# 8. LSaaS: Liquid Staking as a Service

[Back to whitepaper overview](/lsteak-protocol-docs/lsteak-whitepaper-v2.2/overview.md)

LSaaS (Liquid Staking-as-a-Service) is a deterministic derivative framework within the LSteak ecosystem.

It lets partner tokens issue redeemable `xl-*` tokens.

Each `xl-*` token has a Redemption Ratio (RR).

RR is designed to increase monotonically over time via yield reallocation and structural value transfer.

The redesigned LSaaS architecture has:

* no escrow
* no liquidity vaults
* no AMM pairs for `xl-*` tokens
* no discretionary controls or “emergency routing”
* a one-time partner addition to the primary `LSTEAK/ETH` POL position

No other liquidity pairs are required in this model.

All operations are contract-contained.

All flows are guarded by immutable, pre-simulated constraints.

### 8.1 Accounting model

RR is defined per partner as:

$$
RR = \frac{Q + B}{S}
$$

Where:

* `Q` = partner tokens held in the **VTL Queue**
* `B` = partner tokens held in **xl-token contract backing**
* `S` = total supply of `xl-*` tokens

The Queue is fully included in redemption accounting.

There are no off-balance-sheet reserves.

### 8.2 Entry pipeline (partner deposit flow)

When a partner token is deposited, the system attempts to process it through the Value Transfer Loop (VTL).

Any portion that cannot be processed due to guardrails is placed into the VTL Queue.

Minting uses the **pre-deposit** RR and counts both outcomes (backing + queued):

$$
xl\_{\text{minted}} = \frac{X + Q\_{\text{added}}}{RR\_{\text{pre}}}
$$

Where:

* `X` = partner tokens added to xl backing via the VTL in this deposit
* `Q_added` = partner tokens placed into the Queue in this deposit

### 8.3 Value Transfer Loop (VTL)

The VTL converts partner-token value into bond-backed capital inside the Partner Yield Engine (PYE).

It then re-expresses that value back into partner tokens and deposits them into xl backing.

VTL execution steps:

1. Sell partner token → ETH.
2. Use 100% of ETH to mint LSTEAK at core BPT.
3. Allocate resulting funds to the PYE (same bond/hedge ratio as LSteak core).
4. Sell LSTEAK → partner token.
5. Deposit partner tokens into xl backing.

#### Immutable guardrails

VTL execution is permitted only if **both** constraints hold:

1. `LSTEAK_price >= BPT × 0.98`
2. The execution must not cause RR drawdown greater than `0.5%`.

Each VTL is fully simulated before execution.

If any constraint fails, the entire transaction reverts atomically.

### 8.4 VTL Queue drip mechanism

Every 10 minutes, the system attempts a VTL using tokens from the Queue.

This reduces `Q` and increases `B` without minting any `xl-*` tokens.

Because both `Q` and `B` are included in RR accounting, Queue-drip is accounting-neutral by design.

### 8.5 Partner Yield Engine (PYE)

The PYE is owned by LSteak.

It is allocated at the same bond/hedge ratio as the LSteak core.

Yield distribution depends on whether the Queue contains tokens.

#### 8.5.1 Yield allocation (Queue > 0)

1. `5%` Treasury (gross yield).
2. From the remaining yield:
   * `25%` direct Queue reduction (non-trade transfer from Queue → xl backing, after PYE capital increase)
   * `10%` LSTEAK/ETH POL increase
   * `10%` compound into PYE
   * `5%` buy and burn LSTEAK
   * `50%` buy partner token and deposit into xl backing (increases RR)

#### 8.5.2 Yield allocation (Queue = 0)

1. `5%` Treasury (gross yield).
2. From the remaining yield:
   * `5%` LSTEAK/ETH POL increase
   * `15%` compound into PYE
   * `5%` buy and burn LSTEAK
   * `75%` buy partner token and deposit into xl backing (increases RR)

### 8.6 xl-token redemption

To redeem `x` `xl-*` tokens:

1. Compute partner tokens owed: `p = x × RR`.
2. Source `p` from the Queue first, then from xl backing.
3. Burn the `xl-*` tokens.
4. Transfer `p` partner tokens to the redeemer.

Redemption is contract-only.

There is no market routing for `xl-*` redemptions.

### 8.7 System invariants

* Any LSTEAK minted for LSaaS counts toward core BPT calculation.
* The PYE is backed at the same bond/hedge ratio as core LSTEAK.
* No treasury skim is applied to LSaaS LSTEAK minting inside the VTL.
* VTL guardrails are immutable and pre-simulated.
* RR includes both the Queue and xl backing.
* Queue drip does not mint `xl-*` tokens.
* Redemption is deterministic and contract-based.
* Partner onboarding requires a one-time addition to primary `LSTEAK/ETH` POL only.


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