rate configurations for a lending asset. Each Base Pool operates independently, ensuring the isolation of financial activities and risk. This isolation means that multiple Base Pools can exist for the same asset, offering diverse lending options.

Creating a Base Pool is a permissionless process. Users have the autonomy to specify various parameters of the Pool, including acceptable collateral assets, interest rate models, associated oracles for asset valuation, and liquidation protocols.

Key aspects configurable in a Base Pool include:

  • The primary lending asset
  • Eligible collateral assets
  • Models for setting interest rates
  • Fees for loan origination
  • Mechanisms for managing positions
  • Caps on pool size

For users accessing the platform via the Sentiment UI, interaction with Base Pools is indirect, typically through Super Pools that efficiently distribute user liquidity across multiple Base Pools for enhanced liquidity management.

If users interact with Sentiment via the Sentiment UI, it is unlikely that they will be interacting with Base Pools themselves. Instead they will likely be depositing into a Super Pool, which distributes their liquidity among several Base Pools.

Super Pools

Super Pools, designed as ERC4626-compliant vaults, simplify the user experience by aggregating deposits to allocate across various Base Pools. This setup allows for the creation and customization of Super Pools by any user, aiming to match individual risk preferences and improve the lending experience by offering a modular and flexible approach to risk management.

Super Pools facilitate:

  • Selection and configuration of Base Pools for liquidity allocation
  • Setting caps on allocations to individual Base Pools
  • Caps on overall deposits
  • Fees for withdrawals
  • A portion of fees directed to the protocol

For users accessing the platform via the Sentiment UI, funds will be deposited into a Super Pool which allocates to many Base Pools.