How it works

xDLOL (Extensible Decentralized Liquidity Orchestration Layer) is a decentralized infrastructure designed to synchronize token balances and enable yield-accruing mirrored assets across multiple chains. By leveraging LayerZero messaging and a decentralized gossip protocol, xDLOL ensures seamless cross-chain liquidity synchronization and efficient asset management for dApps and users.

Liquidity Matrix

At its core, Liquidity Matrix maintains a synchronized, up-to-date view of liquidity across chains through a combination of:

  • LayerZero’s OAppRead Protocol → Fetches liquidity data from remote chains using lzRead(), ensuring real-time synchronization.

  • Merkle-Based Liquidity Proofs → Stores liquidity states in a structured Merkle tree format, allowing for efficient verification.

  • Decentralized Settlement Mechanism → Ensures that liquidity updates are reconciled across chains in a verifiable and immutable manner.

Key Technical Mechanisms

1. Liquidity State Updates via LayerZero’s Read Protocol

  • Each chain runs a local Liquidity Matrix instance, which maintains liquidity snapshots.

  • Periodically, it broadcasts the latest Merkle root to other chains via lzRead(), allowing other chains to verify and update their liquidity views.

  • Smart contracts can fetch global liquidity states by calling getSettledTotalLiquidity().

2. Efficient Cross-Chain Liquidity Queries

  • Instead of relying on off-chain oracles, any dApp can directly query the Liquidity Matrix for real-time liquidity:

int256 liquidity = ISynchronizer(synchronizer).getSettledTotalLiquidity(address(this));

  • This ensures instant access to liquidity data across all supported chains.

3. Guaranteed Liquidity for Execution

  • Before executing a trade or transfer, the Liquidity Matrix performs a cross-chain availability check:

    • Calls quoteSync() to estimate gas and messaging costs.

    • Verifies if liquidity exists across chains before allowing execution.

  • This prevents users from attempting trades that would fail due to insufficient liquidity on a target chain.

xD ERC20

Unlike traditional tokens that require manual bridging and fragmented liquidity management, xD ERC20 tokens exist as a single, synchronized liquidity pool across all chains.

xD ERC20 tokens operate on three key principles:

  1. Synchronized Balances → A user’s balance remains the same across chains, eliminating the need for bridging.

  2. Automated Yield Accrual → Liquidity is dynamically allocated to the highest-yielding chains, and yield is automatically reflected in xD ERC20 balances.

  3. Composable with Any DeFi Application → Works natively within cross-chain AMMs, lending protocols, and staking pools.

Key Technical Mechanisms

1. Cross-Chain Balance Synchronization

  • Every xD ERC20 token contract is linked to the Liquidity Matrix to ensure balances remain consistent across chains.

  • Before transferring tokens, xD ERC20 queries its liquidity state to verify availability:

uint256 balance = ISynchronizer(synchronizer).getSettledLiquidity(address(this), userAddress);

  • Transfers only execute when global availability matches local balance expectations.

2. Wrapping and Unwrapping: Fully Automated

  • Users deposit base assets (e.g., USDC) into the staking vault, which then mints equivalent xD ERC20 tokens.

  • Deposits automatically start earning yield without manual staking.

  • When a user burns xD ERC20 to redeem base assets, the contract:

    • Verifies cross-chain liquidity availability.

    • Executes a withdrawal from the vault on the chain with the most available liquidity.

Example: Cross-Chain Unwrap Flow

  1. User initiates an unwrap request.

  2. xD ERC20 contract checks liquidity availability on all chains using LayerZero’s lzRead().

  3. If liquidity is found on Chain A, the withdrawal request is processed on Chain A instead of the origin chain.

  4. The user receives base assets (USDC) directly from the highest-liquidity chain.

3. Automated Yield Optimization

  • Unlike static yield-bearing tokens, xD ERC20 dynamically shifts liquidity to the highest-yielding chain.

  • The staking vault reallocates deposits based on APY signals, ensuring maximum return for xD ERC20 holders.

  • Yield Accrual Mechanism:

    • As yield accumulates, xD ERC20 balances increase proportionally to reflect the earnings.

    • Users can redeem their xD ERC20 holdings at any time for the underlying assets + accrued yield.

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