Core Components
Fund Registry
The Fund Registry manages investment funds with Senior/Junior tranches. This is the core component that enables risk segregation and economic alignment.
Core Operations
Fund Creation Parameters
- jurisdiction: "USD", "EUR", "BRL"
- targetSize: e.g., 1,000,000 (in base units)
- seniorRatioBps: 7000 = 70% senior, 30% junior
- seniorYieldBps: 800 = 8% fixed yield
- managementFeeBps: 200 = 2% annual fee
Risk Parameters
| Parameter | Default | Description |
|---|---|---|
| Min Senior Ratio | 10% | Minimum portion for senior tranche |
| Max Senior Ratio | 95% | Maximum portion for senior tranche |
| Min Fill Rate | 50% | Required fill for activation after deadline |
| Max Management Fee | 5% | Maximum annual fee to managers |
Pool Factory
The Pool Factory deploys and manages liquidity pools:
Each pool is uniquely identified by (jurisdiction, riskBucket) tuple, ensuring no overlap.
Weighted Pool
Individual pools handle:
- Deposits: Accept assets, mint LP tokens
- Withdrawals: Burn LP tokens, return pro-rata assets
- Swaps: Execute asset-to-asset trades
- TWAP: Maintain price accumulators for oracle queries
LP Token Mechanics
Token Calculations
lpTokensReceived = (depositValue / poolTotalValue) × totalLpSupplyassetsReceived[i] = (lpTokensBurned / totalLpSupply) × poolBalance[i]Insurance Fund
The Insurance Fund absorbs losses from defaults:
Funding Sources
- Yield waterfall contributions (5% of cashflows)
- Liquidation penalties
- Protocol-owned liquidity
- Direct deposits
Coverage Limits
- Per-asset cap: 10% of fund
- Per-bucket cap: 40% of fund
- Claim cooldown: 24 hours
Yield Router
The Yield Router implements a priority waterfall for cashflow distribution:
Circuit Breaker
Automated safety mechanisms protect the protocol:
Trigger Conditions
| Condition | Action |
|---|---|
| Price deviation > 20% in 1 hour | Pause new deposits |
| Utilization > 95% for 30 min | Pause borrows |
| Default rate > 5% in 24 hours | Emergency halt |
| Insurance fund < 20% target | Elevated monitoring |
Two-Layer Liquidity Architecture
LiquitX uses a two-layer architecture that separates capital aggregation (Risk Vaults) from per-asset trading (Asset Markets). The Liquidity Router coordinates capital flow between layers.
Risk Vaults (Layer 1)
ERC-4626-like share-based vaults that accept lxUSD deposits from LPs. Each vault is scoped to a specific risk bucket (AAA, AA, A) and jurisdiction. Share price = totalValue / totalSupply, where totalValue includes both reserve lxUSD and capital deployed to Asset Markets.
Asset Markets (Layer 2)
Lightweight 2-asset AMMs pairing a single senior tranche token (sr-token) with lxUSD. Each funded asset gets its own market. Markets follow a lifecycle: DORMANT (seeded with lxUSD) → ACTIVE (first sr-token deposit enables trading) → MATURED (asset matures, trading halted) → CLOSED (settled, LPs can withdraw).
Liquidity Router (Coordinator)
Orchestrates capital flow between Risk Vaults and Asset Markets. Governance deploys vault capital to create new markets, and the router handles maturity settlement — returning lxUSD payouts to vaults and increasing share prices for LPs.
Peg Defense Module
Protects senior tranche token pegs through graduated buy-side interventions when TWAP shows a depeg. Funded from the yield waterfall allocation.
- TWAP < 95% of face value: deploy 5% of reserves, max 2% of pool per buy
- TWAP < 90% of face value: deploy 15% of reserves, max 5% of pool per buy
- TWAP < 85% of face value: deploy 30% of reserves, max 10% of pool per buy
LP Staking
MasterChef-style staking where LPs lock LP tokens for boosted yield rewards. Longer lock periods earn higher multipliers. Emergency unstake is always available with a 50% reward penalty.
| Tier | Lock Duration | Multiplier | Cooldown |
|---|---|---|---|
| Flexible | None | 1.0x | None |
| 30 Days | 30 days | 1.2x | 7 days |
| 90 Days | 90 days | 1.5x | 7 days |
| 180 Days | 180 days | 2.0x | 7 days |
Junior Marketplace
A P2P orderbook for junior tranche tokens. Since junior tokens have variable, uncertain payoffs (dependent on asset performance), AMM pricing is poorly suited. Instead, informed buyers and sellers set their own prices via sell and buy orders with optional expiry and partial fill support.
Stablecoin Infrastructure
LiquitX uses jurisdiction-native stablecoins (lxUSD, lxBRL, lxEUR) to eliminate forex exposure. Each LXToken is 1:1 backed by collateral (e.g., USDC for lxUSD) held in a dedicated CollateralVault. Anyone can mint by depositing collateral and redeem by burning tokens.