papers/lightspeed-dex/sections/07-security.tex

\section{Security}


\subsection{Validator Incentives}

\textbf{Staking}: Validators lock 1M LUX (\$10M at \$10/LUX).

\textbf{Rewards}:
\begin{equation}
R_v = R_{\text{base}} + R_{\text{fees}} + R_{\text{MEV}}
\end{equation}

where:
\begin{itemize}
    \item $R_{\text{base}}$: 5\% annual inflation
    \item $R_{\text{fees}}$: 0.05\% of volume
    \item $R_{\text{MEV}}$: Fair distribution of any captured MEV
\end{itemize}

\textbf{Slashing conditions}:
\begin{enumerate}
    \item Incorrect ordering (detected via zk-SNARK)
    \item Downtime $>$1\% (SLA violation)
    \item Censorship (refusing valid transactions)
    \item Collusion (coordinated frontrunning)
\end{enumerate}

\textbf{Penalty}: 10\% of stake burned + ejection from validator set.

\subsection{Circuit Breakers}

\textbf{Volatility protection}: Halt trading if price moves $>$10\% in 1 minute.

\begin{lstlisting}[language=Go]
func (dex *LuxDEX) CheckCircuitBreaker(pair TradingPair) error {
    priceNow := dex.GetPrice(pair)
    price1MinAgo := dex.GetHistoricalPrice(pair, time.Now().Add(-1*time.Minute))
    
    change := math.Abs(priceNow - price1MinAgo) / price1MinAgo
    
    if change > 0.10 {
        dex.HaltTrading(pair, 5*time.Minute)
        return ErrCircuitBreakerTriggered
    }
    return nil
}
\end{lstlisting}

\textbf{Resume}: After 5-minute cooldown or manual governance override.

\subsection{Oracle Integration}

For price feeds, we use \textbf{decentralized oracles} (Chainlink, Pyth):

\begin{itemize}
    \item 50ms update frequency
    \item Aggregated from 20+ data sources
    \item Outlier rejection (median of medians)
    \item On-chain verification
\end{itemize}

\textbf{Use case}: Mark prices for liquidations, funding rates.