Abstract

Reimagining Fixed Income Yield Investments

In traditional finance, fund managers leverage their expertise to attract capital and generate returns—but this model inherently requires centralized trust and limits transparency. In DeFi, trustless, non-custodial yield generation has unlocked new opportunities for liquidity providers to participate directly, yet challenges remain in accurately predicting returns and aligning incentives across participants.

This paper introduces a unified, multi-layered framework that transforms DeFi yield farming through state-of-the-art risk management and incentive-driven performance. At its core lies the Sharpe Consensus, a mechanism powered by verifiers who use statistical and AI-driven benchmarking to dynamically assess and validate the performance of diverse investment strategies (or “Farms”). This approach ensures predictable, risk-adjusted returns while enforcing competitive performance incentives and penalising underperformance via staking and slashing mechanisms.

LPs receive claim tokens representing a 1:1 claim on their principal, enabling seamless transfers and secondary market liquidity. At deposit, they also earn an immediate bonus in $DXP tokens—calculated from live, market-driven pricing—which provides upfront value. Additionally, an integrated insurance pool allows market participants to hedge against underperformance, further aligning incentives and bolstering farm discipline.

Governance is decentralised and weighted by vDXP holdings, ensuring that protocol updates and fee adjustments are driven by community consensus. This unified, modular system not only enhances security and efficiency but also creates a self-reinforcing network effect—establishing a durable competitive advantage in the evolving DeFi landscape.