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Paystream’s peer-to-peer (P2P) matching engine is the core mechanism that directly matches lenders and borrowers on the platform for more optimised interest rates. Matching Logic Workflow

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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 optimised P2P rate.

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Matching Algorithm

Matching Logic Workflow 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 fulfil 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 minimises fragmentation, maximises capital utilisation, and ensures efficient matching with minimal leftover idle funds. This model achieves near-100% utilisation 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.

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Routing idle liquidity

Fallback Workflow When there is no borrower available, Paystream’s routing system immediately springs into action, deploying idle capital to earn the best possible yield. The routing engine intelligently allocates capital across multiple yield-generating strategies:
  • LLP lending pool for leveraged positions
  • integrated protocols like Drift, Kamino, MarginFi(Project 0), and Jup lend
This routing approach ensures that every dollar of capital is continuously earning the highest possible yield, even when P2P matches aren’t immediately available. Example:
  1. Alice (Lender) joins first
    • Alice deposits USDC into Paystream. Since no borrower is waiting, her funds are automatically routed into other yield bearing pools to ensure yield is earned.
  2. 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 optimised P2P interest rate. For detailed information about the routing system, see our Router section.

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Overcollateralization and LTV

Paystream is an overcollateralized lending system, meaning borrowers must supply collateral to secure their loans. Every borrower first deposits assets as collateral, which makes them a lender on that side of the market before they borrow another asset. Collateral deposits are deposited in the underlying pool – thus even collateral can earn interest while posted. Paystream enforces the same Loan-to-Value (LTV) ratios and liquidation thresholds as the underlying protocols it integrates with, to maintain consistency and security. In practice, this means that for each supported asset, there is a maximum borrowable percentage of its value (LTV), and if a borrower’s debt exceeds a certain percentage (the liquidation threshold, slightly higher than LTV), their position can be liquidated.