# Native Credit Pool

**Native Credit Pool** is a unified, single-sided asset supply pool that enables market makers to borrow assets for trading, thereby enhancing liquidity in the on-chain spot market.

### Single-Sided Liquidity Provision

With a [single-sided liquidity](https://docs.native.org/native-dev/concepts/single-sided-liquidity-pools) model, liquidity providers are no longer constrained by pair-based deposits and suffer the impermanent loss. Assets are borrowed and returned exactly as deployed, along with accrued credit interest.

<figure><img src="https://2236132028-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fta4g2TwHaleDMaDKVgwR%2Fuploads%2FWv2aQsE1CqQVSQRMjjUh%2FSingle-Sided%20Liquidity%20Provision.png?alt=media&#x26;token=177dd2d2-ca50-4512-98f0-e7e57dcad4f2" alt=""><figcaption></figcaption></figure>

### Liquidity Pairing Mechanism

Native introduces a [**Liquidity Pairing**](https://docs.native.org/native-dev/concepts/liquidity-pairing) mechanism that dynamically allocates liquidity as needed to optimize capital efficiency, yield, and risk management.

<figure><img src="https://2236132028-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fta4g2TwHaleDMaDKVgwR%2Fuploads%2FC3e7y1gSz0Pkadps6K8r%2FLiquidity%20Paring%20Mechanism.png?alt=media&#x26;token=715ede4c-c9ac-4eb2-a380-c5b6e094891c" alt=""><figcaption></figcaption></figure>

### **Liquidity Tiers in Native Credit Pool**

Assets added to the **Native Credit Pool** are categorized into **three distinct tiers**:

* **Smart Pairing Liquidity**: Utilized for all trades with the higher yield and lowest risk. Provided primarily by retail liquidity providers (LPs).
* **Dedicated Pairing Liquidity**: Used specifically for trading the dedicated token. Provided by both retail LPs and asset issuers.
* **Bootstrapping Liquidity**: Acts as a buffer fund, utilized for all trades to ensure liquidity stability and credit-based trading. Provided by market makers.

### **Key Benefits**

* **Tiered Risk Management**: Liquidity is allocated across risk tiers, ensuring tailored exposure for LPs and optimal capital deployment.
* **Dynamic Liquidity Allocation**: Assets are allocated intelligently to meet trading demands, offering smart yield opportunities for liquidity providers.
* **Cost-Effective Capital Deployment**: Asset issuers benefit from efficient capital allocation and optimized incentives for liquidity provisioning.

### Related Concepts

* [Total Available Liquidity](https://docs.native.org/native-dev/concepts/total-available-liquidity)
* [Health Ratio](https://docs.native.org/native-dev/concepts/health-ratio)