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Restructured from flat .tex/.pdf files into per-paper subdirectories. Added Antje Worring as co-author on all papers. Synced PDFs to pdfs/ for download site.
27 lines
2.7 KiB
TeX
27 lines
2.7 KiB
TeX
\section{Introduction}
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\label{sec:intro}
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% ============================================================
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Cross-chain bridges hold over \$15 billion in locked assets as of Q1 2025~\cite{defillama2025}. These assets---primarily ETH, BTC, and stablecoins---sit idle in bridge vaults while their equivalent representations circulate on destination chains. At prevailing DeFi yields (3--5\% for ETH staking~\cite{lidofinance}, 4--8\% for stablecoin lending~\cite{aavev3}), this idle capital forfeits \$600M--\$1.2B annually.
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The waste is structural. Conventional bridges treat the lock-and-mint operation as a pure custodial function: lock the original, mint a synthetic, return the original upon burn. The locked assets serve no productive purpose during the bridge period. This is equivalent to holding cash in a vault rather than deploying it in interest-bearing instruments---a practice that banking abandoned centuries ago.
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We address this inefficiency with a yield-bearing bridge token system built atop the Lux Teleport protocol~\cite{luxteleport}. The key insight is that bridge vaults can be replaced with yield-bearing vaults that deploy locked assets to on-chain strategies, while maintaining the 1:1 (or better) backing guarantee that bridge security requires.
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\subsection{Contributions}
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\begin{enumerate}[nosep,leftmargin=1.5em]
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\item A share-based accounting model for yield-bearing bridge tokens with formal monotonicity and collateralization proofs (Section~\ref{sec:share}).
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\item A composable \texttt{IYieldStrategy} interface with 29 concrete implementations across 9 yield categories (Section~\ref{sec:strategies}).
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\item Bitcoin-native yield composition through Babylon, Lombard, SolvBTC, and CoreDAO---the first non-custodial BTC yield aggregation (Section~\ref{sec:btc}).
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\item MPC-attested backing oracle with automatic undercollateralization pause (Section~\ref{sec:attestation}).
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\item A three-tier risk framework with formal diversification constraints (Section~\ref{sec:risk}).
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\item Economic analysis of the xLUX flywheel and capital efficiency comparison against conventional bridge tokens (Section~\ref{sec:economics}).
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\end{enumerate}
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\subsection{Scope and Relationship to Prior Work}
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This paper extends the Lux Teleport protocol specification~\cite{luxteleport}, which defines the MPC threshold signature scheme (FROST~\cite{frost} and CGGMP21~\cite{cggmp21}), nonce management, sovereign governance, and Shariah compliance. We take the bridge's security model as given and focus exclusively on the yield layer: how locked assets generate returns, how those returns are reflected in bridge token prices, and how the system maintains safety invariants under adversarial conditions.
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% ============================================================
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