P2P Matching
Matching Engine
How PayStream’s matching engine works.
PayStream’s peer-to-peer (P2P) matching engine is the core mechanism that directly matches lenders and borrowers on the platform for more optimized interest rates.
At the core of Paystream’s P2P engine is a priority-based, real-time matching system designed to pair lenders and borrowers efficiently while ensuring capital is never idle.
When a new borrower initiates a loan request, the matching engine attempts to fulfill it by pairing them with the largest available lender supplying the requested asset. This top-down approach continues, matching the borrower to the next largest lender, and so on, until the loan amount is fully satisfied or no further lender liquidity is available.
If the borrow request exceeds any single lender’s amount, the system can split the borrow across multiple lenders, in descending order of their supply size. This minimizes fragmentation, maximizes capital utilization, and ensures efficient matching with minimal leftover idle funds.
This model achieves near-100% utilization of matched funds: every P2P dollar lent is directly tied to a corresponding borrowed amount, eliminating capital inefficiencies typically seen in idle pool-based lending.
The integration with underlying lending pools is a crucial aspect of PayStream’s design. Whenever a P2P match cannot be made or only partially fills, the unmatched portion of funds goes to the underlying protocol as a fallback.
This ensures that your capital never sits idle – it’s either matched P2P at an optimized rate or earning yield via the fallback pool.
Whenever the P2P queue can’t immediately pair lenders with borrowers, PayStream automatically routes the idle liquidity into the chosen underlying protocolsuch as Drift, Kamino, MarginFi, or Save Finance so the funds keep earning the base supply APY until a matching borrower arrives.
Example:
How the Matching Engine Works
PayStream’s matching engine can be viewed as a priority queue or a pseudo-order book for matching loans. However, unlike a traditional order book, users do not place bids or asks with specific interest rates. Instead, the protocol automatically determines a fair P2P interest rate (one that lies between the pool’s supply APY and borrow APY) and matches lenders to borrowers at that rate. This means lenders and borrowers don’t negotiate rates; any available lending liquidity will be paired with borrowing demand instantly at the optimized P2P rate.Matching Algorithm
At the core of Paystream’s P2P engine is a priority-based, real-time matching system designed to pair lenders and borrowers efficiently while ensuring capital is never idle.
When a new borrower initiates a loan request, the matching engine attempts to fulfill it by pairing them with the largest available lender supplying the requested asset. This top-down approach continues, matching the borrower to the next largest lender, and so on, until the loan amount is fully satisfied or no further lender liquidity is available.
If the borrow request exceeds any single lender’s amount, the system can split the borrow across multiple lenders, in descending order of their supply size. This minimizes fragmentation, maximizes capital utilization, and ensures efficient matching with minimal leftover idle funds.
This model achieves near-100% utilization of matched funds: every P2P dollar lent is directly tied to a corresponding borrowed amount, eliminating capital inefficiencies typically seen in idle pool-based lending.
Note: a borrower cannot put a borrow order greater than the available liquidity; it is blocked at the time.
Fallback to Underlying Pools
The integration with underlying lending pools is a crucial aspect of PayStream’s design. Whenever a P2P match cannot be made or only partially fills, the unmatched portion of funds goes to the underlying protocol as a fallback.
This ensures that your capital never sits idle – it’s either matched P2P at an optimized rate or earning yield via the fallback pool.
Whenever the P2P queue can’t immediately pair lenders with borrowers, PayStream automatically routes the idle liquidity into the chosen underlying protocolsuch as Drift, Kamino, MarginFi, or Save Finance so the funds keep earning the base supply APY until a matching borrower arrives.
Example:
- Alice (Lender) joins first
- Alice deposits USDC into Paystream. Since no borrower is waiting, her funds are automatically deposited into a fallback liquidity pool (like Kamino or MarginFi) to ensure yield is earned.
- Bob (Borrower) joins later
- When Bob borrows USDC, Paystream checks for matched P2P liquidity. It sees Alice’s funds in the fallback pool, withdraws them instantly, and matches her to Bob at an optimized P2P interest rate.