Liquid Protocol

The Liquid Protocol (contracts/liquid/) provides yield-bearing bridge tokens and the LiquidLUX (xLUX) master yield vault that receives all protocol fees across the Lux ecosystem.

LiquidLUX (xLUX)

The master yield vault. Deposit WLUX, receive xLUX shares. All protocol fees (DEX, bridge, lending, perps, NFT) flow into this vault, increasing the value of xLUX over time.

import "@luxfi/contracts/liquid/LiquidLUX.sol";

LiquidLUX vault = LiquidLUX(VAULT_ADDRESS);

// Deposit WLUX, receive xLUX shares
wlux.approve(address(vault), amount);
uint256 shares = vault.deposit(amount, msg.sender);

// Withdraw -- burns xLUX, returns WLUX
uint256 assets = vault.withdraw(shares, msg.sender, msg.sender);

Fee Sources

Fees are pushed by the FeeSplitter contract. 90% goes to the vault (increasing xLUX value), 10% to the DAO treasury. Validator rewards are exempt from the performance fee.

Governance Integration

xLUX holders automatically have voting power through VotingLUX:

vLUX = xLUX + DLUX

xLUX uses ERC20Votes for checkpoint-based voting power, preventing flash loan governance attacks.

Bridge Tokens

Yield-bearing wrapped tokens bridged from external chains. All use LRC20B as the base contract with MPC-controlled minting.

Token Naming Convention

• L* prefix: Bridge tokens on Lux (LETH, LBTC, LUSD)
• Z* prefix: Bridge tokens on Zoo (ZETH, ZBTC, ZUSD)
• x* prefix: Liquid staked tokens (xLUX)

LiquidToken Base

All liquid tokens extend LiquidToken, which adds ERC-3156 flash loan support:

import "@luxfi/contracts/liquid/LiquidToken.sol";

// Flash loan any liquid token
function executeFlashLoan(
    IERC3156FlashLender lender,
    address token,
    uint256 amount
) external {
    lender.flashLoan(this, token, amount, "");
}

// Implement the callback
function onFlashLoan(
    address initiator,
    address token,
    uint256 amount,
    uint256 fee,
    bytes calldata data
) external returns (bytes32) {
    // Use the borrowed tokens
    // Repay amount + fee
    return keccak256("ERC3156FlashBorrower.onFlashLoan");
}

Yield Strategies

Yield Stacking: Deposit LUX into LiquidLUX, then use xLUX as perps collateral for leveraged fee exposure.

Delta-Neutral: 50% into LLP (perps LP), 50% short ETH via perps. Net: ETH-neutral, pure fee yield.

Governance + Yield: Stake LUX into LiquidLUX, use xLUX voting power via vLUX to direct gauge weights, earn fees plus influence protocol emissions.