📝Liquidity Provider Agreement
Last updated August 10, 2023
This Liquidity Provider Agreement (or “Agreement”) contains an electronic agreement between the Liquidity Provider (or “Provider”) and Open Liquidity Protocol (or “Protocol”), the software managed by DXS Brokerage LLC (or “Company”), incorporated under registered number 2853 LLC by the Registrar of Limited Liability Companies, registered by the Financial Services Authority of Saint Vincent and the Grenadines, First Floor, First St Vincent Bank Ltd Building, James Street, Kingstown, St. Vincent and the Grenadines.
The Provider is solely responsible for understanding and complying with any and all laws, terms and regulations of his/her specific jurisdiction that may be applicable to the Provider in connection with the Liquidity Provider Agreement. The Provider should be aware that the risk of loss as a result of providing liquidity can be high.
The Protocol, for value received, is programmed to pay back to the Provider the liquidity amount plus interest. Where liquidity amount and interest can be Bitcoin SV cryptocurrency (or "BSV") or USDC/USDT/DAI cryptocurrency (or "USD"). Growth of usage of the trading applications, such as DXS.app, operating on top of the Protocol, defines the repayment schedule of the liquidity amount and interest. The amount of interest payable will be automatically calculated as indicated in provision 4 of this Agreement, communicated, confirmed and electronically signed individually with every Provider. Participation in this Agreement as well as all the commercial terms are written into a BSV transaction. Liquidity amount and interest are payable in BSV or USD.
Liquidity is provided in the form of a non-transferable loan with undefined maturity and defined amount of interest receivable, subject to the funding round. This opportunity is not available to citizens or residents of the U.S.A., Canada, Seychelles, Switzerland, the UK, Algeria, Ecuador, Iran, Syria, North Korea, Sudan, United States Minor Outlying Islands, Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, American Samoa, as well as to a citizen or resident of territories where such activity shall be especially licensed, accredited or regulated by other ways. Provider is not allowed to contribute liquidity unless his funds comply with anti-money laundering (AML) requirements. Every incoming transaction is meticulously screened with specialized AML software.
IF THE PROVIDER DOES NOT ACCEPT AND/OR UNDERSTAND THIS AGREEMENT, THE PROVIDER SHALL NOT PARTICIPATE IN THE LIQUIDITY PROVIDER AGREEMENT. THE PROVIDER ACCEPTS THIS AGREEMENT BY PROVIDING LIQUIDITY.
The Provider warrants to the Company that in providing liquidity under this Agreement (a) providing liquidity does not and will not conflict with any judgment, law, statute, rule or regulation applicable to the Provider; (b) the Provider has received all the information he considers necessary or appropriate for deciding whether to enter into this Agreement; (c) the Provider has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of this Agreement; (d) the Provider is outside the United States and is not a U.S. person and is not entering into this Agreement for the account or benefit of a U.S. person (as such terms are defined in Regulation S under the U.S. Securities Act of 1933, as amended); and the Provider acknowledges that this Agreement has not been registered under the U.S. Securities Act of 1933, as amended, and is not being offered to or for the account or benefit of, or entered into with, United States or U.S. persons; (e) the Provider has completed and delivered to the Company a "KYC Form" and the information contained in such KYC Form is true, accurate and not misleading, if the liquidity amount to be provided exceeds the amounts stated in provision 7 of this agreement; (f) the Provider is in compliance with all Money Laundering Laws applicable to him; (g) none of the Provider or any Person having a direct or indirect beneficial interest in the Provider is a Sanctioned Person, or a child, spouse, parent or sibling of a Sanctioned Person; (h) none of the funds paid to the Company have been derived in violation of applicable laws, including applicable Money Laundering Laws, counter terrorism laws, and laws relating to bribery or corruption; (i) the Provider has entered into this Agreement for its own account and not for the account of another.
The following provisions lay out the mechanics and risks associated with participation in this Agreement.
1. Liquidity mechanism
Users of trading applications based on the Protocol add trading positions to the trading session. The Liquidity Protocol distributes 3% of total trading session losses to liquidity providers and 1% of total trading session losses to a bug fund. The Protocol then settles profits against the remaining 96% of losses. If trading session losses exceed profits, the remainder goes to the liquidity pool. If trading session profits exceed losses, up to 0.33% of each liquidity pool (known as 'session liquidity') can be used to settle profits.
While the Protocol has multiple liquidity pools (BSV and USD), there is only one trading session (session liquidity) which consists of 0.33% of the BSV liquidity pool plus 0.33% of the USD liquidity pool.
2. Role of liquidity providers
Liquidity providers fund the liquidity pools and therefore cover deficit trading sessions. A larger trading session attracts more traders by backing higher profit potential. Faster growth of usage increases the amount of payments to liquidity providers.
In addition to covering deficit trading sessions, liquidity providers fund Bounty Money balances.
3. Risks
Please read and understand the following risks before providing liquidity:
The Liquidity Protocol may break down or be exploited.
The assumption that at scale trading losses will more often exceed profits may be false in this particular case.
This platform may never scale because of unsuccessful liquidity fundraising, marketing or sales.
General business risk.
4. Liquidity allocation
Liquidity provided by multiple Providers will be allocated across 28 rounds limited by size in BSV and USD. All rounds, regardless of size and number, offer identical rates of return (aka yield or APY). Earlier rounds give higher total returns by being paid for longer. Earlier contributors have the advantage of consistent payments without needing to make repeated contributions and locking up more liquidity in the pool.
5. Refund on demand (BSV liquidity pool)
All BSV refunds are subject to the solvency of the liquidity pool.
Before 30 days from the date of liquidity contribution:
Liquidity contributions to the Open Liquidity Protocol BSV liquidity pool are locked for the first 30 days and cannot be refunded.
30-365 days from the date of liquidity contribution:
Liquidity contributions to the Open Liquidity Protocol BSV liquidity pool that are withdrawn between 30 and 365 days are subject to a 30% haircut and a return penalty.
A return penalty means you will receive the principal amount of liquidity contributed, less any returns already received.
Refund Amount = min[size of the liquidity pool; total liquidity provided * 0.7] - [return received]
After 365 days from the date of liquidity contribution:
Liquidity contributions to the Open Liquidity Protocol BSV liquidity pool that are withdrawn after 365 days are subject to a return penalty.
A return penalty means you will receive the principal amount of liquidity contributed, less any returns already received.
Refund Amount = min[size of the liquidity pool; total liquidity provided] - [return received]
6. Refund on demand (USD liquidity pool)
All USD refunds are subject to the solvency of the liquidity pool.
Before 365 days from the date of liquidity contribution:
Liquidity contributions to the Open Liquidity Protocol USD liquidity pool that are withdrawn prior to 365 days are subject to a return penalty.
A return penalty means you will receive the principal amount of liquidity contributed, less any returns already received. However, these deducted returns will simply be held for 365 days before being paid to the liquidity contributor.
Refund Amount = min[size of the liquidity pool; total liquidity provided] - *[return received] *Returns are paid to the liquidity provider after 365 days
After 365 days from the date of liquidity contribution:
Liquidity contributions to the Open Liquidity Protocol USD liquidity pool that are withdrawn after 365 days have zero refund penalties.
Refund Amount = min[size of the liquidity pool; total liquidity provided]
7. KYC
KYC is not required for liquidity contributions of <$1k total
Phone verification is required for liquidity contributions between $1k and $10k total
Full KYC is required for liquidity contributions >$10k total
8. Security
The Protocol, as a digital counterpart to this Agreement, is programmed to automatically execute the aforementioned terms and commercial conditions of this Agreement. The Protocol is designed to run on the BSV blockchain and to be governed by a distributed network of unpredictably selected servers via multisignature access (or “Network”). At the moment of publishing this Agreement the Protocol is hosted on a single server, maintained by the Company. The Company is responsible for keeping the terms and conditions of this Agreement, programmed in the Protocol, unchanged, until the Network is rolled out.
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