NXT Liquidity Infrastructure

Written By Catalin Fetean

Last updated 11 months ago

Introduction to Nexity Network’s Liquidity Architecture

Nexity Network is redefining global trade finance by removing barriers to liquidity and making real-world assets (RWA) actually work in a decentralized system.

Unlike traditional trade finance systems that operate within slow, centralized banking frameworks, Nexity’s liquidity model moves trade assets on-chain, ensuring capital flows freely, transactions happen in real-time, and businesses get the financing they need—without outdated intermediaries.

This section dives deep into how Nexity’s liquidity pools work at a technical level, detailing smart contract mechanics, tokenization frameworks, risk management protocols, and governance structures.

Liquidity Infrastructure: A Multi-Stage System

Trade finance isn't just about tokenizing assets—it’s about making them liquid, efficient, and usable in real financial markets. Nexity's liquidity pools enable instant trade financing by transforming tokenized trade receivables, invoices, and contracts into fully liquid digital assets.

How the Liquidity Pools Work

Nexity’s on-chain liquidity system operates in four distinct phases:

  1. Asset Tokenization

    • Trade contracts, invoices, and purchase orders are tokenized and deposited into Nexity’s liquidity pools.

    • These tokenized assets serve as collateral for borrowing and financing.

  2. Liquidity Deployment

    • Liquidity providers fund the pools, ensuring immediate capital availability.

    • Smart contracts dynamically allocate liquidity to trade assets based on demand, risk, and transaction history.

  3. Transaction Execution

    • Businesses access financing instantly by borrowing against tokenized assets.

    • Payments flow automatically from buyers to sellers, facilitated by smart contract-based escrows.

  4. Yield Distribution & Repayment

    • As invoices are settled, payments flow back to liquidity providers in real-time.

    • Smart contracts enforce transparent repayment schedules, distributing interest and principal efficiently.

Smart Contract Mechanics: The Core of Liquidity Automation

Nexity’s liquidity pools are built on a robust smart contract framework that automates capital flow while ensuring asset security and compliance.

Key Smart Contracts in Nexity’s Liquidity System

  1. Liquidity Pool Contract

    • Governs deposits, withdrawals, and risk-based lending mechanisms.

    • Ensures capital efficiency by dynamically adjusting loan-to-value (LTV) ratios.

    • Manages liquidity provider incentives, including yield distribution.

  2. Trade Asset Tokenization Contract

    • Converts trade receivables into tokenized assets that can be traded or used as collateral.

    • Encodes key trade details, such as invoice terms, payment schedules, and risk scores.

    • Allows assets to be fractionalized for diversified liquidity provisioning.

  3. Automated Settlement Contract

    • Facilitates direct payments from buyers to liquidity providers once invoices are settled.

    • Reduces counterparty risk by locking funds in smart contracts until trade terms are met.

    • Distributes funds transparently, eliminating intermediaries.

  4. Risk Management Contract

    • Evaluates borrower creditworthiness and asset quality in real time.

    • Dynamically adjusts interest rates and collateral requirements based on market conditions.

    • Enforces overcollateralization mechanisms to protect liquidity providers.

Smart Contract Code Example: Liquidity Pool Management

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.19;

contract NexityLiquidityPool {
    mapping(address => uint256) public deposits;
    mapping(address => uint256) public loans;
    uint256 public totalLiquidity;
    uint256 public interestRate = 5;  // Example fixed interest rate

    event Deposit(address indexed provider, uint256 amount);
    event LoanIssued(address indexed borrower, uint256 amount);
    event Repayment(address indexed borrower, uint256 amount);

    function depositLiquidity() public payable {
        deposits[msg.sender] += msg.value;
        totalLiquidity += msg.value;
        emit Deposit(msg.sender, msg.value);
    }

    function requestLoan(uint256 amount) public {
        require(amount <= totalLiquidity, "Insufficient liquidity");
        loans[msg.sender] += amount;
        totalLiquidity -= amount;
        payable(msg.sender).transfer(amount);
        emit LoanIssued(msg.sender, amount);
    }

    function repayLoan() public payable {
        require(loans[msg.sender] > 0, "No active loan");
        uint256 repayment = msg.value;
        loans[msg.sender] -= repayment;
        totalLiquidity += repayment;
        emit Repayment(msg.sender, repayment);
    }
}

This is a simplified contract structure, but it showcases how liquidity providers contribute funds, businesses access financing, and repayments flow back into the pool.

Tokenization Standards: Bringing Trade Assets On-Chain Tokenizing trade finance assets isn’t just about digitization—it’s about making them financially productive. Nexity follows strict tokenization protocols to ensure real-world usability.

Token Standards Used in Nexity ERC-3643 Compliant RWA Tokens

Trade finance assets are tokenized under ERC-3643, ensuring full compliance with security token regulations. These tokens are programmable, allowing for automated enforcement of trade contracts. Programmable Trade Receivable NFTs

Every invoice, purchase order, or trade receivable is minted as a unique NFT. NFTs contain embedded financial metadata, including risk assessments and settlement schedules. Fractionalized Trade Assets

Tokenized invoices can be split into smaller units, allowing multiple liquidity providers to finance a single trade. Enhances liquidity by making trade finance accessible to a wider range of investors. Risk Management & Liquidity Safeguards Managing liquidity isn't just about providing funding—it’s about ensuring that funding remains secure, transparent, and efficient.

Multi-Layered Risk Controls On-Chain Credit Scoring

Nexity uses AI-powered risk assessment to evaluate borrower creditworthiness. Smart contracts dynamically adjust interest rates based on risk profiles. Collateralized Lending Mechanisms

Borrowers must deposit overcollateralized assets to secure funding. Ensures that liquidity providers are protected from defaults. Automated Loan Liquidation

If repayment deadlines are missed, smart contracts trigger automated asset liquidation. Ensures that liquidity pools remain solvent and well-funded. Decentralized Insurance

Liquidity providers have the option to stake funds in an insurance contract that covers default risk. Provides an additional layer of protection, reducing systemic risk. Nexity’s Governance Model: Decentralized Decision-Making Liquidity must be actively managed to ensure sustainability. Nexity implements a multi-tiered governance structure to balance liquidity incentives, risk controls, and capital efficiency.

Governance Mechanisms Liquidity Provider Voting

LPs vote on key protocol parameters, including fee structures and interest rates. Institutional Risk Oversight

Institutional partners contribute underwriting expertise and liquidity guarantees. Protocol-Level Adjustments

Dynamic adjustments are made based on market conditions, ensuring capital remains well-allocated. On-Chain Treasury for Security & Expansion

A portion of transaction fees is allocated to the treasury to fund security audits, protocol upgrades, and global expansion initiatives. Final Thoughts: Why Nexity’s Liquidity Model Stands Out Unlike traditional trade finance or speculative DeFi projects, Nexity’s liquidity system is built on real demand, real transactions, and real financial efficiency.

Traditional Finance is Slow → Nexity automates trade finance on-chain. Other RWA Projects Stop at Tokenization → Nexity ensures liquidity, making assets usable from day one. DeFi is Often Unsustainable → Nexity’s yield is generated from real-world trade, not inflationary rewards. By merging blockchain automation with real-world financial activity, Nexity isn’t just improving trade finance—it’s making liquidity work the way it should.

6. Smart Contract Architecture

The NXT Liquidity Pools are built on a modular and upgradeable smart contract framework, ensuring security, flexibility, and scalability. The architecture is designed to optimize capital efficiency while maintaining compliance with trade finance regulations.

6.1 Core Contracts

The system is composed of several key smart contracts:

  1. LiquidityPool.sol – Manages deposits, withdrawals, and interest distribution for liquidity providers.

  2. TradeFinanceVault.sol – Holds tokenized trade assets and facilitates financing requests.

  3. LiquidityManager.sol – Routes liquidity between different pools and external DeFi protocols for optimal returns.

  4. RiskAssessment.sol – Implements automated risk scoring and borrower evaluation before capital is deployed.

  5. YieldOptimizer.sol – Allocates capital dynamically between trade finance deals to maximize returns.

  6. Governance.sol – Allows token holders to vote on key protocol parameters.

6.2 LiquidityPool.sol

This contract manages the core operations of the liquidity pool, including deposits, withdrawals, and rewards distribution.

Key Functions

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.19;

contract LiquidityPool {
    using SafeMath for uint256;

    mapping(address => uint256) public deposits;
    mapping(address => uint256) public rewards;
    uint256 public totalLiquidity;
    address public governance;

    constructor() {
        governance = msg.sender;
    }

    function deposit() external payable {
        require(msg.value > 0, "Deposit must be greater than zero");
        deposits[msg.sender] = deposits[msg.sender].add(msg.value);
        totalLiquidity = totalLiquidity.add(msg.value);
    }

    function withdraw(uint256 amount) external {
        require(deposits[msg.sender] >= amount, "Insufficient balance");
        deposits[msg.sender] = deposits[msg.sender].sub(amount);
        totalLiquidity = totalLiquidity.sub(amount);
        payable(msg.sender).transfer(amount);
    }

    function distributeRewards() external onlyGovernance {
        uint256 totalRewards = address(this).balance.sub(totalLiquidity);
        for (uint256 i = 0; i < liquidityProviders.length; i++) {
            address provider = liquidityProviders[i];
            uint256 share = deposits[provider].mul(totalRewards).div(totalLiquidity);
            rewards[provider] = rewards[provider].add(share);
        }
    }
}

6.3 RiskAssessment.sol

To ensure responsible capital allocation, the NXT protocol evaluates borrowers before issuing financing. This contract integrates both on-chain and off-chain data for risk scoring.

contract RiskAssessment {
    mapping(address => uint256) public creditScore;

    function updateCreditScore(address borrower, uint256 score) external onlyAuthorized {
        require(score <= 100, "Invalid score range");
        creditScore[borrower] = score;
    }

    function isEligible(address borrower) external view returns (bool) {
        return creditScore[borrower] >= 50;
    }
}

7. Tokenized Trade Finance Assets

Every trade finance deal within the NXT ecosystem is tokenized as an NFT or ERC-1155 token. These tokenized assets represent:

  • Invoices

  • Purchase orders

  • Trade credit agreements

  • Tokenized warehouse receipts

7.1 Tokenization Standards

The platform uses ERC-3643 (Compliant Token Standard) to ensure all trade finance assets comply with legal and regulatory frameworks.

import "@openzeppelin/contracts/token/ERC1155/ERC1155.sol";

contract TokenizedTradeAsset is ERC1155 {
    struct TradeAsset {
        uint256 id;
        string description;
        uint256 value;
        address issuer;
        bool isFinanced;
    }

    mapping(uint256 => TradeAsset) public tradeAssets;
    uint256 public nextAssetId;

    function mintAsset(string memory description, uint256 value) external {
        tradeAssets[nextAssetId] = TradeAsset(nextAssetId, description, value, msg.sender, false);
        _mint(msg.sender, nextAssetId, 1, "");
        nextAssetId++;
    }
}

8. Dynamic Liquidity Allocation

To optimize returns, the liquidity pool dynamically reallocates capital between:

  1. Trade Finance Deals – Funding invoices, purchase orders, and structured trade credit.

  2. DeFi Yield Strategies – Deploying excess liquidity into low-risk DeFi yield aggregators.

  3. Cross-Chain Liquidity Pools – Enabling seamless access to capital across multiple chains.

The LiquidityManager.sol contract is responsible for automated rebalancing.

contract LiquidityManager {
    address public tradeFinancePool;
    address public defiYieldPool;

    function rebalanceLiquidity() external {
        uint256 tradeFinanceYield = ITradeFinancePool(tradeFinancePool).expectedYield();
        uint256 defiYield = IDefiPool(defiYieldPool).expectedYield();

        if (tradeFinanceYield > defiYield) {
            moveLiquidity(defiYieldPool, tradeFinancePool);
        } else {
            moveLiquidity(tradeFinancePool, defiYieldPool);
        }
    }
}

9. Governance & Security

NXT liquidity pools are governed by the community via a Decentralized Autonomous Organization (DAO).

  • Proposal System: Governance token holders vote on protocol changes, including interest rates, fee structures, and risk parameters.

  • Security Audits: Every contract undergoes rigorous third-party audits before deployment.

  • Insurance Fund: A portion of transaction fees is allocated to an insurance fund to cover potential defaults.

contract Governance {
    struct Proposal {
        string description;
        uint256 votesFor;
        uint256 votesAgainst;
        bool executed;
    }

    Proposal[] public proposals;

    function createProposal(string memory description) external {
        proposals.push(Proposal(description, 0, 0, false));
    }

    function vote(uint256 proposalId, bool support) external {
        if (support) {
            proposals[proposalId].votesFor++;
        } else {
            proposals[proposalId].votesAgainst++;
        }
    }
}