Liquidity Loan Notes-Structured Finance Model 📄

6.1 LLN Lifecycle

LLNs are engineered as fixed-term structured products, with a lifecycle designed for clarity and predictability:

1. Subscribe — Institutions lock capital into LLNs at issuance.

2. Lock — Capital is fully committed for a defined term.

3. Accrue — Interest or yield accrues deterministically based on trading fees, funding payments, and borrowing fees.

4. Mature — Upon maturity, accrued yield is finalized on-chain.

5. Redeem — Principal and yield are returned atomically to the investor.

This lifecycle ensures auditability, predictable cash flows, and full collateralization of obligations.

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6.2 Yield Formula

Yield for LLNs is calculated on-chain as:

$$\text{Accrued Yield} = \text{Principal} \times \text{APR} \times \frac{\text{Elapsed Time}}{365}$$

Where:

• Principal = Locked capital at subscription

• APR = Annualized percentage rate derived from protocol revenue streams

• Elapsed Time = Days since subscription

Yield Sources:

• Trading Fees — Fees collected from perpetual contract execution

• Funding Payments — Transfers between longs and shorts accrued to the protocol

• Borrowing Fees — Interest generated by leveraged positions

LLNs convert these variable streams into deterministic, contractually guaranteed returns, appealing to institutional balance sheets.

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