# Strategy Allocation

Ledgity’s yield is generated from a **diversified portfolio of short-duration, cash-flow-producing real-world financial instruments**, combined with a controlled on-chain liquidity component.

The allocation framework is designed to balance:

* **Yield stability**
* **Liquidity availability**
* **Risk diversification**

***

### **Target Allocation Model**

| Allocation Segment                       | Approx. Weight | Role                                   | Characteristics                                            |
| ---------------------------------------- | -------------- | -------------------------------------- | ---------------------------------------------------------- |
| **Short-Duration Revenue Financing**     | **\~80%**      | Core yield source                      | Recurring repayments, diversified issuers, non-speculative |
| **On-Chain Structured Yield (Low Risk)** | **\~15%**      | Liquidity optimization & composability | Non-leveraged lending, institutional-grade DeFi partners   |
| **Liquidity Buffer (On-Chain)**          | **\~5%**       | Supports instant withdrawals           | Dynamic, monitored & rebalanced                            |

> This allocation model may evolve based on market conditions, liquidity needs, and governance oversight.

***

### **1) Short-Duration Revenue Financing (\~80%)**

This segment provides the **majority of yield**.

* Companies repay financing **in recurring cash flows** (monthly/weekly)
* Maturities are **short (typically <12 months)**
* Positions are **diversified** across sectors and issuers
* Documentation, collateral, and reporting follow **institutional standards**

This ensures the yield is **predictable, repeatable, and linked to real economic activity** — not speculation.

***

### **2) On-Chain Structured Yield (\~15%)**

Exposure to **conservative, battle-tested DeFi strategies**, used only when:

* Collateral is transparent and verifiable
* No leverage loops are required
* Counterparty risk is understood and monitored

Typical examples:

* Lending to over-collateralized borrowers
* Liquid, non-speculative yield markets
* Institutional-grade DeFi protocols only

This segment provides **composability** and **additional liquidity mobility**.

***

### **3) Liquidity Buffer (\~5%)**

Maintained **on-chain** to process **instant withdrawals** and operational rebalancing.

* Adjusted dynamically based on vault inflows/outflows
* Ensures day-to-day liquidity availability
* Reduces reliance on forced unwinds of longer-duration positions

This prevents **liquidity mismatch**, a common failure mode in RWA protocols.

***

### **Why This Allocation Works**

| Risk Dimension      | Ledgity Approach                          | Outcome                                |
| ------------------- | ----------------------------------------- | -------------------------------------- |
| **Duration Risk**   | Short-duration repayment cycles           | Predictable liquidity                  |
| **Credit Risk**     | Diversified issuers + strict underwriting | Stable performance profile             |
| **Liquidity Risk**  | Dedicated on-chain buffer                 | Instant withdrawals for standard usage |
| **Volatility Risk** | No yield dependence on token incentives   | Sustainable return profile             |


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