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zeekayandHanzo Dev
70f6883235
A July commit removed eight papers on the premise "no license — DEX/non-custodial only". That premise is wrong: Lux operates an ATS, a broker-dealer, a transfer agent and a bank, and this material is resold at lux.financial. The merge that brought main in preserved the removal because the commit stated a reason, which is how a stale reason outlives the fact it rested on. Back, at the versions main carried — main never received the removal, so its copies are the later ones: the ATS architecture, the security-token standard, smart order routing, institutional custody, MPC custody, post-quantum securities, the SSB partnership and the CoinBridge brief. 83 files. Co-authored-by: Hanzo Dev <[email protected]>
39 lines
4.0 KiB
TeX
39 lines
4.0 KiB
TeX
\section{Introduction}
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The United States securities market operates under a regulatory framework designed for centralized intermediaries. Broker-dealers hold customer securities in street name. Transfer agents maintain issuer registries on private databases. Alternative Trading Systems match orders through proprietary systems that custody assets during settlement. Every intermediary holds keys, creating attack surfaces that have produced losses exceeding \$10B in the traditional finance sector over the past decade through insider theft, operational failures, and cyberattacks.
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The blockchain industry has attempted to address these structural risks by building ``decentralized exchanges,'' but DEX architectures designed for fungible utility tokens are fundamentally incompatible with the regulatory requirements of securities trading. Securities require transfer restrictions, accreditation verification, jurisdictional compliance, forced transfers for regulatory actions, and auditable cap table management. No existing DEX satisfies these requirements.
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\subsection{From Arca to Lux}
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This work originates in the Arca platform (ar.ca), where the author served as CTO in 2018. Arca built several foundational components for digital securities infrastructure:
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\begin{itemize}[nosep]
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\item \textbf{ArCoin}: An interest-bearing digital security backed by US Treasury bills, implemented as an ERC-1400 token with automated NAV calculation and distribution.
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\item \textbf{st-contracts}: A security token protocol implementing ERC-1400 (Security Token Standard) and ERC-1404 (Simple Restricted Token Standard) with on-chain transfer restrictions.
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\item \textbf{exchange-sdk}: A trading SDK for digital securities with order book management, matching engine, and settlement coordination.
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\item \textbf{sec-wallet}: An institutional-grade wallet for securities custody with multi-signature authorization and audit logging.
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\item \textbf{Arca Funds}: The first crypto hedge fund structure with tokenized fund interests represented as security tokens.
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\item \textbf{miners/binance-recorder}: Market data infrastructure for recording and replaying exchange data feeds.
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\end{itemize}
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The central lesson from Arca was that custodial architectures---even well-engineered ones---create irreducible counterparty risk. When a platform holds private keys on behalf of investors, every operational failure, insider threat, and regulatory seizure becomes a potential loss event. The path forward required eliminating custodial risk at the protocol level.
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This paper describes that path: a non-custodial ATS built on Lux Network that satisfies every requirement of SEC Regulation ATS, broker-dealer registration, and transfer agent registration while never holding a single private key.
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\subsection{Contributions}
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\begin{enumerate}[nosep]
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\item A complete ATS architecture that is non-custodial by construction, using MPC threshold signatures for all asset movements.
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\item A single-binary deployment model on Hanzo Base that packages order matching, settlement, compliance, and reporting into 32 collections and 64 routes.
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\item Atomic T+0 settlement on Lux EVM, eliminating the T+1/T+2 settlement risk present in traditional securities infrastructure.
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\item A regulatory compliance framework that maps SEC/FINRA requirements to on-chain enforcement mechanisms.
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\item Integration architecture for hybrid traditional/digital securities via Alpaca OmniSub.
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\end{enumerate}
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\subsection{Related Work}
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The Lux MPC custody architecture is detailed in the companion paper on M-Chain \cite{lux-mchain-mpc}. The security token standard used for on-chain securities is formalized in the Lux Security Token Standard \cite{lux-security-token-standard}. Smart order routing across multiple execution venues is described in the Lux Smart Order Routing paper \cite{lux-smart-order-routing}. The transfer agent subsystem is presented separately \cite{lux-transfer-agent}. The Lux credit protocol, which enables margin lending against tokenized securities, is specified in \cite{lux-credit-protocol-spec}.
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