> For the complete documentation index, see [llms.txt](https://docs.native.org/native-dev/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.native.org/native-dev/legacy-v2/native-swap-engine.md).

# Native Swap Engine

Enabling PMM Pricing and Atomic Swaps with On-Chain Credit Management

### Onchain Executable Orderbook

Native introduces a **high-frequency, auto-sign orderbook** that seamlessly aligns with prevailing market prices, offering reliable quotes to ensure low latency and a high success rate by utilizing real-time on-chain inventory.

<figure><img src="https://2236132028-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fta4g2TwHaleDMaDKVgwR%2Fuploads%2Fj9Ecs4G6KC3rZqTxk4q4%2FOn-chain%20Executable%20Orderbook.png?alt=media&amp;token=5d47fd0f-e4a6-4c8d-9cf8-bced10d51994" alt=""><figcaption></figcaption></figure>

### **Credit-Based Swap**

#### **Example: Credit-Based Swap in User Action**

<figure><img src="https://2236132028-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fta4g2TwHaleDMaDKVgwR%2Fuploads%2FAaeNG5bkK2LHf6oZzJiZ%2FCredit-Based%20Swap%20new.png?alt=media&amp;token=f4bde008-d444-4519-bf75-4e3148e170ef" alt=""><figcaption></figcaption></figure>

{% hint style="info" %}
**Scenario**: Josh, a retail trader, wants to swap 1 ETH for USDC using a Native-powered aggregator/solver. PMM1, a trading house, has pledged **100 USDC as collateral**, securing a **$100 credit** from Native.<br>

**Step-by-Step Process**:

* (**T-1:** Josh entered a swap intent to the aggregator. The aggregator checks the latest price and depth from Native orderbook endpoint)
* **T0**: Josh submits a swap intent through the aggregator.
* **T1**: Native Swap Engine receives the intent. PMM1 offers a **quote of 3600 USDC** using the Native Credit Pool as inventory, by leveraging its **$100 credit**, even though it doesn’t hold USDC in its wallet.
* **T2**: Josh signs and approves the transaction to swap **1 WETH for 3600 USDC**.
* **T3**:
  * Native Credit Pool pays **Josh 3600 USDC** and receives **1 WETH**.
  * Native records a **long 1 WETH** and a **short 3600 USDC** position on PMM1’s credit record.
  * This entire process occurs **atomically in a single transaction**.
    {% endhint %}

#### **Post-trade: Credit Risk Management**

<figure><img src="https://2236132028-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fta4g2TwHaleDMaDKVgwR%2Fuploads%2F4fPcQJnFGXOfSd7HJWl4%2Fimage.png?alt=media&amp;token=7069ca92-977d-4277-ab70-e8f047a6e04b" alt=""><figcaption></figcaption></figure>

{% hint style="info" %}
**What if Price Moves?**

* If the price of WETH drops to **$3598**, **$2** is cut from PMM credit
* If the price of WETH stays **above $3500**, PMM1’s credit covers its position. The 100 USD collateral is used to cover the gap.
* If the price drops **below $3500**, the 100 USDC collateral **and** the 1 WETH would be **subject to liquidation**.
  {% endhint %}

{% hint style="info" %}
The above example assumes the [collateral factors](/native-dev/legacy-v2/credit-based-swap/collateral-factor.md) for all the assets are set to 100%. [Learn more](/native-dev/legacy-v2/credit-based-swap/collateral-factor.md)
{% endhint %}