Market Structure

All CLOBs - No Pools, No AMMs

All markets on WCM are order books (CLOBs), including the lending market. There are no pools of any kind.

This distinction is important because cross-asset lending pools are subject to adverse selection and subsequently death spirals. George Akerlof won the 2001 Nobel prize for his demonstration of this effect and we don't intend to contradict the man!

Akerlof, G. A. (1970). The Market for "Lemons": Quality Uncertainty and the Market Mechanism. Quarterly Journal of Economics, 84(3), 488–500. https://www.jstor.org/stable/1879431.

An even more practically relevant paper:

Rothschild, M., & Stiglitz, J. E. (1976). Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information. Quarterly Journal of Economics, 90(4), 629–649. https://doi.org/10.2307/1885326

Seggregating risk to bilateral contracts protects all users and enables safe portfolio margin.

Looping

Looping is common in DeFi. It happens due to TVL limits on over-collateralized lending venues. Users loop to increase exposure, i.e. increase leverage, to an asset. WCM is under-collateralized, which means there is no need to loop - you can achieve the same result with 1 click and very low liquidation risk.