DeFi Integration

DeFi Protocols

Comprehensive decentralized finance protocol suite for the Lux ecosystem

DeFi Protocols

Specifications: LP-9060 DeFi Protocols Overview | LP-8401 Confidential Lending | LP-9050 AMM Standard

Implementation: github.com/luxfi/standard

The LX DeFi suite provides institutional-grade financial primitives with privacy-preserving capabilities, post-quantum security, and cross-chain interoperability.

Implementation Status

ProtocolSourceStatusLP Spec
Lending Corestandard/src/lending/ProductionLP-8401
Margin Tradingstandard/src/gmx2/ProductionLP-9060
DeFi Vaultsstandard/src/alcx2/ProductionLP-9060
LUX Stakingnode/vms/platformvm/ProductionLP-70
AMM/CLMMdex/contracts/ProductionLP-9050
Flash Loansstandard/src/lending/flash/ProductionLP-8401
Price Oraclesstandard/src/oracles/ProductionLP-9060
Governancestandard/src/dao/ProductionLP-9060

Architecture Overview

+------------------------------------------------------------------+
|                      LX DeFi Protocol Suite                   |
+------------------------------------------------------------------+
|                                                                   |
|  +-------------+  +-------------+  +-------------+  +-----------+ |
|  |   Lending   |  |   Margin    |  |   Vaults    |  |  Staking  | |
|  |   Protocol  |  |   Trading   |  |   & Yield   |  |   (LUX)   | |
|  +------+------+  +------+------+  +------+------+  +-----+-----+ |
|         |                |                |               |       |
|         +--------+-------+--------+-------+-------+-------+       |
|                  |                |                               |
|           +------v------+  +------v------+                        |
|           | Price Oracle|  |   AMM/CLMM  |                        |
|           |   Feeds     |  |   Pools     |                        |
|           +------+------+  +------+------+                        |
|                  |                |                               |
|           +------v----------------v------+                        |
|           |     Flash Loan Engine        |                        |
|           +------------------------------+                        |
|                          |                                        |
|           +------v----------------v------+                        |
|           |  Governance & Risk Mgmt      |                        |
|           +------------------------------+                        |
+------------------------------------------------------------------+
|                    Cross-Chain Bridge (B-Chain)                   |
+------------------------------------------------------------------+

Protocol Suite

Core Protocols

  • Lending Protocol: Overcollateralized lending with ZK credit scoring, privacy-preserving positions, and confidential liquidations.
  • Margin Trading: Leveraged perpetual trading up to 50x with cross-margin and isolated margin support.
  • DeFi Vaults: Automated yield strategies with auto-compounding, delta-neutral positions, and risk-adjusted returns.
  • LUX Staking: Native LUX staking with validator delegation, liquid staking derivatives, and governance participation.

Infrastructure

  • AMM & Liquidity: Concentrated liquidity market maker (CLMM) with customizable fee tiers and range orders.
  • Flash Loans: Uncollateralized atomic loans for arbitrage, liquidations, and collateral swaps.
  • Price Oracles: Multi-source oracle aggregation with TWAP, Chainlink, and Pyth integration.
  • Governance: On-chain governance with timelock, proposal voting, and parameter updates.

Risk Management

  • Risk Parameters: Collateral factors, liquidation thresholds, interest rate models, and protocol limits.

Key Features

Privacy-Preserving DeFi

Built on LP-8401 Confidential Lending Protocol:

// Zero-knowledge credit scoring
interface IZKCreditScoring {
    function verifyCreditScore(
        bytes32 userCommitment,
        uint256 minRequired,
        bytes calldata proof
    ) external view returns (bool eligible);
}

// Confidential collateral management
interface IConfidentialCollateral {
    function verifyCollateralization(
        bytes32 positionId,
        uint256 loanAmount,
        bytes calldata solvencyProof
    ) external view returns (bool sufficient);
}

Post-Quantum Security

All DeFi protocols integrate with Lux's quantum-resistant cryptography:

  • Ringtail Signatures: ML-DSA-65 lattice-based signatures for transaction signing
  • Hybrid BLS+RT: Dual verification for cross-chain Warp messages
  • Q-Chain Integration: Quantum-safe key derivation and storage

Cross-Chain Composability

DeFi protocols operate across Lux chains via Warp messaging:

// Cross-chain lending position
type CrossChainPosition struct {
    ChainID      ids.ID
    PositionID   [32]byte
    Collateral   *big.Int
    Debt         *big.Int
    WarpProof    *warp.Message
}

Interest Rate Model

The protocol uses a kinked interest rate model for optimal capital efficiency:

                    Borrow Rate
                        |
                        |                    ____
                        |                ___/
                        |            ___/
                        |        ___/
                        |    ___/
                        |___/
                        +------------------------> Utilization
                            Kink (80%)

Mathematical Formula:

If utilization <= kink:
    BorrowRate = BaseRate + (Utilization * MultiplierRate)

If utilization > kink:
    BorrowRate = BaseRate + (Kink * MultiplierRate) +
                 ((Utilization - Kink) * JumpMultiplier)

Default Parameters:

ParameterValueDescription
Base Rate2%Minimum borrow rate
Multiplier10%Rate increase per utilization
Jump Multiplier200%Rate multiplier above kink
Kink80%Utilization threshold

Quick Start

Supply Assets

import "github.com/luxfi/dex/pkg/defi/lending"

func supplyAssets(ctx context.Context) error {
    client, err := lending.NewClient(ctx, &lending.Config{
        Endpoint: "https://api.lux.network",
        ChainID:  96369,
    })
    if err != nil {
        return err
    }

    result, err := client.Supply(ctx, &lending.SupplyParams{
        Asset:  "USDT",
        Amount: "10000.00",
    })
    if err != nil {
        return err
    }

    fmt.Printf("Supplied: %s USDT\n", result.Amount)
    fmt.Printf("Shares: %s\n", result.Shares)
    fmt.Printf("APY: %s%%\n", result.CurrentAPY)
    return nil
}

Open Margin Position

import "github.com/luxfi/dex/pkg/defi/margin"

func openPosition(ctx context.Context) error {
    client, err := margin.NewClient(ctx, &margin.Config{
        Endpoint: "https://api.lux.network",
        ChainID:  96369,
    })
    if err != nil {
        return err
    }

    position, err := client.OpenPosition(ctx, &margin.OpenParams{
        Symbol:     "BTC-USD",
        Side:       margin.Long,
        Collateral: "10000.00",
        Leverage:   5,
    })
    if err != nil {
        return err
    }

    fmt.Printf("Position: %s\n", position.ID)
    fmt.Printf("Size: $%s\n", position.Size)
    fmt.Printf("Entry: $%s\n", position.EntryPrice)
    fmt.Printf("Liquidation: $%s\n", position.LiquidationPrice)
    return nil
}

Security Considerations

Smart Contract Security

  • Reentrancy Protection: All external calls use CEI pattern
  • Integer Safety: SafeMath for Solidity 0.6.x, native checks for 0.8.x+
  • Access Control: Role-based permissions with timelock
  • Emergency Pause: Circuit breakers for critical operations

Economic Security

  • Liquidation Buffers: Health factor thresholds prevent bad debt
  • Insurance Fund: Protocol fees fund liquidation shortfalls
  • Rate Limits: Maximum borrow/supply limits per block
  • Oracle Validation: Multi-source price verification with deviation checks

Audit Status

ProtocolAuditorDateReport
Lending CoreTrail of Bits2025-06Link
Margin VaultOpenZeppelin2025-05Link
AMM/CLMMConsensys2025-04Link

Gas Costs

Typical gas costs on C-Chain (96369):

OperationGasUSD @ 25 gwei
Supply150,000~$0.08
Borrow200,000~$0.11
Repay120,000~$0.06
Liquidate350,000~$0.18
Flash Loan250,000~$0.13