> For the complete documentation index, see [llms.txt](https://docs.liquidex.sh/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.liquidex.sh/core-concepts.md).

# Core Concepts

Liquidex turns complex liquidity provision into a single, simple investment. Here are the core ideas that power the protocol.

***

## One deposit, one position

You never need to manually split your funds across many pools. The experience is intentionally simplified:

{% stepper %}
{% step %}

### Deposit

Deposit a single asset — **USDG** — into an index vault (for example, the **TECH Index**).
{% endstep %}

{% step %}

### Automatic allocation

The protocol splits your deposit across the underlying pools **by weight**.
{% endstep %}

{% step %}

### Receive one token

You get a single **ERC-4626 share token** (for example `TECH_INDEX`) representing your fractional ownership of the entire liquidity basket.
{% endstep %}
{% endstepper %}

{% hint style="success" %}
One share token = your whole position. Track one token, and the protocol handles all the complexity underneath.
{% endhint %}

***

## The Liquidity Scoring Engine

Weights are **not** chosen by which asset is "better". Capital goes where it can be deployed **most efficiently**. The on-chain engine scores each asset using live market data:

{% tabs %}
{% tab title="Fee Productivity" %}
Measures **trading volume** — how much fee each position earns relative to its capital. Higher productivity signals better fee opportunity.
{% endtab %}

{% tab title="Volatility Risk" %}
Computes **realized volatility** from a rolling price history, avoiding over-exposure to risky assets.
{% endtab %}

{% tab title="Liquidity Demand" %}
Tracks **in-range status** plus per-asset weight caps to control concentration and liquidity demand.
{% endtab %}
{% endtabs %}

{% hint style="info" %}
These are **objective, on-chain signals** — not opinions. The scoring engine is fully transparent and verifiable on-chain.
{% endhint %}

***

## Automated rebalancing — zero manual effort

Allocation runs every **epoch** (24 hours). If market conditions shift, the engine:

1. Recomputes the **target weights**
2. Automatically **rebalances** the LP positions
3. Keeps your capital deployed **at peak efficiency**

<details>

<summary>What happens during an epoch?</summary>

Every 24 hours the protocol re-evaluates market conditions, recalculates the ideal allocation for your capital, and adjusts the underlying liquidity positions — all without any action required from you.

</details>

{% hint style="success" %}
You never have to move your liquidity by hand. Liquidex continuously optimizes for you, around the clock.
{% endhint %}

***

## The three pillars of Liquidex

| Pillar                 | Purpose                            |
| ---------------------- | ---------------------------------- |
| **Single-position UX** | One deposit, one token             |
| **On-chain scoring**   | Objective, transparent allocation  |
| **Auto-rebalancing**   | Constant optimization, zero effort |


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