6. Flash Loan Recycling System

System Overview

The Flash Loan Recycling System is the core innovation of OmniLink, enabling instant cross-chain swaps without requiring user collateral or protocol-owned liquidity.

graph TD
    User([User]) --> SC[Source Chain Interface]
    SC --> FL[Flash Loan Provider]
    FL --> FLH[Flash Loan Handler]
    FLH --> BA[Bridge Adapter]
    BA --> Bridge[Bridge Protocol]
    
    Bridge -.-> DC[Destination Chain]
    DC --> RLP[Recycling Liquidity Pool]
    RLP --> User2([User])
    
    Bridge -.-> |Settlement| RLP

Transaction Lifecycle

1. Source Chain Initiation:

• User submits transaction to source chain

• System takes flash loan from provider

• Tokens are sent to bridge protocol

• Flash loan is repaid immediately

2. Destination Chain Execution:

• Destination contract receives request

• Recycling pool releases tokens to user

• User receives tokens instantly

• Operation is marked as pending settlement

3. Background Settlement:

• Bridge completes token transfer (minutes/hours later)

• Tokens arrive on destination chain

• Recycling pool is replenished

• Operation is marked as complete

Flash Loan Integration

Aave V3 Integration:

sequenceDiagram
    participant User
    participant FLH as Flash Loan Handler
    participant Aave as Aave V3 Pool
    participant Bridge
    
    User->>FLH: initiateSwap()
    FLH->>Aave: flashLoan()
    Aave->>FLH: executeOperation()
    FLH->>Bridge: bridgeTokens()
    FLH->>Aave: repay loan
    FLH->>User: return tx receipt

dYdX Integration (Ethereum only):

sequenceDiagram
    participant User
    participant FLH as Flash Loan Handler
    participant dYdX as dYdX Solo Margin
    participant Bridge
    
    User->>FLH: initiateSwap()
    FLH->>dYdX: operate() with flashloan
    dYdX->>FLH: callback
    FLH->>Bridge: bridgeTokens()
    FLH->>dYdX: repay loan
    FLH->>User: return tx receipt

Recycling Pool Mechanics

Pool Flow Diagram:

graph TD
    RLP[Recycling Liquidity Pool] --> User1[User 1]
    RLP --> User2[User 2]
    RLP --> User3[User 3]
    
    Bridge1[Bridge Settlement 1] -.-> RLP
    Bridge2[Bridge Settlement 2] -.-> RLP
    Bridge3[Bridge Settlement 3] -.-> RLP
    
    Fees[Protocol Fees] --> RLP

Pool Health Calculation:

HealthRatio = (PoolBalance * 1000) / DailyVolume

Dynamic Fee Calculation:

if HealthRatio < 250:      # <25% health
    Fee = 0.5%
else if HealthRatio < 500: # <50% health
    Fee = 0.35%
else if HealthRatio < 750: # <75% health
    Fee = 0.25%
else:                      # >75% health
    Fee = 0.2%

Settlement Process

Normal Settlement:

1. Bridge completes token transfer

2. Tokens arrive on destination chain

3. Destination chain contract verifies authenticity

4. Recycling pool receives tokens

5. Pool parameters update automatically

Delayed Settlement:

1. System monitors for settlement timeout

2. After 6 hours, marks operation for review

3. Continues attempting settlement

4. After 24 hours, triggers fallback mechanism

5. Settlement eventually completes or manual intervention

Failed Settlement (Rare):

1. Bridge failure is detected

2. System attempts alternate bridge route

3. If all bridges fail, insurance fund covers loss

4. Operation is marked as insurance claim

5. Admin intervention reviews failure

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