For Web3 users, promises of yield can often be little more than promises. Over the last few years, there have been countless examples of crypto projects offering yield, but the mechanics that ensure that yield remains consistent have failed when under pressure.
As crypto natives, we believe there is a better way of helping protect yield, so users can feel confident that our LSDs can perform the way they were designed to. This is why we have taken special measures to help ensure yield is delivered to LSD users, whatever the weather.
We do that in two key ways, which we’ll explore more below.
A self-sustaining ecosystem
AQTIS was designed to function independently. That means that once the project is live, many of the core functions interact independently to ensure the ecosystem can sustain itself. An overview of how all of this works can be found below.
For this article, two key parts of the AQTIS ecosystem help ensure yield is delivered.
ELIF — AQTIS’ insurance fund
The ELIF, or the Ecosystem Liquidity Insurance Fund plays a pivotal role in maintaining the stability and security of the AQTIS ecosystem.
Its primary role is to serve as a strategic reservoir to ensure AQTIS LSDs can maintain their performance, whatever the weather. The ELIF reduces systemic risk by providing a buffer, actively ensuring that the highest performance standards are maintained.
The ELIF is not just a passive insurance fund. It’s an active insurance fund that acts as a liquidity buffer between the ELA and our Quant Tech.
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ELIF accumulates assets over time based on our performance, serving as a contingency plan for when ELA requires reinforcement. This reserve is strategically designed to safeguard AQTIS LSD-holders. We aim to fill this fund with up to 40% of total LSD TVL, with the aim to cover at least one year of yield which is 15% on average, and up to a 25% drawdown.
The longer the project runs the more robust the fund becomes. After the ELIF is filled with 20% of LSD TVL, ensuring the ELA has enough liquidity to be effective, we would be able to cover yield for 1–2 years.
This would ensure our quant tech can run smoothly without having to exit positions forcibly to cover excess liquidity demand. In addition, we have the opportunity to alter the size of the ELIF to 40% or increase buybacks and treasury deposits.
ELA — helping liquidity be where it needs to be
The Ecosystem Liquidity Aggregator helps ensure liquidity is distributed to where it needs it most — this helps safeguard yield by deploying it as efficiently as possible.
This is AQTIS’ approach to increasing the efficiency of the liquidity pools attached to our LSDs. It does this in two unique ways: it provides deep liquidity to facilitate easy entry and exit from the AQTIS ecosystem, so users can enter and leave LSDs with minimal slippage whenever they need to.
The second way is that it helps eliminate idle liquidity, which is found across the crypto space. Let’s look at an example.
Services like Lido and Curve offer staking services to users who do not have the required amount of ETH to become a validator on Ethereum. In exchange, a user receives stETH in return for lending their Ethereum to the service provider. The stETH they receive can be used in DeFi projects as collateral for loans and other services.
To function properly, these services must hold a certain amount of money to ensure users can easily swap their stETH for the ETH they originally put in. Curve, for example, has a liquidity utilization number of just over 6%, with around $10 million entering and leaving the pool over 24 hours — as of January 2024. This means that the majority of the time, 90% of the liquidity in the staked Eth ecosystem remains idle.
The ELA is a solution that increases efficiency, maintains liquidity, and still protects users. It holds up-to 25% of the total liquidity and is accessible via individual LP-management smart contracts tailored for each LSD. This ensures that liquidity can be efficiently mobilized when necessary, maintaining the protocol’s stability and user confidence.
The ELA is designed to provide 100% exit potential in emergencies for any individual LSD. In volatile markets or unexpected scenarios, this feature ensures that users can exit positions, thereby mitigating potential losses.
What does this all mean?
The AQTIS ecosystem is, as you can see, designed to run autonomously, but more importantly, has multiple fail safes to ensure liquidity can continue to be delivered, even in challenging scenarios.
This, alongside the use of our quant technology, sets us apart from the competition.
❓ Questions or Feedback?
As always, we’re eager to answer all your questions and consider your suggestions. We’d love to hear your thoughts, so please share them in our Telegram or Discord.
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That’s all for now. Stay tuned for more exciting updates, and we’ll catch you in the next one!
