Protocol Architecture
Manager Registry
The Manager Registry maintains an allowlist of entities authorized to originate assets and create funds on the protocol. Each manager must:
- Pass governance vetting for reputation and compliance
- Maintain performance metrics (default rate, originated volume, fund count)
- Operate within vertical capacity limits (max 100 managers per vertical)
Economic alignment is achieved through the Senior/Junior tranche system in the FundRegistry, where junior tranche proceeds are locked until senior investors are fully paid—providing skin-in-the-game without direct staking.
Manager Lifecycle
Fund Registry
The Fund Registry is the core component managing investment funds with a Senior/Junior tranche structure. This dual-tranche design provides:
- Risk segregation - Different risk/reward profiles for different investor appetites
- Economic alignment - Junior tranche absorbs losses first, creating manager accountability
- Capital protection - Senior investors receive priority on returns
Fund Lifecycle
Fund Creation Parameters
- Target size (e.g., $1,000,000)
- Senior/Junior ratio (10-95% senior, configurable)
- Senior fixed yield (e.g., 800 bps = 8%)
- Management fee (max 5% annually)
- Fundraising deadline
- Expected maturity date
Yield Distribution Waterfall
Asset Registry
The Asset Registry tracks all tokenized assets throughout their lifecycle:
Each asset record includes:
- Immutable metadata hash (IPFS/Arweave)
- Mutable state information
- Jurisdiction designation
- Risk bucket assignment
- Performance history
Risk Oracle
The Risk Oracle bridges off-chain risk analysis with on-chain execution through M-of-N threshold signatures:
| Bucket | Description | LTV | Haircut | Liquidation Bonus |
|---|---|---|---|---|
| AAA | Investment grade | 80% | 5% | 5% |
| AA | High quality | 70% | 10% | 7% |
| A | Standard grade | 60% | 15% | 10% |
| RISKY | Speculative | 40% | 25% | 15% |
Rating Process
AMM Pool Design
LiquitX employs a Balancer-style weighted pool adapted for RWAs:
Pool Invariant
∏ (Bᵢ ^ Wᵢ) = kWhere: Bᵢ = balance of asset i, Wᵢ = weight of asset i (risk-adjusted), k = constant product
Why Weighted Pools
- Multi-asset support - Each pool holds multiple assets of the same risk tier
- Dynamic weights - Adjusts for risk-adjusted value changes
- Capital efficiency - Better than constant-product for heterogeneous assets
- TWAP oracles - Built-in time-weighted price feeds
Fee Structure
- Swap fee: 0.30% (configurable)
- Protocol fee: 20% of swap fees → Treasury
- LP fee: 80% of swap fees → Liquidity providers