Protocol Architecture 📊

HFDX follows a modular design with separation-of-concerns, ensuring each protocol component is auditable, maintainable, and upgradable without compromising system integrity.

Core components:

Component	Function
User Wallet	Asset custody, transaction signing
HFDX Router	Centralized execution gateway for all trades
Margin Engine	Risk, leverage, and margin computation
Liquidity Pool	Capital provisioning and loss absorption
Funding Module	Funding rate computation and periodic settlement
Oracle System	Provides external price indices
Liquidation Module	Force closes positions under margin breach
LLN Manager	Lifecycle management of Liquidity Loan Notes

System Architecture Flow:

                    ┌─────────────┐
                    │ User Wallet │
                    └──────┬──────┘
                           │
                           ▼
                    ┌─────────────┐
                    │   Router    │
                    └──────┬──────┘
                           │
            ┌──────────────┴──────────────┐
            │                             │
            ▼                             ▼
    ┌───────────────┐            ┌─────────────┐
    │ Margin Engine │            │ LLN Manager │
    └───────┬───────┘            └──────┬──────┘
            │                           │
            ▼                           ▼
    ┌───────────────────────────────────────────┐
    │          Liquidity Pool                   │
    │              ◄──────►                     │
    │          Funding Module                   │
    └───────────────────┬───────────────────────┘
                        │
                        ▼
              ┌──────────────────┐
              │ Liquidation Module│
              └──────────────────┘

This architecture ensures clear separation between:

• User interaction — Router & Wallet

• Risk calculation and margin enforcement — Margin Engine

• Capital management — Liquidity Pool & LLN Manager

• External data integration — Oracle System

• Position resolution — Liquidation Module

The modularity allows for incremental upgrades while preserving immutable core logic.