Reserve Management Overview

Given the bridging mechanism of qAR, Quantum's "Reserve Management" system dynamically adjusts the balance of AR held in reserve as users wrap and unwrap qAR. As the supply of qAR fluctuates, the system rebalances AR holdings between MPC wallets and regulated custodial providers to maintain optimal liquidity and security.

In the process of wrapping & unwrapping qAR, users transfer AR and request AR in exchange for/from qAR. To facilitate this, Quantum needs to:

• Safely & securely custody protocol reserve assets (AR) across MPC wallets and custodial solutions.

• Transfer AR between the Quantum bridge and users.

• Dynamically rebalance AR holdings between MPC wallets and regulated custodial providers based on liquidity needs and security considerations.

Quantum also needs to manage rewards distribution within the AO ecosystem while maintaining AR holder benefits.

Example Internal Workflows Some workflow examples to highlight how different components of the system interact:

• Upon a user successfully wrapping AR to qAR, the transferred AR is moved to the MPC-secured reserve wallet. If this causes the MPC wallet to exceed a predefined threshold, the system initiates a rebalancing, moving excess AR to the regulated custodial provider.

• As qAR supply increases, the reserve management system may shift more AR to the custodial solution for enhanced security of larger holdings.

• Upon a user successfully unwrapping qAR to AR, the user receives AR from the most liquid part of the reserve, typically the MPC wallet. If this causes the MPC wallet balance to fall below a certain threshold, the system triggers a transfer from the custodial provider to replenish the MPC wallet.

• During periods of high unwrapping activity, the system may preemptively move more AR from the custodial solution to the MPC wallet to ensure smooth liquidity.

• The reserve management system continuously monitors the balance between MPC wallets and the custodial solution, initiating rebalances as needed to maintain optimal operational efficiency and security.