# Asset Reserve Fund (ARF)

The **Asset Reserve Fund (ARF)** is Lendr’s capital buffer—standing ready to absorb unexpected shocks such as custodian failure, hedge slippage, or oracle malfunction..

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### 1 Target Size

* **3 % of total protocol TVL** (aggregated across all chains).
* Held in highly liquid **USDL / USDC** so it can be deployed instantly.

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### 2 How the ARF Is Funded

| Source              | Share                                   | Flow                                                                                                                     |
| ------------------- | --------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ |
| Performance fees    | **10 %** of every vault’s positive P\&L | Auto‑routed by the **FeeRouter** until the 3 % cap is reached.                                                           |
| Emergency RWAL swap | Governance‑approved only                | If ARF falls below 1 % TVL after a payout, xRWAL holders can authorize a temporary RWAL‑to‑USDL auction to recapitalize. |

When the ARF ≥ 3 % TVL, its 10 % fee share is re‑routed to xRWAL stakers; it re‑activates automatically if the balance dips below target.

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### 3 When the ARF Can Be Used

| Scenario                         | Trigger                                                            | Disbursement Process                           |
| -------------------------------- | ------------------------------------------------------------------ | ---------------------------------------------- |
| **Custodian default**            | Verified asset shortfall after audit                               | Multisig releases funds to the affected vault. |
| **Hedge loss > draw‑down limit** | Vault draw‑down exceeds its maxDrawdown and governance vote passes | ARF tops up the vault to restore NAV.          |
| **Smart‑contract exploit**       | Confirmed exploit & independent audit                              | Emergency payout after a 48 h timelock.        |

*A super‑majority Snapshot vote (≥ 66 %* RWAL *quorum) is required for any ARF withdrawal.*

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### 4 Transparency & Oversight

* **On‑chain addresses** — `0xArf…` (per chain) visible in real time.
* **Monthly report** — balance, inflows, outflows and scenario stress‑tests.
* **Auditability** — ARF contract included in every external security audit.

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### 5 Replenishment & Growth

If a payout reduces the ARF below its 3 % TVL target:

1. The **10 % performance‑fee share** automatically resumes flowing to the ARF.
2. Governance may temporarily direct *all* fees to the ARF until the target is restored.
3. As a last resort, xRWAL can approve an RWAL‑for‑USDL sale to recapitalize the fund.

> **Goal:** protect user balances first, with minimal dilution to fee shareholders.

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#### In Short

The Asset Reserve Fund provides a clear, on‑chain safety net so that unforeseen losses are covered by the protocol—not by individual depositors.