Collateral Efficiency and State Machines
Technical details on collateral
PACT SWAP uses transaction-specific smart contract state machines to manage collateral efficiently. Each swap is governed by a PACT, which acts as a temporary state machine that locks collateral for the duration of the trade. Once the swap is either completed or times out, the collateral is automatically released or slashed depending on the outcome — no manual arbitration or epoch-based lockups required.
This design enables just-in-time collateralization. Instead of requiring validators to stake large amounts of capital over long periods, collateral in PACT SWAP is dynamically matched to the size and lifetime of each individual transaction. This reduces capital costs, avoids unnecessary lockups, and increases capital velocity for liquidity providers and market makers.
By decoupling security from global consensus and tying it directly to per-swap collateral, PACT SWAP achieves a level of capital efficiency that validator-based systems can't match. Liquidity can flow more freely, risks are isolated per transaction, and participants are rewarded for uptime and honesty without being penalized by system-wide slashing mechanics.
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