# Fundamentals

## Autonomous Index Funds

Private Pools Network provides full functionalities of an Index Fund on-chain. Users can create Index Funds with any crypto asset. Portfolios can be configured with a variety of assets at different weight scales. Our index funds are designed to operate autonomously, using algorithmic logic to constantly rebalance portfolios to configured weights, amplified by the process of Arbitrage. The resulting profits are distributed as yield to users of the Private Pools Network. 

## Real Yield Generation

In the process of portfolio rebalancing, our system executes arbitrage trades across DeFi and CEX liquidity sources. Through this process, our system maintains preset weights for the assets allocated into the index funds and generates returns, maximizing unitary asset values. These profits are then distributed to the liquidity providers & PPN token users.

## Flywheels and Positive Feedback Loops 

Our echosystem is designed to offer self propelling positive feedback loops baked into our ecosystem, by virtue of the $PPN token playing a pivotal role in driving momentum within our network. \
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As outlined in the [Fees & Yield Distribution](/ecosystem/fees-and-yield-distribution.md) section of this document, 10% of all index yield is used to build momentum within our ecosystem, perpetually enhancing performance as the network generates yield. 

### How it works 

#### Trading engine capital 

The[ Trading Engine ](/ecosystem/architecture/trading-engine.md)is the heart of our [private order flow](broken://pages/X3tqsKLlaUA5F4eIqiDV#private-order-flow) model. The more capital it accumulates, the more opportunities it can arbitrage, which in turn generates more yield that is fed back into the trading engines capital reserves. This, in short, depicts the self propelling nature of the network and its ability to extract yield from volatility. 

<figure><img src="/files/soycEZ5hfOm7cmvg1RV8" alt=""><figcaption></figcaption></figure>


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