The Aqualis AMU algorithm enables funds from a traditional DEX pool to be used for more than just trading, allowing a single pool of assets to be allocated for multiple purposes and thus earn revenue from multiple sources. This gives Aqualis the opportunity to drastically reduce fees for users, without sacrificing revenue for depositors, creating Aqualis an objective edge against current DeFi protocols.
In order for the AMU algorithm to function, Aqualis has developed a new stablepool (SP) which operates as an interoperable pool of stablecoins that will directly interact with a lending protocol, allowing a single pool of funds to simultaneously be used for trading and lending.
The key assumption for the SP is that all stable coins in the SP are pegged to $1 USD, or in other words all assets in the SP are equal to each other. Although this can be seen as a risky assumption, as stable coins mature and become more regulated, it is highly likely this assumption will become more of a reality. However, in the event a depeg actually does occur, similar products such as Uniswap V3 which use the concentrated liquidity pool model will actually experience the same level of impermanent loss to Aqualis, without the hedge of stable coins secured in lending. Thus, through the diversification of risk, the Aqualis protocol actually offers a hedge against de-pegs despite the bold assumption of a peg. More information and comparisons between existing protocols can be found on the De-Peg event risk page.
Through this 1 to 1 assumption, users can trade with no price impact, thus eliminating the price impact component of Aqualis' fees and reducing the liquidity required for trading significantly. This additional under-utilized liquidity allows Aqualis to delegate funds from the SP to the lending protocol. All revenue earned from lending will be accumulated and compounded into the SP smart contract through our accumulateFees function, allowing depositors to earn from both lending and trading by depositing into just one pool!
This ensures Aqualis can offer users competitive fees, while maintaining organic and sustainable rewards for depositors without utilizing inflationary token designs.
To ensure the safety of users, Aqualis will only use the largest stablecoins, such as USDT, USDC and DAI.