Existing Problem

Market Failure in DEX

LP inefficiency

a. High LP with low trading volume

Traditional DeFi platforms can suffer from an imbalance between high liquidity provision and low trading volume. This can result in inefficient use of capital and lower returns for LPs. The AEE addresses this issue by optimizing the allocation of liquidity and trading volume, ensuring that LPs receive more consistent and attractive returns on their investments.

b. LP return’s uncertainty

In many DeFi platforms, the returns for LPs can be unpredictable, which can deter potential liquidity providers from participating. The AEE aims to reduce this uncertainty by offering more stable and predictable returns for LPs. This is achieved through mechanisms such as the Earn as Expected Engine, which compensates LPs when their actual returns fall below the expected level, ensuring a more reliable return on investment and boosting confidence in the ecosystem.

Imbalance between stakeholders

a. Trader vs LP provider/Token holder (See-saw relationships in handling fee)

In conventional DeFi platforms, traders and liquidity providers (LPs) sometimes face conflicting interests. When trading fees vary, one party's gain might mean a loss for the other, resulting in an unbalanced ecosystem with misaligned incentives. The AEE revolutionizes this by fostering a harmonious environment that supports both traders and LPs. Experience enhanced collaboration and mutual growth with AEE's balanced ecosystem.

b. Long vs Short (Long-Short imbalance→ Net Long in entire market→ One-sided exposure risk)

In the crypto market, traders tend to have a net long position, causing an imbalance in the market and increasing the risk of one-sided exposure. This can lead to market instability and increased risk for LPs. The AEE seeks to mitigate this by offering incentives for traders to take both long and short positions, promoting a more balanced market and reducing exposure risks.

Dislinkage between Governance token and ecosystem

a. DEX growth only partly reflects on the token price→ lower incentive to hold the token

In some DeFi ecosystems, the growth of the decentralized exchange (DEX) is not fully reflected in the governance token's price, leading to lower incentives for holding the token. The AEE addresses this problem by linking the token's value more closely with the platform's growth, providing better incentives for token holders to contribute to the ecosystem.

b. Lack of ecosystem involvement → Not fair to token holders’ contribution

Token holders often contribute to the platform's growth and governance but may not see a fair return on their contributions. The AEE aims to increase token holder involvement by providing a more equitable distribution of rewards and benefits, recognizing the contributions of the token holders and encouraging active participation in the ecosystem.