Architecture

Timelock enables permissionless perps, options, and spot trading through a single Uniswap V4 pool with sophisticated liquidity management.

Core Components

Timelock Vault

The vault is the liquidity management layer that bridges LPs and the Uniswap V4 pool:

• Accepts LP deposits and forwards liquidity to the Uniswap V4 pool.
• Borrows idle tick liquidity from the pool to collateralize perps and options.
• Ensures borrowed liquidity is risk-neutral to LPs.
• Optional: integrates with Vault Manager for automated rebalancing.

Uniswap V4 Pool

The unified liquidity layer that powers all trading activity:

• Executes spot swaps for traders.
• Provides liquidity for perps and options via the Timelock Vault.
• Collects swap fees, perp funding, and option premia.
• Returns fees to vault depositors and direct LPs.

Timelock Options Market

Enables oracle-free options trading:

• Traders purchase ATM everlasting options.
• Premium paid via streaming theta (continuous funding).
• Liquidity borrowed from vault to collateralize option payoffs.
• Pricing derived from pool implied volatility (IV).

Optional Components

Perps Operator Service

• Triggers hourly funding deduction for all open positions.
• Allows gasless trading on the dApp via an API.
• Allows users to specify a max spending limit for the total funding they can be charged.

Vault Managers

• Automated liquidity rebalancing for concentrated positions.
• Optimizes tick ranges based on market conditions.
• Maximizes fee capture for vault depositors.

Timelock Hook

• Uniswap V4 hook for enhanced pool functionality.
• Enables features like buybacks, single-asset fee collection, and custom trading logic.
• Composable with other protocols.

Liquidity Flow

Spot Trading Flow

1. Spot Traders swap tokens directly in the Uniswap V4 pool.
2. Pool charges swap fees based on the fee tier.
3. Fees distributed to LP #1 (via vault) and LP #2 (direct).

Perps & Options Trading Flow

1. Perps/Options Traders open positions via Timelock Options Market.
2. Vault borrows liquidity from the Uniswap V4 pool to collateralize the position.
3. Trader pays funding (streaming theta) to keep the position open.
4. Funding flows back to LP #1 depositors as additional yield.
5. On position close, borrowed liquidity is returned to the pool.

Risk Management

The vault ensures all positions are fully collateralized:

• Perps: Spot asset borrowed and escrowed to back the derivative.
• Options: Strike amount borrowed, eliminating liquidation risk.
• LPs: Protected from trader PnL; earn fees regardless of trade outcomes.

Key Design Principles

1. Unified Liquidity: One pool serves spot, perps, and options, maximizing capital efficiency.
2. Oracle-Free: Pricing derived from Uniswap market data and implied volatility.
3. Permissionless: Anyone can create markets by supplying liquidity.
4. Risk-Neutral LPs: Vault borrowing design ensures LPs are not exposed to trader PnL.
5. No Liquidations: Fully collateralized positions eliminate liquidation risk for traders.

This architecture enables Timelock to deliver liquidation-free leverage and permissionless derivatives while maintaining LP safety and capital efficiency across all trading venues.

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