Infrastructure & Architecture

Introduction

Lava Finance is built on a modular, cross-chain architecture designed for speed, security, and composability. The protocol combines intent-based execution, vault-centric liquidity management, decentralized oracle networks, and non-custodial asset handling into a unified infrastructure layer.

This section details the technical components that power the Lava ecosystem — from trade execution to yield distribution to real-world asset tokenization.

System Architecture

Intent-Based Execution System

Traditional DEX architecture forces users to interact directly with liquidity pools. This creates slippage, MEV exposure, and fragmented liquidity across chains.

Lava replaces this with an intent-based model where users declare outcomes and solvers compete to deliver them.

Intent Lifecycle

Stage	Description
1. Creation	User specifies desired outcome (asset, direction, size, leverage)
2. Signature	Intent signed off-chain — no gas until execution
3. Broadcast	Intent distributed to solver network
4. Competition	Solvers quote execution prices, compete for fill
5. Selection	Best quote wins based on price, speed, and reliability score
6. Execution	Winning solver executes trade on-chain
7. Settlement	User receives position with deterministic pricing

Intent Structure

Intent {
    user: wallet_address
    action: LONG | SHORT | CLOSE
    asset: bAAPL | BTC-PERP | EUR/USD | ...
    size: uint256
    leverage: uint8 (1-100x)
    max_slippage: uint16 (basis points)
    deadline: timestamp
    signature: bytes
}

Intents are chain-agnostic. A user on Solana can express an intent that a solver fills using liquidity on Arbitrum — settlement abstracted from the user.

Benefits

• Zero AMM slippage: No bonding curves or pool imbalances

• MEV protection: Intent abstraction prevents front-running

• Cross-chain liquidity: Solvers aggregate across all connected venues

• Gas efficiency: Users pay only on successful execution

• Deterministic pricing: Price locked at intent acceptance

Solver Network

Solvers are the execution backbone of Lava. They are specialized operators that compete to fill user intents at optimal prices.

Solver Requirements

Requirement	Description
Stake	Minimum $LAVA stake as collateral against malicious behavior
Liquidity Access	Connections to CEXs, DEXs, OTC desks, and market makers
Infrastructure	Low-latency systems for real-time quote generation
Reliability Score	Track record of successful, timely fills

Solver Economics

Solvers earn profit from:

• Spread between quoted price and actual execution

• Volume-based rebates from liquidity venues

• Protocol incentives for maintaining uptime and fill rates

Solvers pay fees to the protocol for each successful fill. These fees flow to staking vaults and liquidity providers.

Solver Selection Algorithm

Score = (Price Quality × 0.5) + (Speed × 0.2) + (Reliability × 0.2) + (Stake Weight × 0.1)

Winner = MAX(Score) among all valid quotes within deadline

The algorithm prioritizes price while rewarding consistent, fast execution. Solvers with higher stakes and better track records gain preference in tie-breakers.

Solver Slashing

Malicious or negligent behavior triggers slashing:

Violation	Penalty
Failed fill after commitment	1% of stake
Price manipulation attempt	10% of stake + ban
Collusion detection	25% of stake + permanent ban
Repeated timeout	Temporary suspension

Slashed funds flow to affected users and the protocol treasury.

Vault Architecture

Vaults are the liquidity and yield infrastructure of Lava. All protocol assets flow through vault contracts.

Vault Types

Vault	Function	Assets	Yield Source
Staking Vault	Hold staked $LAVA and stablecoins	$LAVA, USDC	Protocol fee share
Liquidity Vault	Provide execution depth for solvers	USDC, USDT	Trading fees
Collateral Vault	Hold bTokens as loan collateral	bAAPL, bTSLA, etc.	—
Reserve Vault	Protocol treasury and reserves	Multi-asset	Governance-directed

Staking Vault Mechanics

Yield distribution occurs continuously. Users can claim accrued rewards at any time. Principal withdrawal subject to tier lock period.

Liquidity Vault Mechanics

Liquidity vaults provide depth for solver execution:

1. LPs deposit stablecoins into vault

2. Vault issues LP tokens representing share

3. Solvers draw on vault liquidity for trade execution

4. Trading fees accumulate in vault

5. LPs redeem LP tokens for principal + fees

Utilization rates determine APY. Higher trading volume = higher LP returns.

Collateral Vault Mechanics

bToken holders can deposit assets as collateral to borrow USDC:

Parameter	Value
Collateral assets	bAAPL, bTSLA, bNVDA, bGOOGL, bAMZN, bMSFT
Loan asset	USDC
LTV ratio	Up to 70%
Liquidation threshold	80%
Interest rate	Variable (utilization-based)

Borrowers retain exposure to underlying asset. No taxable event triggered. Interest payments flow to protocol revenue.

Oracle Infrastructure

Lava relies on decentralized oracle networks (DONs) for accurate, tamper-resistant data across all operations.

Oracle Functions

Function	Data Required	Update Frequency
Trade execution	Real-time asset prices	Sub-second
Position marking	Mark prices for PnL calculation	Per block
Liquidation	Threshold prices for margin calls	Per block
Proof-of-Reserve	bToken backing verification	Hourly
Collateral valuation	bToken prices for borrowing	Per block

Oracle Providers

Provider	Role
Chainlink	Primary price feeds for crypto assets
Pyth Network	High-frequency price feeds for Solana
Custom DON	Synthetic stock prices from equity data providers
Reserve Attesters	Proof-of-Reserve for bToken backing

Price Feed Architecture

Manipulation Resistance

• Multiple independent data sources per asset

• Outlier detection and removal

• Time-weighted average prices (TWAP) for liquidations

• Circuit breakers on extreme price movements

• Multi-sig oracle updates for critical parameters

Cross-Chain Infrastructure

Lava operates natively across Solana and EVM L2s without requiring users to bridge assets manually.

Supported Networks

Network	Type	Finality	Primary Use
Solana	L1	~400ms	High-frequency trading, primary execution
Arbitrum	L2 (Optimistic)	~250ms	EVM liquidity access, DeFi integrations
Base	L2 (Optimistic)	~250ms	Coinbase ecosystem, retail onboarding
Future L2s	—	—	Expansion based on liquidity and demand

Cross-Chain Execution Flow

Users interact on their preferred chain. Solvers handle cross-chain routing internally. Settlement is abstracted — users receive positions without managing bridges.

Unified Liquidity

Traditional multi-chain protocols fragment liquidity. Lava's solver network aggregates liquidity across all connected chains into a single execution pool:

Traditional Model	Lava Model
Separate pools per chain	Unified liquidity via solvers
User bridges manually	No bridging required
Slippage varies by chain	Consistent execution quality
Arbitrage across chains	Solvers arbitrage internally

Message Passing

Cross-chain state synchronization via:

Method	Use Case
Wormhole	Asset transfers, vault state sync
LayerZero	Governance messaging, parameter updates
Native bridges	L2-specific operations

Critical operations require multi-chain confirmation. Governance actions propagate to all deployed chains.

Smart Contract Architecture

Lava's smart contracts are modular, upgradeable (via governance), and audited.

Core Contracts

Contract	Function	Chain Deployment
IntentRouter	Receives and validates user intents	All chains
SolverRegistry	Manages solver registration and stakes	Primary (Solana)
ExecutionEngine	Processes solver fills, settles trades	All chains
StakingVault	Manages staked positions and rewards	All chains
LiquidityVault	Holds LP deposits, distributes fees	All chains
CollateralVault	Manages bToken collateral and loans	All chains
bTokenFactory	Mints and burns bTokens	Primary (Solana)
OracleConsumer	Interfaces with price feeds	All chains
FeeDistributor	Routes protocol revenue to recipients	All chains
Governance	Manages proposals and voting	Primary (Solana)

Upgradeability

Contracts use a proxy pattern for upgradeability:

Upgrade Type	Process
Minor (bug fixes)	Multisig approval (3/5 threshold)
Major (new features)	Governance vote + timelock (48h)
Emergency (critical vulnerability)	Emergency multisig (4/5 threshold) + immediate pause

All upgrades are transparent. Bytecode changes published before execution. Users can exit positions during timelock if they disagree with upgrade.

Risk Management System

Lava implements multiple layers of risk management to protect users and protocol solvency.

Position Risk

Mechanism	Description
Margin requirements	Initial margin based on leverage and asset volatility
Maintenance margin	Minimum margin to keep position open
Auto-deleveraging	Reduces position size before liquidation in extreme conditions
Liquidation engine	Closes underwater positions to protect LPs

Liquidation Process

Position Health = Collateral Value / Position Value

If Health < Maintenance Threshold:
    1. Liquidation bot detects underwater position
    2. Oracle price verified (TWAP for manipulation resistance)
    3. Position closed at market price
    4. Remaining collateral returned to user (minus liquidation penalty)
    5. Penalty distributed to liquidator and protocol

Liquidation penalty: 5% of position value

• 3% to liquidator (incentive)

• 2% to insurance fund

Insurance Fund

Protocol maintains an insurance fund to cover:

• Liquidation shortfalls (position closed below debt)

• Oracle failures or manipulation

• Smart contract exploits (post-audit discovery)

Fund sources:

• Liquidation penalties (2% allocation)

• Protocol revenue (10% allocation)

• Governance-directed treasury allocation

Circuit Breakers

Trigger	Action
Price move > 20% in 5 minutes	Trading paused for affected asset
Liquidation cascade (>10% of OI in 1 hour)	Auto-deleverage activated
Oracle stale (>60 seconds)	New positions blocked
Vault utilization > 95%	Withdrawals throttled

Circuit breakers are automatic. No manual intervention required. Trading resumes when conditions normalize.

bToken Infrastructure

bTokens are synthetic representations of real-world equities, backed 1:1 by underlying shares.

Proof-of-Reserve System

Component	Description
Custodian	Regulated entity holding underlying shares
Attestation frequency	Hourly
Verification method	Oracle network queries custodian API
On-chain proof	Merkle root of holdings published to contract
User verification	Any user can verify their bToken is backed

If reserves fall below 100% backing:

1. Minting paused immediately

2. Governance notified

3. Custodian required to restore backing within 24h

4. If unresolved, redemptions prioritized (FIFO)

Corporate Actions

bTokens reflect corporate actions on underlying shares:

Action	bToken Treatment
Dividends	Converted to USDC, distributed to holders
Stock splits	bToken supply adjusted proportionally
Mergers	bToken converted to new entity or USDC
Delistings	bToken redeemed at last traded price

API & SDK Architecture

Lava provides programmatic access for developers, traders, and AI agents.

REST API

Endpoint Category	Functions
/markets	Asset listings, prices, trading pairs
/intents	Create, sign, submit, cancel intents
/positions	View open positions, PnL, margin status
/vaults	Staking balances, yields, LP positions
/btokens	bToken balances, prices, reserve status
/account	Wallet balances, transaction history

WebSocket Streams

Stream	Data
prices	Real-time price updates for all assets
fills	Intent fill notifications
liquidations	Liquidation events across protocol
vault_yields	Real-time yield accrual updates

AI-Agent SDK

Purpose-built SDK for autonomous trading agents:

python

from lava_sdk import LavaAgent

agent = LavaAgent(wallet=wallet, network="solana")

# Express trading intent
intent = agent.create_intent(
    action="LONG",
    asset="bAAPL",
    size=10000,
    leverage=5,
    max_slippage=50  # basis points
)

# Submit and monitor
result = agent.submit_intent(intent)
position = agent.get_position(result.position_id)

# Automated strategy execution
agent.run_strategy(
    strategy="momentum",
    assets=["BTC-PERP", "ETH-PERP"],
    risk_limit=0.02  # 2% max drawdown
)

SDK features:

• Intent creation and management

• Position monitoring and risk checks

• Vault interactions (staking, LP)

• Strategy templates (momentum, mean-reversion, arbitrage)

• Event-driven execution hooks

Security Architecture

Defense Layers

Layer	Protection
Smart contract	Audited code, formal verification for critical functions
Access control	Role-based permissions, multisig for admin functions
Economic	Solver staking, liquidation incentives, insurance fund
Operational	Circuit breakers, rate limiting, anomaly detection
Infrastructure	Distributed nodes, DDoS protection, encrypted communications

Audit Coverage

Auditor	Scope	Status
PeckShield	Core contracts (vaults, execution, staking)	Complete
—	bToken contracts	Scheduled (Phase 3)
—	Cross-chain messaging	Scheduled (Phase 2)

Bug Bounty Program

Severity	Reward
Critical (fund loss)	Up to $500,000
High (protocol disruption)	Up to $100,000
Medium (limited impact)	Up to $25,000
Low (informational)	Up to $5,000

Bounty program managed via Immunefi. All valid reports published post-fix.

Incident Response

Phase	Actions
Detection	Automated monitoring + community reports
Triage	Severity assessment within 1 hour
Containment	Pause affected contracts if critical
Resolution	Deploy fix via emergency multisig or governance
Post-mortem	Public report within 7 days

Infrastructure Summary

Component	Technology	Purpose
Execution	Intent-based solver network	Optimal trade execution
Settlement	Solana, Arbitrum, Base	Multi-chain finality
Liquidity	Vault-centric model	Unified liquidity pool
Oracles	Chainlink, Pyth, custom DON	Price feeds, Proof-of-Reserve
Storage	On-chain state + IPFS (metadata)	Position and vault data
API	REST + WebSocket	Programmatic access
SDK	Python, TypeScript	AI-agent integration
Security	Audits, multisig, insurance fund	Protocol protection

Lava's infrastructure is designed for scale, speed, and security. Every component is modular — allowing independent upgrades without system-wide disruption. The architecture supports current products while providing a foundation for future expansion into new asset classes, chains, and use cases.