# Protocol Architecture

Xp.Finance operates entirely on-chain, leveraging on-chain scripts for all interactions:<br>

* **Liquidity Pools:** Community-driven pools where users deposit or borrow funds securely.<br>
* **NFT Bonds:** Tokenized, transferable loan positions enabling flexible debt trading.<br>
* **LP Tokens:** Represent user deposits proportionally, ensuring transparent management and easy redemption.<br>
* **Collateralization Mechanism:** Strict overcollateralization policies maintain platform solvency and user protection.