When you interact with Dolomite, for example, by depositing funds or opening a trade, the module layer combines your actions into a single operation. This operation is then executed by the core layer, which maintains the system’s security while still allowing it to improve over time.
Virtual liquidity system
Dolomite introduces a virtual liquidity system that pools all user deposits into a single Dolomite Balance. This balance works as a unified account that you can apply across the different services offered by the protocol.
Instead of transferring tokens on-chain each time you take an action, Dolomite records the changes internally. This design enables one token to serve multiple purposes simultaneously. You can earn lending interest on it, use it as collateral for borrowing, and also collect swap fees without needing to move it out of the system.
Behind the scenes, a smart contract updates its internal ledger to reflect these activities. By avoiding frequent on-chain transfers, the protocol reduces transaction costs and makes your capital more efficient. This approach also gives you greater flexibility and helps prevent liquidity from being locked during times of market stress, making it easier for you to manage your positions.
Key Features
Earn
The protocol provides multiple earning opportunities, including interest from lending, fees from liquidity provision, and potential returns from leveraged trading. Because of the virtual liquidity system, a single asset can work in several ways at once, allowing you to collect multiple types of yield at the same time.
Borrow
When you borrow on Dolomite, each position is isolated and managed separately. Your deposits are not automatically used as collateral, and you choose which assets to assign to a borrow position. This gives you more control over your risk, since a liquidation only affects the position involved while your other loans remain untouched.
Leave a Reply