Catalyst · Pools
Pool architecture
Every Catalyst startup has two Uniswap v4 pools deployed for it. They serve completely different purposes. Understanding the split is the key to understanding how the protocol protects investor principal while still creating token upside.
Pool 1 — the funding pool (USDx / USDy)
Pool 1 pairs two stablecoins. Investors deposit liquidity here and it is where their principal lives throughout the entire cycle. Because both sides of the pool are stablecoins, there is effectively zero impermanent loss — the pool rebalances within a tight band and withdrawals always return approximately what was deposited.
Pool 1 is attached to the CatalystHook contract. Every swap through this pool triggers the hook's afterSwap handler, which implements the 70/30 fee split:
- •70% of the fee is credited to the founder's operational balance
- •30% of the fee is queued for auto-buyback of TOKEN from Pool 2
- •LPs earn zeroswap fees — their return comes from the token allocation, not the fee share
✅Why stablecoin pairing matters
If Pool 1 paired a stablecoin with the startup's TOKEN instead, an investor's principal would rebalance with TOKEN price. A token crash would wipe out half the LP value. By using two stablecoins, Catalyst cleanly separates principal preservation (Pool 1) from token price discovery (Pool 2). You cannot lose your stables by being in Pool 1.
Pool 2 — the price discovery pool (USDx / TOKEN)
Pool 2 is the standard Uniswap v4 price discovery pool for the startup's token. It is created at the moment Pool 1 reaches its funding target and is seeded with 25% of the token supply + a portion of the initial stablecoin from Pool 1. From that moment on, anyone can trade USDx for TOKEN and vice versa.
Unlike Pool 1, Pool 2 is a standard Uniswap v4 pool: no custom hooks, no fee splitting, LPs earn normal swap fees. Its price is the canonical on-chain price of the startup's token and is what the PerformanceEvaluator reads at deadline to judge success.
Side by side
| Property | Pool 1 | Pool 2 |
|---|---|---|
| Pair | USDx / USDy | USDx / TOKEN |
| Purpose | Funding + investor principal | Token price discovery |
| Impermanent loss | ~Zero (both stables) | Normal (TOKEN volatility) |
| Hook attached | CatalystHook (fee split) | None (vanilla v4 pool) |
| LP fees | 0% (flow to founder/buyback) | Standard Uniswap v4 fees |
| Created at | Startup registration | Funding target reached |
| Who provides liquidity | Investors | Protocol seeds with 25% token supply |
| Read by evaluator | Investor positions (for token claims) | Final token price (for success check) |
How they interact
The two pools are coupled through the hook's auto-buyback logic. On every Pool 1 swap:
1.User swaps USDy → USDx on Pool 1 (or vice versa). Standard v4 swap.
2. Hook's afterSwap runs. Computes fee, splits 70/30.
3. 70% credited to founder balance. Founder can withdraw later via withdrawOperationalFees().
4.30% (in USDx) used immediately to swap USDx → TOKEN on Pool 2.
5. Received TOKEN goes to the buyback reserve, pushing TOKEN price up on Pool 2.
6. At cycle resolution, buyback reserve is burned (if Completed) or redistributed (if Failed).
ℹ️Why two pools instead of one
A single USDx/TOKEN pool would mix investor principal with token volatility — an investor would lose money just from holding the LP through a price drop, regardless of what the founder actually did. By isolating principal in a stables-only pool and putting token volatility in a separate pool, Catalyst makes the risk/reward split clean: stable pool = principal protection, token pool = upside exposure.