sLiq Protocol

sLiq is the first tradable market for impermanent loss. Traders take leveraged long or short positions on the IL of any Uniswap V3 pool, while liquidity providers earn fees from a self-balancing skew mechanism. Think of it as a volatility index (VIX) for DEX liquidity -- oracle-based, perpetual, chain-agnostic.

Built by EarnPark | Live beta on Arbitrum | Whitepaper

Live metrics (30 days, organic): 2,400+ positions opened, 175 ETH collateral deposited

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How It Works

flowchart LR
    subgraph LP["Liquidity Providers"]
        D[Deposit USDC] --> S[Receive vsLP shares]
        S --> F[Earn trading fees]
    end

    subgraph Vault["sLiq Vault (per pool)"]
        A[Anchor Uniswap V3 NFT] --> FEE[Fee accrual]
        FEE --> K["K-multiplier<br/>k_long = N_short / N_long"]
        K --> DIST[Fee distribution]
    end

    subgraph Traders["Traders"]
        OL[Open Long IL] --> PNL_L["P&L = k·Fees − IL"]
        OS[Open Short IL] --> PNL_S["P&L = IL − Fees/k"]
    end

    D --> Vault
    DIST --> F
    DIST --> PNL_L
    DIST --> PNL_S

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1. LPs deposit collateral (e.g., USDC) into a Vault and receive vsLP shares. The vault holds an anchor Uniswap V3 NFT position that accrues trading fees.
2. Traders open positions by choosing a side (Long or Short IL), a tick range (determines leverage), and a collateral amount.
3. Fees accrue continuously from the anchor position. The K-multiplier distributes fees proportionally based on time-weighted skew between long and short effective liquidity.
4. Settlement occurs when traders close or get liquidated. Long positions earn k·Fees − IL, Short positions earn IL − Fees/k.

Position Lifecycle

stateDiagram-v2
    [*] --> SelectPool: Choose Uniswap V3 pool
    SelectPool --> ChooseSide: Long IL or Short IL
    ChooseSide --> SetRange: Tick range → leverage
    SetRange --> Deposit: Collateral amount
    Deposit --> Active: Position opened
    Active --> Checkpoint: Price moves, fees accrue
    Checkpoint --> Active: Still in range
    Checkpoint --> Liquidatable: Out of range (Long)<br/>or fees > collateral (Short)
    Active --> Closed: Trader closes
    Liquidatable --> Liquidated: Anyone calls liquidate()
    Closed --> [*]: PnL settled
    Liquidated --> Rolled: If rolling enabled
    Liquidated --> [*]: If no rolling
    Rolled --> Active: Re-opened with new range

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K-Multiplier Mechanism

The K-multiplier is the core innovation that keeps the vault solvent without delta hedging:

• When Long > Short exposure: k_long < 1, k_short > 1 -- longs earn less, shorts earn more
• When Short > Long exposure: k_long > 1, k_short < 1 -- longs earn more, shorts earn less
• At equilibrium: k = 1 for both sides

This creates a natural incentive for traders to take the underrepresented side, maintaining balance.

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Architecture

Contract	Description	Size
Vault.sol	Core vault: positions, checkpoints, deposits/withdrawals, ERC-4626-like share accounting	22,168 B
VaultManager.sol	Beacon proxy factory: deploys and upgrades Vault instances per pool	3,318 B
VaultMath.sol	Pure math library: IL calculation, effective liquidity, fee accounting, price conversions	7,440 B

graph TD
    subgraph "Deployment Layer"
        VM[VaultManager<br/>Ownable] -->|owns| Beacon[UpgradeableBeacon]
        VM -->|"deploys (CREATE2)"| BP1[BeaconProxy<br/>WETH/USDC]
        VM -->|"deploys (CREATE2)"| BP2[BeaconProxy<br/>ARB/ETH]
        VM -->|"deploys (CREATE2)"| BP3[BeaconProxy<br/>Pool N]
    end

    subgraph "Implementation Layer"
        Beacon -->|"points to"| VaultImpl[Vault Implementation]
        BP1 -->|delegatecall| VaultImpl
        BP2 -->|delegatecall| VaultImpl
        BP3 -->|delegatecall| VaultImpl
    end

    subgraph "Library Layer"
        VaultImpl -->|calls| Math[VaultMath]
    end

    subgraph "External Dependencies"
        VaultImpl -->|"reads fees"| NFPM[Uniswap V3 NFPM]
        VaultImpl -->|"reads price"| Pool[Uniswap V3 Pool]
        VaultImpl -->|"oracle price"| CL[Chainlink Feed]
        VaultImpl -->|"sequencer check"| SEQ[Chainlink Sequencer]
    end

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Key Features

• Perpetual positions -- no epoch locks, no expiry. Open and close at any time.
• Leverage from range width -- narrower tick ranges produce higher leverage (up to ~660x with current MIN_RANGE=60; up to 1000x planned via Phase 2 range expansion), derived from the IL formula. See MATH.md Section 3.
• Chainlink oracle primary -- Chainlink price feeds with Arbitrum sequencer uptime checks; falls back to pool.slot0() only when Chainlink is unavailable.
• Beacon proxy upgradeability -- all vaults share a single implementation via UpgradeableBeacon, enabling atomic upgrades across all markets.
• Auto-rolling positions -- positions can be configured to automatically re-open on liquidation (direct, inverse-minus, or inverse-plus rolling strategies).
• ERC-4626-like LP accounting -- vsLP share tokens with proportional deposit/withdraw mechanics.

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Deployments

This repository contains the development version of sLiq Protocol contracts. The live beta on Arbitrum One runs a previous contract version; addresses are available upon request. This codebase reflects the next iteration currently in active development.

Network	Contract	Address
Arbitrum One	VaultManager	Available upon request
Arbitrum One	VaultMath	Available upon request
Arbitrum One	Vault (implementation)	Available upon request
Arbitrum One	Vault (WETH/USDC proxy)	Available upon request

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Quick Start

git clone https://github.com/earn-park/sliq-protocol.git
cd sliq-protocol

forge install          # install dependencies
forge build            # compile contracts
forge test             # run all tests (141: unit + fuzz + invariant)
forge test --gas-report # with gas reporting

Requirements

• Foundry (forge, cast, anvil)
• Solidity 0.8.30+

Configuration

Copy .env.example to .env and fill in your RPC URLs and API keys for fork testing and deployment.

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Testing

Suite	Tests	Description
Unit: Vault	69	Deposit, withdraw, open, close, checkpoint, liquidate, rolling, pausable, guardian, oracle, cross-decimal
Unit: VaultManager	14	Deploy, upgrade, access control, multi-vault
Unit: VaultMath	40	Price conversions, IL, fees, effective liquidity, triangular numbers
Fuzz: VaultMath	16	Property-based testing (1,000 runs each) -- roundtrips, monotonicity, bounds
Invariant: Vault	2	Stateful invariant testing (256 runs each) -- collateral accounting, vault solvency

forge test -vvv                      # verbose output
forge coverage --ir-minimum          # coverage report

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Development Process

This protocol was developed using AI-assisted tooling (Claude, GitHub Copilot) with mandatory human review at every stage. Specifically:

• Architecture and math: Designed by the EarnPark team. IL formulas are derived from standard Uniswap V3 concentrated liquidity math; the K-multiplier skew mechanism is original (see MATH.md).
• Implementation: AI-assisted with manual code review for all contract logic, access control, and external interactions.
• Testing: 141 tests (123 unit + 16 fuzz + 2 invariant) covering oracle paths, share accounting, position lifecycle, and economic invariants. CI runs build, test, format check, and Slither static analysis on every push.
• Internal security review: Completed, covering economic attack modeling, business logic audit, and static analysis. See SECURITY.md.
• Third-party audit: Planned prior to mainnet launch (Milestone 2).

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Security

This codebase has undergone internal security review covering static analysis, economic attack modeling, and business logic audit. A formal third-party audit is planned prior to mainnet launch.

• Security model: docs/SECURITY.md
• Vulnerability reporting: See SECURITY.md
• Audit status: Internal review completed; third-party audit planned

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Documentation

Document	Description
ARCHITECTURE.md	System design, contract relationships, Mermaid diagrams
SECURITY.md	Trust assumptions, known limitations, invariants
MATH.md	IL formulas, K-multiplier derivation, fee distribution math
MARKET_ANALYSIS.md	Competitive landscape, market sizing, and design advantages
DEPLOYMENT.md	Deployment guide, Arbitrum addresses, upgrade procedures
INTEGRATION.md	Integration guide for external protocols and frontends
ROADMAP.md	Development roadmap, grant milestones, planned features
CHANGELOG.md	Release history (Common Changelog format)

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Advisors

• Anton Bukov — co-founder of 1inch Network, advisor and early backer of sLiq Protocol.

Links

• App: sliq.finance
• EarnPark: earnpark.com
• Proof of Reserves: earnpark.com/proof-of-reserves
• Whitepaper: available at sliq.finance

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Contributing

Please see CONTRIBUTING.md for guidelines.

License

This project is licensed under the Business Source License 1.1 (BUSL-1.1). The license parameters — including the Additional Use Grant, Change Date, and Change License — may be revised in future versions as the protocol's governance and ecosystem integration mature. Any changes will be announced publicly and will apply only to new versions of the Licensed Work.

Disclaimer

This software is provided as-is, without warranty of any kind. sLiq is a technical protocol for trading impermanent loss exposure. It does not provide investment advice. Users are responsible for understanding the risks of decentralized finance, including but not limited to smart contract risk, oracle risk, and market risk. See the whitepaper and SECURITY.md for detailed risk disclosures.