$aETH has designed a self-sustaining loop that not only amplifies its value but also continually boosts its attractiveness to participants. This documentation simplifies how this beneficial loop works.

1. Launch & Initial Attraction:

  • Kickstart: The launch introduces the $aETH token and its enticing features.

  • The Allure of High APR: An impressive Annual Percentage Rate (APR) is presented, acting as the initial magnet for liquidity providers.

2. Attraction of High APR:

  • Liquidity Multiplies: The tempting APR lures more investors to the liquidity pool.

  • Key Activity: To join this pool, participants buy or mint $aETH to pair it with assets like $ETH and $USDC.

3. Ramifications of Increased Liquidity:

  • Boost in LP Price: With a growing number of participants and deepening liquidity, the Liquidity Pool (LP) token price starts its ascent.

4. Emergence of Arbitrage Opportunities:

  • Spotting the Discrepancy: A rising LP price manifests a gap between the contract and the LP rates.

  • Capitalizing on the Gap: Astute traders grab this window of opportunity. They mint $aETH from the contract for less and offload it in the higher-priced liquidity pool.

  • Dual Rewards: Minting boosts the token’s contract price and simultaneously amplifies the APR.

5. The Natural Profit Extraction:

  • The Dynamic: After enjoying appreciable gains, some holders decide to liquidate, selling their assets.

  • LP’s Reaction: This sell-off nudges the LP price downwards.

6. Round Two of Arbitrage:

  • Spotting a New Gap: The lowered LP price vis-Γ -vis the contract rate opens a fresh arbitrage door.

  • Acting Again: Traders now purchase from the deflated liquidity pool and proceed to burn in the contract in order to redeem the corrisponding amount of ETH, reaping the price differential.

  • Double Boost: Each redeem action elevates both the contract's price and the overall APR.

Last updated