> ## Documentation Index
> Fetch the complete documentation index at: https://docs.boltliquidity.io/llms.txt
> Use this file to discover all available pages before exploring further.

# Separating Price from Pool Depth

> Why an asset's executable onchain price should not depend on how much capital sits in its local pool.

## The argument, in six moves

<Steps>
  <Step title="Onchain markets traditionally make local liquidity do two jobs">
    A pool provides inventory for execution and helps determine the price at which that inventory trades.

    In an AMM, reserve state determines the marginal price, while depth determines how quickly execution moves along the curve as trade size increases.

    That means local capital supports both execution and local price formation.
  </Step>

  <Step title="The broader market may already have discovered the price">
    For an asset trading across active markets, price discovery is already happening elsewhere.

    Yet the onchain venue is often asked to recreate that price from the capital sitting in one local pool.

    The information already exists. Local depth is being used to reproduce it.
  </Step>

  <Step title="That turns market quality into a capital problem">
    When price formation and execution capacity are tied to the same pool, improving execution usually means adding more depth.

    That depth has to be funded by treasury capital, LPs, or incentives, and the requirement repeats for every market.
  </Step>

  <Step title="Bolt separates price formation from execution capacity">
    The executable onchain price is derived from the venues driving broader market price discovery.

    Local liquidity provides the inventory available for execution and settlement.

    The price and the capacity no longer have to come from the same place.
  </Step>

  <Step title="Price and capacity can then scale differently">
    More inventory can support more execution.

    But the amount of local depth no longer determines where the market price comes from.

    **Execution capacity still depends on available inventory and quote limits. Price formation does not.**
  </Step>

  <Step title="That changes the capital model">
    For assets with reliable external price discovery, better pricing no longer requires equivalent growth in local depth.

    Capital can be deployed around the execution capacity the market actually needs, rather than also being used to recreate price discovery locally.
  </Step>
</Steps>

***

## The economic consequence

The immediate consequence is higher capital utilization.

If liquidity no longer has to be committed primarily to create local depth, the same capital can support more trading activity over the course of a day.

<Info>
  **Over 100x capital turnover** is what the separation looks like once it is running: each dollar of onchain liquidity supports over a hundred times its value in daily client volume, rather than sitting idle to create depth. [How the measure works](/capital-efficiency)
</Info>

That number matters because it changes the economics of building a market. The relevant question becomes less about how much capital must sit in a pool, and more about how much execution capacity the market actually needs.

That is a different capital-allocation problem.

***

## Where the separation matters most

The gap between price discovery and local depth is widest in markets that already have a credible price, but have not built a deep onchain market around it.

<CardGroup cols={2}>
  <Card title="Real-world assets" icon="building-columns">
    Reliable price discovery can exist before deep onchain liquidity does. That makes tokenized assets a natural fit for separating the two.
  </Card>

  <Card title="The long tail" icon="chart-line">
    Thin local markets benefit most when credible price discovery already exists somewhere broader.
  </Card>

  <Card title="New markets" icon="rocket">
    Execution capacity can grow with actual demand instead of requiring deep local liquidity from day one.
  </Card>

  <Card title="Liquid there. Thin here." icon="arrows-left-right">
    An asset can have a real market elsewhere while remaining shallow on a particular chain or venue.
  </Card>
</CardGroup>

***

<CardGroup cols={2}>
  <Card title="How Bolt Works" icon="diagram-project" href="/how-bolt-works">
    The four steps from market data to settlement.
  </Card>

  <Card title="Capital Efficiency" icon="chart-line" href="/capital-efficiency">
    What the separation is worth to whoever was funding the depth.
  </Card>
</CardGroup>