# Loss Pool

**The loss pool is a reserve fund in the RWA Marketplace that covers the losses incurred due to defaults or delays in loan repayments.** It provides a safety net for Asset Buyers, ensuring that they are compensated for any losses.

The loss pool is essential because it protects the Asset Buyers from bearing the entire loss in case of defaults or delays in repayments. Without the loss pool, the risk of default would be higher, making it difficult for Asset Buyers to invest in the marketplace.

Currently, in the beta version of the RWA Marketplace, only Asset Originators and Polytrade contribute to the loss pool. 

Overall, the loss pool is a crucial component of the RWA Marketplace, ensuring that asset buyers are protected from losses, and the marketplace remains a safe and secure platform for real-world asset investments.

<mark style="color:purple;">**Note:**</mark> <mark style="color:purple;"></mark><mark style="color:purple;">The RWA Marketplace is planning to upgrade its loss pool to be a smart contract, which will automate the process of triggering the pool in case of a default. Currently, the loss pool is manually triggered by the Asset Originators or Polytrade.</mark>

<mark style="color:purple;">With the new smart contract, the loss pool can be automatically triggered by the NFT holder when a default occurs. This feature will reduce the response time, making the process more efficient and transparent.</mark>

<mark style="color:purple;">In addition, the marketplace plans to open the loss pool to trade holders in the future, allowing them to participate and receive a share of the profit. By opening the loss pool to trade holders, the marketplace aims to incentivize more participants to join and contribute to the pool, ensuring that the marketplace is better equipped to handle defaults and mitigate risks.</mark>


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