Protocol-Owned Liquidity

Overview

BankX maintains active liquidity depth in both the XSD/WETH and BankX/WETH AMM pools through a Protocol-Owned Liquidity (POL) model. Rather than relying purely on external LPs, the protocol detects liquidity deficits via the PID Controller's three deficit buckets and incentivises community members to add liquidity in exchange for tiered BankX and XSD rewards — with the protocol itself acting as a liquidity provider of last resort through the treasury.

Key Concepts

• Deficit buckets — Three boolean flags in PIDController (bucket1, bucket2, bucket3) that signal active liquidity or collateral deficits. Each bucket carries a diff (required amount), timestamp, and amountpaid (how much has been filled).
• bucket1 — XSD/WETH pool has insufficient WETH liquidity relative to total XSD value at the xsd_percentage_target threshold. Active for up to 18 hours (64800 seconds).
• bucket2 — BankX/WETH pool has insufficient WETH liquidity relative to BankX Certificate of Deposit supply at the bankx_percentage_target threshold. Active for up to 18 hours.
• bucket3 — CollateralPool is undercollateralised: collatValue * 400 <= 3 * XSDvalue. Active for up to 7 days (604800 seconds). While active, redemptions are blocked.
• amountpaid — Tracks how much ETH-equivalent value has been added to each deficit pool so far. Buckets reset when amountpaid >= diff or the time window expires.
• xsd_percentage_target / bankx_percentage_target — Owner-set percentage thresholds for how much of the token's market cap should be backed by AMM liquidity.

Deficit Detection

systemCalculations() calls three internal checkers:

incentiveChecker1 — XSD/WETH Deficit

uint XSDvalue = (XSD.totalSupply() * silver_price) / 1e6;
uint reserve = (xsdweth_reserve * XSD.eth_usd_price() * 2) / 1e6; // both sides of pool
if (reserve < (XSDvalue * xsd_percentage_target) / 100) {
    bucket1 = true;
    diff1 = (((XSDvalue * xsd_percentage_target) / 100) - reserve) / 2;
    timestamp1 = block.timestamp;
}

The deficit diff1 is split into thirds — each third defines one reward tier.

incentiveChecker2 — BankX/WETH Deficit

Similar logic, but compares BankX AMM reserves against cd_allocated_supply (BankX Certificate of Deposit supply) weighted by bankx_percentage_target.

incentiveChecker3 — Collateral Pool Deficit

uint XSDvalue = (collateralpool.collat_XSD() * silver_price * global_collateral_ratio) / 1e12;
if (collatValue * 400 <= 3 * XSDvalue) {
    bucket3 = true;
    diff3 = (3 * XSDvalue) - (collatValue * 400);
}

This is a 75% collateralisation threshold (400/3 ≈ 133% overcollateralisation required before bucket3 clears).

Liquidity Provision: Tiered Reward System

When a deficit bucket is active, users can add WETH to the affected pool via the Router (userAddLiquidityETH()) and earn tiered rewards from the RewardManager.

Tier Structure

Each deficit diff is split into three equal thirds:

• Tier 1 — First third of the deficit. Rewards vest at vesting1.
• Tier 2 — Second third of the deficit. Rewards vest at vesting2.
• Tier 3 — Final third. Rewards vest at vesting3.

Reward Rates by Pool

Rewards are denominated in USD (ETH value) and converted to token amounts at the current BankX and XSD prices at the time of redemption.

Creator (Treasury) Liquidity

The treasury and contract owner can add liquidity directly via Router.creatorAddLiquidityTokens() and creatorAddLiquidityETH() without earning tiered rewards. The RewardManager.creatorProvideXSDLiquidity() and creatorProvideBankXLiquidity() functions call sync() on the respective pool and update amountpaid in the PID Controller if a bucket is active.

Reward Redemption

After the vesting period expires, users call Router.userRedeemLiquidity(pool, deadline), which calls RewardManager.LiquidityRedemption(pool, msg.sender). The function:

1. Checks which vesting tiers have matured (vestingtimestamp <= block.timestamp).
2. Converts stored USD-denominated rewards to BankX and XSD token amounts using current PID prices.
3. Mints BankX and XSD directly to the user's address.

Security Considerations

• Deficit limit. Each userProvide*Liquidity() call enforces (ethvalue + amountpaid) < difference * 3 to prevent overfilling a deficit bucket beyond its capacity.
• blockDelay on provision. Users providing BankX or XSD pool liquidity must have a recent priceCheck in the PID Controller — same anti-flash-loan delay as minting/redeeming.
• Collateral pool provision has no blockDelay. userProvideCollatPoolLiquidity() does not carry the blockDelay modifier, reflecting the urgency of bucket3 events.
• bucket3 blocks redemptions. While bucket3 is active, all CollateralPool redeem functions revert with "Cannot withdraw in times of deficit". This prevents a bank-run scenario during a collateral shortfall.