How Agents Work
How do agents work under the hood?
How do agents work under the hood?
Autonomous AI systems that optimize yields without user interventionContinuous Monitoring
- Agents scan 15+ DeFi protocols (Aave, Compound, Morpho, etc.) in real-time
- Monitor APY changes, gas costs, and market conditions across Base and Ethereum
- Track protocol health, liquidity depth, and security status
- Only execute moves when finding 0.3%+ yield improvements after gas costs
- Calculate optimal timing based on network congestion and gas prices
- Use risk-adjusted return algorithms to compare opportunities
- Direct smart contract interactions with established protocols
- Non-custodial architecture - users maintain full fund control
- Automatic compound interest management and optimization
What happens after a user's first deposit?
What happens after a user's first deposit?
Predictable timeline for first optimizationImmediate (0-2 minutes)
- Deposit confirmed and visible in user balance
- Agents activate and begin scanning available protocols
- Initial opportunity analysis starts
- Agents compare yields across all 15+ integrated protocols
- Calculate gas costs and optimal execution timing
- Identify best opportunity based on amount and risk parameters
- Agent executes first yield optimization automatically
- User receives notification:
"Agent moved $500 to Morpho (3.8% → 9.2% APY)" - Funds immediately start earning optimized yields
- Continuous 24/7 monitoring and optimization
- Automatic compounding of earned interest
- Regular rebalancing cycles (typically 2-5 times per month)
How does rebalancing work?
How does rebalancing work?
Automatic fund movement to optimize returnsTrigger Conditions
- Agent identifies 0.3%+ better yields after accounting for gas costs
- Gas prices reach favorable levels for profitable execution
- Market conditions change to favor different protocols
- New protocol opportunities become available
- Analysis: Agent calculates profitability of potential move
- Timing: Wait for optimal gas conditions if necessary
- Withdrawal: Exit current position from lower-yielding protocol
- Asset Swap: Convert between stablecoins if beneficial (USDC ↔ GHO/USR/USDbc)
- Deposit: Enter position in higher-yielding protocol
- Notification: Update user with move details
Investment Duration & Strategy
How long should users stay invested?
How long should users stay invested?
Optimal time horizons for maximum returnsMinimum Effective Period
- 1 week: Initial agent optimizations and adjustments
- 1 month: Compound interest becomes noticeable in returns
- 3+ months: Full benefit of multiple rebalancing cycles
- 3-12 months: Sweet spot for optimal agent performance
- Captures multiple high-yield opportunities through market cycles
- Maximizes compound interest acceleration effects
- Allows agents to learn optimal timing patterns
- No lock-up periods or withdrawal penalties
- Instant withdrawals available 24/7
- Agents continue optimizing until withdrawal
When are earnings paid out?
When are earnings paid out?
Real-time earnings accumulation modelContinuous Earning
- Interest accrues every second from deployed protocols
- Balance updates in real-time to reflect current earnings
- No scheduled “payout dates” - earning is continuous
- Earned interest automatically reinvested into yield-generating positions
- Larger balance results in higher absolute returns going forward
- Compound effect accelerates returns over time
- 10% performance fee calculated and deducted daily
- Only charged on actual profits earned
- Fees automatically deducted from gross earnings
- Displayed balance always reflects withdrawable amount
- All fees already deducted from shown balance
- No hidden charges or surprise deductions
Yield Generation & Performance
How is yield (APY) generated?
How is yield (APY) generated?
Revenue sources behind DeFi yieldsLending Markets (Primary Source)
- Users’ stablecoins are lent to borrowers through protocols like Aave and Compound
- Borrowers pay interest rates (typically 4-12% annually) for access to capital
- Borrowers use funds for trading, arbitrage, leveraged positions, or business operations
- Lenders (Liquid users) receive portion of interest payments
- Some yields come from providing liquidity to decentralized exchanges
- Traders pay fees (0.05-0.3%) on each transaction
- Fees distributed proportionally to liquidity providers
- Protocols like Uniswap V3 can generate significant fee income
- Many DeFi protocols offer native token rewards to attract users
- Additional yields from governance tokens and protocol incentives
- Limited-time promotional rates to bootstrap liquidity
- Tokens may appreciate in value beyond yield benefits
Why are returns higher than banks?
Why are returns higher than banks?
Structural efficiency advantages of DeFiEliminated Intermediary Costs
- Traditional banks have massive overhead (branches, staff, compliance, marketing)
- DeFi protocols are software-based with minimal operational costs
- Smaller gap between borrower payments and lender earnings
- DeFi operates in 24/7 global markets with no geographic restrictions
- Borrowers compete globally for capital access
- Interest rates reflect true supply and demand dynamics
- Smart contracts handle operations automatically
- No physical infrastructure or large staff requirements
- Lower costs enable higher user returns
- DeFi represents cutting-edge financial innovation
- Early adopters often capture higher returns during ecosystem growth
- Protocol competition drives yields higher than traditional finance
Risk Management
What are the risks?
What are the risks?
Comprehensive risk assessment for DeFi operationsIntegrated Protocol Risk (Primary)
- User deposits sit directly with DeFi protocols (Aave, Compound, Morpho)
- Protocol hacks or exploits could result in loss of user funds
- Mitigation: Only integrate battle-tested, audited protocols with strong track records
- Limitation: Cannot protect against zero-day exploits or governance attacks
- Stablecoin values can fluctuate ±0.1% normally, up to ±3% during extreme events
- Yield rates change based on supply/demand and market conditions
- Mitigation: Focus on USD-pegged assets, continuous monitoring, quick exit capabilities
- Protocol maintenance or emergency measures can pause operations
- Typical Duration: Hours during network issues, resolved as conditions normalize
- Evolving DeFi regulations could impact service availability
- Jurisdiction-specific restrictions may affect operations
- Approach: Non-custodial model reduces regulatory compliance burden
Implementation Note: These FAQ responses are designed to be embedded in your developer documentation. Each answer provides both conceptual understanding and practical implementation details for developers integrating Liquid’s autonomous yield optimization.