AIQ is a yield bearing derivative token built on stakeDAO’s liquid veIQ staking with sdIQ, Fraxswap V2 liquidity pools, BAMM lending pools, Curve liquidity and lending pools.

Similar to other yield bearing derivatives such as wstETH, AIQ tokens increase in value relative to IQ tokens over time.

How AIQ Works

1. IQ is converted to AIQ.

IQ tokens can be converted to AIQ tokens through frax.com

2. AIQ Protocol Generates IQ.

When the exchange rate of IQ to AIQ exceeds the current AIQ Target Peg Rate, the AIQ sub-protocol mints new AIQ and converts it to IQ.

IQ gained by the sub-protocol from selling AIQ is deployed into IQ generating strategies.

Similar to sfrxUSD, the AIQ protocol deploys IQ tokens to the highest yielding strategies available.

3. Distributing AIQ Protocol Yield.

All yield generated from the AIQ Treasury yield is converted to IQ. Then:

10% of tokens are utilized for AIQ operational and development costs.

5% of tokens are transferred to the Astral DAO Treasury.

15% of tokens are compounded into the AIQ Treasury, which increases the yield generated by AIQ tokens over time.

70% are swapped to AIQ tokens.80% of AIQ tokens acquired this way are burned.

Remainder are held and deployed by the AIQ Yield Treasury.4. Calculating the AIQ-IQ target peg rate.

Put simply, the Target Peg Rate of AIQ is calculated according to the amount of AIQ burned and the amount of AIQ in Circulation.

The value of IQ in the AIQ Treasury will always be greater than the value of AIQ in circulation if AIQ is at or below the Target Peg Rate.

The AIQ sub-protocol determines the current target swap rate of AIQ-IQ by the following calculation.

NPR = CPR + (1 - ACCR)

NPR: New Peg Rate

CPR: Current Peg Rate

ACCR: AIQ Circulation Change Rate

ACCR = AC ÷ (AC - AB)

AC: AIQ in Circulation

AB: AIQ burned since the last Peg update.

5. Maintaining the AIQ-IQ target peg rate.

When the exchange rate of AIQ to IQ exceeds the Target Peg Rate, the AIQ sub-protocol mints new AIQ and swaps for IQ until AIQ returns to the Target Peg Rate.

When the value of AIQ drops significantly below the Target Peg Rate, sdIQ from the AIQ Treasury are converted into AIQ tokens.

6. AIQ Sub-Protocol Owned Liquidity.

12% of the AIQ Yield Treasury is allocated to AIQ-IQ liquidity pools.

7. AIQ Protocol’s FXTL Yield Distribution.

IQ acquired from FXTL points held by the AIQ Deployer and AIQ Treasury wallets will be utilized to buy and burn AIQ, directly increasing the relative value of AIQ to IQ tokens and the AIQ yield rate.