Tenexium

Decentralized Long-Only Spot Margin Protocol for the Bittensor Network

Tenexium operates as a spot margin protocol within the Bittensor ecosystem, serving as the core infrastructure for the Tenex subnet. The protocol enables users to establish leveraged long positions on subnet tokens using TAO as collateral, while providing TAO liquidity providers with sustainable yields through both Bittensor miner emissions and protocol-generated fees from trading, borrowing, and liquidations.

Table of Contents

• Overview
• Architecture
• Core Mechanics
• Tokenomics
• Security
• API Reference
• License
• Disclaimer

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📋Overview

Key Features

• TAO-Only Liquidity Pool: Liquidity providers supply TAO exclusively, earning both miner emissions and protocol fee shares without direct alpha volatility exposure
• Long-Only Design: Deliberately prohibits short positions to prevent artificial sell pressure in dTAO markets
• Tiered Leverage System: Maximum leverage (up to 10×) determined by Tenex alpha token holdings with on-chain enforcement
• Dynamic Fee Structure: Trading and borrowing fees adjust based on utilization rates with tier-based discounts
• Automated Buyback Program: A defined share of protocol fees fund programmatic buybacks to support Tenex alpha token demand
• Circuit Breaker Protection: Multiple safety mechanisms including rate limiting, utilization caps, and emergency controls

How It Works

1. Liquidity Providers deposit TAO into the protocol and earn:

   • Bittensor miner emissions
   • Share of trading, borrowing, and liquidation fees

2. Traders can:

   • Deposit TAO as collateral
   • Borrow additional TAO against their position
   • Execute leveraged long positions on alpha tokens
   • Benefit from tier-based fee discounts and higher leverage limits

3. Protocol automatically:

   • Maintains TAO liquidity for sustainable borrowing
   • Manages liquidations and risk parameters
   • Routes fees to buyback pool for Tenex alpha support

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🏗️Architecture

Contract Structure

contracts/
├── core/
│   ├── TenexiumProtocol.sol     # Main protocol contract
│   ├── TenexiumStorage.sol      # Persistent state storage
│   └── TenexiumEvents.sol       # Event definitions
├── modules/
│   ├── PositionManager.sol      # Position lifecycle management
│   ├── LiquidityManager.sol     # LP operations & rewards
│   ├── FeeManager.sol           # Fee collection & distribution
│   ├── BuybackManager.sol       # Automated buybacks & vesting
│   ├── LiquidationManager.sol   # Liquidation execution
│   ├── SubnetManager.sol        # Subnet Manager
│   └── PrecompileAdapter.sol    # Bittensor Precompile Adapter
├── interfaces/
│   ├── IAlpha.sol               # Alpha token interface
│   ├── IStaking.sol             # Staking precompile
│   ├── INeuron.sol              # Neuron precompile
│   └── IMetagraph.sol           # Metagraph precompile
└── libraries/
    ├── AlphaMath.sol            # Mathematical operations for alpha calculations
    ├── RiskCalculator.sol       # Risk assessment and position health calculations
    └── TenexiumErrors.sol       # Custom error definitions

Key Components

• UUPS Upgradeable: Proxy pattern for seamless contract upgrades
• Modular Architecture: Separated concerns for maintainability and security
• Bittensor Integration: Native integration with Bittensor precompiles for staking and other operations
• Multi-Role Access: Owner, LPs, traders, and liquidators with appropriate permissions

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🛠️Core Mechanics

Position Management

Opening Positions

1. User deposits TAO collateral
2. Protocol validates tier and leverage limits
3. User borrows additional TAO (up to leverage limit)
4. Protocol executes alpha token purchase on behalf of user
5. Position is recorded with health ratio monitoring

Health Ratio

Health Ratio = (Collateral Value + Alpha Position Value) / Borrowed TAO Value

• Maintenance Margin: 110% (positions liquidated below this threshold)
• Initial Margin: 120% (minimum ratio required to open positions)
• Liquidation Penalty: Additional 2% fee on liquidated collateral

Circuit Breakers

• Utilization Cap: Borrowing disabled when utilization > 90%
• Rate Limiting: LP operations limited to prevent flash attacks
• Emergency Pause: Owner can pause all operations in extreme scenarios

Liquidation System

Liquidation Triggers

• Health ratio < 110%
• Position becomes underwater due to price movements
• Automatic execution by liquidator bots

Liquidation Process

1. Liquidator identifies underwater position
2. Protocol validates liquidation conditions
3. Liquidator receives 40% of liquidation fee
4. Remaining collateral returned to user (minus fees)
5. Borrowed TAO returned to liquidity pool

Liquidator Incentives

• Fee Share: 40% of liquidation penalty
• Priority Access: Front-running protection for registered liquidators
• Reward Pool: Separate reward mechanism for active liquidators

Fee Structure

Trading Fees

• Base Rate: 0.3% per trade (tier-discounted)
• Payment: Deducted from acquired alpha tokens
• Timing: Applied immediately on position open/close

Borrowing Fees

• Base Rate: 0.005% per 360 blocks (dynamic based on utilization)
• Utilization-Kinked Model:
  • Kink Point: 80% utilization
  • Below Kink (0-80%): Gradual increase from base rate to 0.02% per 360 blocks
  • Above Kink (80%+): Steeper increase from 0.02% to maximum rates
• Payment: Settled when position is closed or liquidated
• Timing: Accrued continuously in real-time, calculated on position updates or closure

Liquidation Fees

• Rate: 2% fixed (paid by liquidated position)
• Payment: Distributed to liquidators and protocol
• Timing: Applied immediately upon liquidation execution

Fee Distribution

Fee Type	Liquidity Providers	Liquidators	Protocol
Trading	30%	0%	70%
Borrowing	35%	0%	65%
Liquidation	0%	40%	60%

Leverage Tiers

Eligible Tenex alpha holders receive tier-based fee discounts and higher maximum leverage limits.

Tier	Token Threshold	Max Leverage	Fee Discount
0	0	2×	0%
1	100	3×	10%
2	1,000	4×	20%
3	5,000	5×	30%
4	20,000	7×	40%
5	100,000	10×	50%

Note: Maximum leverage is enforced at position open and cannot exceed the user's tier cap.

Buyback Program

Revenue Sources

• 90% of total protocol revenue (comes from protocol fees)

Buyback Mechanics

• Execution Threshold: Buybacks trigger when buyback pool > buybackExecutionThreshold
• Execution Interval: Automated execution every buybackIntervalBlocks
• Staking: Purchased tokens staked to protocol validator hotkey

Vesting Schedule

• Cliff Period: 3 months (no claims allowed)
• Vesting Period: 12 months (linear vesting after cliff)
• Forfeiture: Unclaimed tokens remain in vesting pool

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💰Tokenomics

TAO Liquidity Pool

• Backing Asset: 100% TAO collateral
• Yield Sources:
  • Miner emissions
  • Protocol fee share (30-35% of all fees)
  • Impermanent loss protection (long-only design)

Tenex Alpha Token

• Utility: Tier determination and fee discounts
• Demand Drivers:
  • Automated buyback program
  • Governance participation
  • Future utility expansion

Reward Distribution

• LP Rewards: Allocated pro rata to TAO liquidity provided
• Liquidator Rewards: Performance-based with minimum activity thresholds
• Buyback Allocation: 90% of protocol fees directed to token purchases

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🔒Security

Architecture Security

Contract Design

• UUPS Upgradeable: Proxy pattern with secure upgrade mechanisms
• Access Control: Multi-role permissions with Ownable and custom modifiers
• Reentrancy Protection: OpenZeppelin ReentrancyGuard on all external functions
• Input Validation: Comprehensive parameter validation and bounds checking

Risk Management

• Circuit Breakers: Multiple emergency stop mechanisms
• Rate Limiting: Anti-flash attack protection on LP operations
• Slippage Controls: Maximum slippage limits on interactions
• Conservative Parameters: Initial deployment with conservative risk settings

Audit Status

Component	Status	Auditor
Core Contracts	🔄 In Progress	Internal
Taostats Verification	🔄 Planned	Taostats
External Audit	🔄 Planned	CertiK/Zellic

Known Risk Factors

Bittensor Ecosystem Risks

• Bittensor Network Stability: Protocol operations depend on Bittensor network uptime and consensus
• Precompile Reliability: Price feeds and staking operations rely on Bittensor precompile functionality

Protocol Risks

• Liquidity Risk: Insufficient TAO liquidity could impact borrowing
• Volatility Risk: Extreme alpha price movements could trigger liquidations
• Governance Risk: Centralized control of critical parameters

Mitigation Strategies

• Multi-sig Governance: Critical parameter updates require multi-signature approval
• Gradual Rollout: Conservative initial parameters with gradual expansion
• Insurance Fund: Protocol reserves for covering extreme scenarios
• Emergency Controls: Multiple emergency pause mechanisms

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🚀Getting Started

Install

git clone https://github.com/Tenexium/tenex-subnet
cd tenex-subnet/scripts
python3 -m venv venv
source venv/bin/activate
pip install -r requirements.txt

For Miners (Liquidity Providers)

Use the CLI to associate your hotkey and manage liquidity; no separate miner daemon is required.

Step 1. Configure environment variables.

cp .env.example .env

Edit .env and set:

# Private key for the EVM wallet you'll use for TAO deposits
MINER_ETH_PRIVATE_KEY=your_evm_private_key_here
# Public key (hex) of your registered miner hotkey
MINER_HOTKEY=your_miner_hotkey_public_key_here
# network name for subtensor EVM (default=mainnet)
NETWORK=mainnet

Note: To create an EVM wallet and export its private key, see the EVM mainnet with Metamask wallet guide.

Note: To get your miner hotkey public key, enter your hotkey (SS58) address in the Snow Address Converter App and copy the public key.

Step 2. Associate your EVM address with your hotkey.

python3 tenex.py associate

Step 3. Add or remove liquidity.

python3 tenex.py addliq --amount <amount>

python3 tenex.py removeliq --amount <amount>

View protocol and miner stats:

python3 tenex.py showstats

For EVM Validators

1. Deploy your validator contract (identical to SubnetManager.sol) and register to the subnet with its H160 address.

2. Copy .env.example to .env and edit the following variables:

   • VALIDATOR_ETH_PRIVATE_KEY: private key of your validator contract
   • WEIGHT_UPDATE_INTERVAL_BLOCKS: number of blocks between weight updates (default=100)
   • NETWORK: network name for Subtensor EVM (default=mainnet)

3. Start the validator process:

python3 evm_validator.py

For Normal Validators

1. Copy .env.example to .env and edit the following variables:

   • WEIGHT_UPDATE_INTERVAL_BLOCKS: number of blocks between weight updates (default=100)
   • NETWORK: network name for Subtensor EVM (default=mainnet)
   • NET_UID: subnet uid (default=67)
   • ENDPOINT: subtensor endpoint to which you will connect (default=wss://entrypoint-finney.opentensor.ai:443)
   • WALLET_PATH: path where your wallets are stored (default=~/.bittensor/wallets/)
   • WALLET_NAME: name of your coldkey (default=tenex)
   • WALLET_HOTKEY: name of your hotkey (default=validators)

2. Start the validator process:

python3 validator.py

For Users

Users can open/close long positions and add collateral via the position management functions: openPosition(), closePosition() and addCollateral(). Alternatively, use the CLI (coming soon):

tenex open --address <wallet_address> --amount <tao_amount> --netuid <netuid> --leverage <leverage> --slippage <slippage>

tenex close --address <wallet_address> --amount <tao_amount> --netuid <netuid> --slippage <slippage>

tenex add --address <wallet_address> --amount <tao_amount> --netuid <netuid>

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📚API Reference

Core Functions

Position Management

// Open a leveraged position
function openPosition(
    uint16 alphaNetuid,
    uint256 leverage,
    uint256 maxSlippage
) external payable

// Close a position
function closePosition(
    uint16 alphaNetuid,
    uint256 amountToClose,
    uint256 maxSlippage
) external

// Add collateral to position
function addCollateral(uint16 alphaNetuid) external payable

Liquidity Management

// Add liquidity
function addLiquidity() external payable

// Remove liquidity
function removeLiquidity(uint256 amount) external

// Claim LP rewards
function claimLpFeeRewards() external returns (uint256 rewards)

// Claim liquidator rewards
function claimLiquidatorFeeRewards() external returns (uint256 rewards)

View Functions

// Get protocol statistics
function getProtocolStats() external view returns (
    uint256 totalCollateralAmount,
    uint256 totalBorrowedAmount,
    uint256 totalVolumeAmount,
    uint256 totalTradesCount,
    uint256 protocolFeesAmount,
    uint256 totalLpStakesAmount
)

// Get user statistics
function getUserStats(address user) external view returns (
    uint256 totalCollateralUser,
    uint256 totalBorrowedUser,
    uint256 totalVolumeUser,
    bool isLiquidityProvider
)

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📄License

Tenexium is licensed under the MIT License - see the LICENSE file for details.

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⚠️Disclaimer

Leveraged trading is risky and can exceed your initial investment. Tenexium is provided “as is” with no warranties. Do your own research, understand the risks, and comply with applicable laws in your jurisdiction.

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Built with ❤️ by the Tenexium Team