Ecosystem Liquidity Aggregator

For any functioning DeFi ecosystem, several key elements must be in place to ensure smooth market operations. One of the most crucial aspects is the presence of Market Makers (MMs) and Automated Market Makers (AMMs), which facilitate permissionless buying and selling and ensure there is sufficient liquidity for trades.

While these systems manage capital flows effectively, they often suffer from inefficiencies—particularly in the form of idle liquidity that could otherwise be deployed more productively. In this document, we will explore how AQTIS has developed its own mechanism to ensure that liquidity in the ecosystem is not only available but also far more efficientcompared to traditional DeFi systems.

What is the Ecosystem Liquidity Aggregator (ELA)?

The Ecosystem Liquidity Aggregator (ELA) is AQTIS’s innovative approach to increasing the efficiency of liquidity pools attached to our Liquid Staking Tokens (LSTs). It achieves this through two key mechanisms:

  1. Providing deep liquidity to ensure easy entry and exit from the AQTIS ecosystem.

  2. Creating a dynamic liquidity system that allocates liquidity where it is most needed, effectively reducing idle capital.

When Liquidity is Inefficient

With the rise of AMMs, reliance on traditional MMs has decreased, leading to easily accessible liquidity pools. However, capital efficiency remains a challenge. For example, stETH, the largest staking ecosystem, manages around $107 billion in staked ETH (as of March 2024), but liquidity pools such as those on Curve and Uniswap hold approximately $250 million.

On an average day, only $10 million is moved in and out of these pools—meaning only 3-4% of the liquidity is actively used. Even during periods of heightened trading, volume may rise to $100 million, leaving 90% of liquidity idle. AQTIS has created a solution that increases liquidity efficiency, while still ensuring sufficient liquidity is available to protect users.

How is the ELA Different?

Unlike traditional models that lock up liquidity in multiple LPs (Liquidity Pools), the ELA allocates 50% of liquidity to a primary LP and the other 50% to the ELA. This setup:

  • Ensures aggregated liquidity across all pools supporting the LSTs.

  • Frees up capital that can be used more productively, improving overall liquidity efficiency.

The remaining 50% of liquidity is strategically deployed to maximize efficiency, reduce LP risks, and improve protocol performance. Importantly, the ELA is exclusively used for liquidity management and will not be used for any other purpose.

The ELA is designed to provide 100% exit potential for any individual pool based on specific metrics during emergencies. It holds 20% of full liquidity demand in its pool, accessible via LP-management smart contracts tailored for each LST. For example, instead of allocating 50% of qETH liquidity into an LP, only 25% is committed, with the rest managed by the ELA. This structure ensures liquidity can be mobilized efficiently while maintaining the stability of the AQTIS ecosystem.

Benefits of the ELA for the AQTIS Ecosystem

The Ecosystem Liquidity Aggregator (ELA) brings several direct benefits to the AQTIS protocol:

1. Optimized Liquidity Usage

By balancing liquidity allocation between LPs and the ELA, we avoid over-allocating liquidity, preventing the scenario where capital sits idle. This optimizes the use of assets within the ecosystem and ensures higher capital productivity.

2. Risk Mitigation for Users

The ELA is designed to provide 100% exit potential during emergencies, adding an additional layer of security for users. In volatile markets, this ensures that users can exit positions when necessary, mitigating potential losses.

3. Enhanced Protocol Stability

By maintaining an optimal liquidity ratio, as demonstrated through our qETH strategy, the protocol avoids the pitfalls of excessive liquidity. This leaner, more efficient liquidity model strengthens overall protocol stability and reliability.

4. Adaptive Liquidity Management

The ELA dynamically adjusts liquidity based on market conditions and individual LST requirements, allowing the protocol to respond quickly and effectively to changes. This flexibility benefits users by ensuring liquidity is always available when needed.

5. Aggregated Performance Improvement

The strategic allocation of liquidity between the primary LP and the ELA, combined with the smart deployment of assets, creates an aggregated performance boost for the entire protocol. This results in improved outcomes for all stakeholders in the ecosystem.

6. Building User Trust

The transparent and strategic management of liquidity via the ELA instills confidence among users. Knowing that their tokens are part of a well-managed and risk-conscious ecosystem encourages long-term engagement and trust in AQTIS.

In Summary

The Ecosystem Liquidity Aggregator (ELA) plays a crucial role in AQTIS’s mission to improve liquidity efficiency and mitigate risks. By providing a smart, dynamic liquidity management system, the ELA enhances the performance and stability of the protocol, ensuring that the AQTIS ecosystem remains secure, liquid, and highly efficient. This is just one of the many ways AQTIS is committed to building a secure, stable, and high-performing DeFi ecosystem for its users.

Any questions? Hop into Discord. ​

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