Market Dynamics

The Liquid $RECORD system facilitates the flow of liquidity into Investment Pools within the Music Protocol ecosystem. $mbUSD holders can invest in a diversified portfolio of music-related assets and earn returns from royalty-linked cash flows. Direct investments in pools typically offer higher yields than investments via the $nRECORD system. However, $nRECORD provides greater liquidity and enhanced diversification by applying a small fee on each yield distribution, resulting in slightly lower returns.

Technologically, the system is managed by a smart contract that handles key financial flows:

• Liquidity Inflow: Accredited Liquidity Providers send stablecoins to the Liquid $RECORD Smart Contract, minting $nRECORD tokens. This controlled process ensures compliance and stability.

• Liquidity Management: Funds from $nRECORD issuance are invested into Investment Pools, allowing Liquid $RECORD investors to earn returns based on the performance of music royalty-linked notes.

• Liquidity Outflow and Redemption: $nRECORD holders can redeem their tokens for stablecoins, which are burned in the process. Redemptions depend on the system’s available liquidity and investment returns.

• Yield Distribution: Returns from Investment Pools are distributed proportionally to $nRECORD holders, providing a steady income stream from music royalties.

• Reserve Management and Overcollateralisation: A reserve of liquidity ensures efficient redemptions. Additionally, a percentage of incoming cash flows is retained to build an overcollateralisation reserve, mitigating risks from potential investment underperformance.

This streamlined system allows $nRECORD holders to access music investment opportunities with the flexibility of liquidity management and easy redemption, making $nRECORD a liquid asset backed by a diverse range of music-related investments.