Aetheria - An Astar ETH Reserve Mechanism

Economics
1

Aetheria proposes a long-term ASTR–ETH reserve mechanism designed to gradually convert value into ETH while preserving continuous user liquidity. Rather than aiming for rapid buybacks or short-term price action, Aetheria focuses on slow capital accumulation, optional redemption, and eventual ETH-backed value convergence.

The core idea is simple:
ASTR is gradually converted into ETH (or yield-bearing ETH), creating a growing reserve that users can redeem against at any time.

The reserve is solely intended for converting ASTR to ETH. Any other inflationary mechanisms or rewards would be implemented separately and would not draw from this reserve.

Motivation

Most buyback or burn mechanisms attempt to:

  • Drive short-term price appreciation
  • Reach an unrealistic “100% supply removal”
  • Depend heavily on sustained external demand

Aetheria takes a different approach. Instead of chasing full supply absorption, it aims to:

  • Build a durable ETH reserve
  • Allow permissionless ETH withdrawal
  • Let value compound slowly over time
  • Reach a point where remaining supply is economically overcollateralised

Once that threshold is reached, the system becomes self-stabilising.

Core Mechanism

Gradual ETH Accumulation

  • A defined percentage of ASTR inflation is used to acquire ETH
  • ETH is held in a transparent on-chain reserve
  • The sole purpose of this reserve is to provide ETH liquidity for ASTR redemptions

Optional Redemption

  • Users may redeem ASTR for a pro-rata share of the ETH reserve at any time
  • Redeemed ASTR is burned, reducing circulating supply

Compounding Effect

  • As supply decreases, remaining ASTR represents a larger share of the ETH reserve
  • This naturally increases the value floor over time

No Forced Exit

  • Users are never required to redeem
  • Liquidity remains available forever

Yield-Bearing ETH Integration

To enhance capital efficiency, the ETH reserve can optionally hold:

  • stETH (Lido Staked ETH) or similar yield-bearing ETH derivatives

Benefits include:

  • ~2–4% native ETH-denominated yield (variable)
  • Faster reserve growth without increasing redemption pressure
  • Additional compounding against a shrinking token supply

Importantly:

  • Redemptions remain ETH-denominated
  • Yield accrues to remaining holders, not the protocol

Inflation Allocation (Illustrative)

Aetheria assumes a transparent, bounded use of inflation specifically for the ETH reserve:

  • 50% — ETH buyback & reserve accumulation
  • 20% — Builders / ecosystem development
  • 20% — Nodes / infrastructure
  • 10% — Team

Note: This allocation is separate from any other inflation mechanisms ASTR may implement for rewards, staking, or other use cases.

Inflation is treated as productive capital, not passive dilution.

Ethereum & CCIP

ETH accumulation and custody occur on Ethereum. All cross-chain coordination is handled via Chainlink CCIP, including:

  • Reserve accounting
  • Redemption settlement
  • State synchronisation

This avoids custom bridges and liquidity fragmentation while keeping ASTR native to Astar.

Why This Works Long-Term

Once roughly 50% of the supply has been redeemed, the system reaches a practical tipping point:

  • Remaining ASTR becomes fully or over-collateralised by ETH
  • Incentives shift from selling → holding
  • Volatility naturally declines as price converges toward NAV

From that point onward, further redemptions are optional rather than economically necessary.

Design Principles

  • Transparency: ETH reserves are fully on-chain and auditable
  • Simplicity: No leverage, no debt, no reflexive mechanics
  • User Sovereignty: Withdraw ETH at any time, no lockups
  • Sustainability: Designed to operate over decades, not cycles

Relationship to Astar

Aetheria is designed to be:

  • A complementary ETH reserve for ASTR
  • A long-term capital primitive within the Astar ecosystem
  • A neutral mechanism that does not interfere with staking or governance

It aligns with Astar’s multi-chain and ETH-adjacent positioning while maintaining ASTR as the native unit of account.

Closing Thoughts

Aetheria is less about “number go up” and more about capital formation. By gradually converting value into ETH (or yield-bearing ETH), while keeping exits open at all times, it creates a system where:

  • Patience is rewarded
  • Risk decreases asymmetrically over time
  • Remaining ASTR naturally gains an ETH-backed value floor

Additional considerations:

  • Aetheria can help integrate ASTR more deeply into the Ethereum ecosystem, enabling ETH-native DeFi applications, cross-chain composability, and broader utility beyond Astar.
  • The ETH reserve is solely for redemptions, keeping it separate from other inflationary mechanisms or token incentives ASTR may implement.

Feedback, critiques, and alternative designs are very welcome — especially around:

  • Redemption curve design
  • stETH risk assumptions
  • Governance minimisation
  • Integration with existing Astar staking or fee flows
  • CCIP risks
  • ETH ecosystem building
  • Early redemptions being irrelevant
  • Incentivizing early withdrawals to reduce ASTR supply

Looking forward to discussion.
[This post was assisted by chatGPT with all of my biases.]

Proposal: Tokenomics 3.0 & dApp Staking Changes
D8A - UCG application
2

Thank you for the proposal.

I have several fundamental questions.

  • Who is the primary owner of this mechanism (or protocol? dApp?)
  • You mention using ASTR to purchase ETH—where does the principal for that come from?
  • Liquidity between ASTR and ETH is quite limited. How do you plan to address this issue?

There is also a more fundamental concern. In a sense, this mechanism amounts to backing the value of ASTR with ETH as collateral. If the collateral is fixed, then ASTR’s value inevitably becomes dependent on the value of that collateral. Even if things work out well in the long run, in the initial phase the collateral would clearly be insufficient, which could significantly damage the value of ASTR.

That brings the focus to the ASTR→ETH redemption rate. This differs greatly depending on whether it is determined by the ratio between the ETH currently held and the total ASTR supply, or by using an oracle-based price feed.

In the former case, as mentioned above, it would substantially impair ASTR’s value (depending on the level of attention it receives). In the latter case, it would merely provide arbitrage opportunities. Such a redemption system is effectively no different from offering a one-sided AMM. In other words, introducing a permissionless redemption mechanism would cause the concept itself to collapse.

I agree with increasing holdings of assets other than ASTR in the Astar DAO treasury, and this is exactly what AFC is currently doing. The goal is to improve the treasury’s financial position by operating in DeFi to acquire stablecoins, DOT, BTC, and other assets—without selling ASTR.

However, in this proposal, the mechanism fundamentally relies on selling ASTR to accumulate ETH. Moreover, because this would be done on an ongoing basis, it creates a structure that applies continuous sell pressure over the long term.
If that’s the case, it might be far better to borrow ETH using ASTR as collateral and earn staking yield, rather than selling ASTR outright.

3

It’s an interesting proposal, and I’d like to hear the AFC’s perspective on this topic. @Poggi_Luca

That said, from a user and holder standpoint, I have a fundamental question:
what is the concrete utility of holding ASTR if, in practice, it becomes easier or more advantageous to simply hold ETH instead?

1 Like
4
  • The owner of the protocol could be majority dao. But then the inflation and fail safes would still be foundation or teams.
  • I think I’m pioneering this method for the first time here. Not a lot of projects are in control of their inflation like astar so I believe this could work.
  • I think initially to get ASTR/ETH liquidity it would be better with double inflation and stagger our purchases.

Staggering purchases will help to avoid MEV and people scalping profit from larger trades.
But buying twice as much ETH and pooling it in steps will help create the initial pool quicker and avoid throwing money away.
Sell 10k ASTR..
Pool 10k ASTR with X stETH..
Sell another 10k.. etc..
So most of the profit will be made by the ASTR/stETH pool which would benefit us as well..

Eventually ASTR will become more fixed to the price of ETH. It still has the potential for going 100x above the NAV. But that would mean more inflation and a bigger ETH pool again.
That situation would probably happen in 10+ years. And it will be the average price of ASTR/ETH over those years..
4% inflation may seem like a lot but it works out to about 0.08% a week..

I kind of wanted to avoid one party like the AFC having control over the aetheria mechanism so that it creates long-term value for the ASTR holders. If a party has access to those kinds of numbers then it could be tempting to increase spending on other things that don’t directly benefit the ASTR holders. If the AFC wanted to do their own selling then I think that should be separate.

Problem with borrowing ETH is that it creates leverage. So if you keep borrowing ETH then the fees accumulate and you end up with debt and probably plan of defaulting on it. Which is the same as selling but with extra fees.

This proposal to me is not really “selling ASTR”. It’s just diversifying our risk away from holding one asset in 2050.

5

@ERC20s Your proposal looks quite interesting, and we have already discussed it in another thread. My question is more related to the long-term sustainability of this initiative, since over time we would effectively be transferring value into ETH.

If ASTR faces prolonged periods of low demand, how do you assess the sustainability of continuing to allocate a fixed percentage of inflation to ETH without creating additional sell pressure in the secondary market?

Considering that we are actively discussing a newer version of Astar’s tokenomics, in line with the V3 proposal, do you still see this model as sustainable even as emissions decrease over time?

1 Like
6

If the price is declining due to low demand.. We can blame the inflation (which some do already)..
But in 10+ years when we have a solid foundation the price will only decline if ETH declines as well.. Then we can blame ETH.. And our low demand won’t matter..

Although it is using the inflation mechanism. We are not really inflating the circulating supply heavily.
Every ETH that is redeemed will be future ASTR burned.
If we mint 100m ASTR and sell for ETH..
We will eventually need to burn 100m ASTR to redeem the ETH..
If it ever becomes profitable to buy ASTR to burn it then the supply could decrease!

This mechanism could bring in new investors that are more interested in the long term sustainability of ASTR..

The only other token that has done something similar is NXM. Eventually the token price became paired to ETH but is now increasing as they build more value in their ecosystem and start exploring alternative investments like stETH.

image
image3755×1690 472 KB

7

Thank you for your reply. However, I still feel that my original questions have not been sufficiently answered.

The ownership and final authority of the protocol are extremely important at the design stage and form the core of the mechanism. In that context, I am not fully convinced by the explanation that “controlling inflation” alone makes this approach acceptable. If this line of reasoning were broadly accepted, many projects could simply issue large amounts of their tokens and use them to accumulate external assets such as ETH or BTC. From both a market and regulatory perspective, this would likely attract very strong criticism.

There is probably a reason why such approaches are rarely adopted. In practice, this structure closely resembles a state issuing currency without clear limits in order to acquire resources, which is fundamentally different from using a portion of an existing treasury to purchase assets. If the asset in question were a stablecoin, there might be more room for discussion. However, when the target is a volatile asset like ETH, the perception is likely to be much harsher. Of course, the situation would be different if ASTR had a clearly defined supply cap and this mechanism operated strictly within that boundary, but the underlying tokenomics have not yet been sufficiently addressed. References to ideas such as “doubling issuance” need to be placed within a much more comprehensive framework.

I also do not think the liquidity issue has been resolved. Executing purchases in stages may help mitigate MEV, but it does not address the fundamental problem of insufficient liquidity. Whether on a DEX or a CEX, if adequate liquidity cannot be secured, it seems unavoidable that significant downward pressure would be placed on the price of ASTR.

What I am asking about are the fundamental and practical conditions required for this protocol to function. I am not rejecting the underlying philosophy or long-term vision. However, even if the intention is that this is “not selling ASTR,” from a third-party perspective it appears economically equivalent to selling, and the actual flow of funds reflects that.

I understand what you are trying to achieve, and I do not think the direction itself is necessarily wrong. That said, based on the current explanation, it is still unclear how this mechanism would operate in a stable manner during the early to mid phases, and I therefore see the hurdle to practical implementation as very high.

8

I wanted to gauge interest before putting work into fully designing the mechanism. Simply put:

  • ASTR already has an inflation mechanism that distributes new tokens to stakers, dApps, and the treasury.
  • Adding an additional flow to send a portion via CCIP to Ethereum would be straightforward.

The Ethereum-side smart contract would:

  1. Set a fixed Uniswap pool address to sell to.
  2. Know how to add ASTR/ETH liquidity to the pool, deepening market depth.
  3. Execute swaps using Uniswap TWAP (Time-Weighted Average Price) to reduce arbitrage risk and execute at a lower-than-average market price.
  4. Provide a redemption mechanism for ASTR → ETH.

For redemptions, the mechanism could work as follows:

  • The contract tracks cumulative ASTR sold.
  • Example: it sells 100 ASTR for 1 ETH, then another 100 ASTR for 0.9 ETH — so 200 ASTR redeems for 1.9 ETH.
  • Initially, redemption could require a high ratio of ASTR (e.g., 10x the ASTR for the first withdrawal) to limit early extraction.
  • Over many years, this ratio would gradually normalize, making the mechanism less competitive relative to directly selling to the Uniswap pool.

This design encourages early participants to use the pool for liquidity rather than the redemption mechanism, while still allowing the protocol to gradually acquire ETH.

  • If the CCIP ASTR token address ever changes, a new contract can be deployed and the inflation flow redirected.

ASTR is in a unique position to do this because it has adjustable inflation, which most other projects lack.

A potential inflation schedule could be:

  • Year 0: 8% inflation (using double issuance), split 4% for selling/redemption and 4% for pooling/liquidity.
  • Year 1+: revert to 4% inflation, with 4% for selling/redemption and 0% for pooling.

This approach balances gradual ETH accumulation, market safety, and liquidity growth while maintaining predictable inflation behavior.

I wanted to gauge the interest before putting work into designing the mechanism.. But simply: ASTR already has it's inflation mechanism that sends money to stakers/dapps/treasury.. So adding another flow that sends money via ccip to eth would not be too difficult to add..

Then the receiving ethereum smart contract would:
Set the uniswap pool address (to sell to)..
Know how to add ASTR/ETH (to create more liquidity on uniswap)..
Know how to execute selling via Uniswap’s TWAP (Time-waited-average price) which can help us execute the swaps at lower than average prices to avoid arbitrage..

Redeem ASTR/ETH mechanism..

I think the best way to execute redemptions would be:
contract sells 100 ASTR for 1 ETH..
sells another 100 ASTR for 0.9ETH
200 ASTR = 1.9ETH
Initially you could withdraw the 1.9ETH for 2000 ASTR (requiring 10x the ASTR)..
Then we gradually decrease the withdrawal ratio over many years until we start to reach a quorum..
So if you want to sell your ASTR then it will be more profitable to sell directly to ETH via the uniswap pool rather than using the mechanism for the first X amount of years.

If there are any changes to ccip astr token address then we can redeploy a new contract and redirect the inflation again..

ASTR is in a unique position where this is possible. Most other projects don’t have an adjustable inflation.

I think a 8% inflation (using the double issuance) is a good start..
4% for selling and 4% for pooling..
Then after 1 year swapping back to 4% inflation with only 4% selling and 0% pooling..

[What i wrote without ai]
9

With regard to this intention, my previous points may have been somewhat too specific. However, I believe these are issues that cannot be avoided sooner or later.

At present, the liquidity of the ASTR/ETH pair on Ethereum is around $6k, which is clearly insufficient for the purpose described here.

This is why “liquidity provision” becomes necessary, but how exactly is this supposed to be done?
Later in your post, you mention allocating part of inflation to liquidity. Does this mean buying ETH via an AMM and then using the remaining ASTR to provide liquidity? Given the lack of baseline liquidity, this would likely result in a large price impact and could lead to a significant downward move.

So the redeemable amount depends on the ETH held by the protocol, and by making early redemption unattractive, redemptions are effectively discouraged. If that is the case, it may be cleaner to simply make redemptions unavailable until certain conditions are met.

For example, once accumulated ETH exceeds a certain threshold, and yield from assets such as stETH increases the ETH balance to the point where the ASTR → ETH redemption rate becomes more attractive than selling ASTR on the market, an incentive would emerge to buy ASTR and participate in redemptions. If the redeemed ASTR were burned, this could create a positive feedback loop for ASTR. This approach is closer to low-risk fund management.

Even if the price of ASTR denominated in ETH continues to decline, the redemption rate would be determined by the protocol’s ETH holdings and the amount of ASTR used, which could serve as a partial downside buffer. When ASTR is rising, there would be little incentive to redeem, but in that case ETH accumulation would continue, so this does not appear problematic.

As I wrote previously, this point is highly problematic.
If this were about reallocating existing inflation, combined with a clearly defined issuance cap, the discussion might be different. However, this proposal increases inflation specifically to purchase ETH while ignoring those constraints. That raises serious ethical concerns and is also inconsistent with what Tokenomics 3.0 is trying to achieve.

If anything, it would be more reasonable to allocate a fixed amount from the existing treasury instead (as several projects already do when acquiring stablecoins, BTC, and similar assets).

What I am concerned about is not holding ETH itself, but rather the means used to acquire it: expanding inflation for that purpose, the continuous sell pressure generated by accumulation, and the lack of sufficient liquidity to absorb that pressure.

1 Like
10

Ya, this is still a huge issue that needs to be addressed by the astar ecosystem..
We need to get people trading our token over there..

I think this mechanism would help to get people trading over there but currently it would not gain much interest while we’re all earning on astar.. We really need to move a large portion of our ecosystem over there and have things like astar staking on ETH..

If we can get ASTR deflationary AND fully backed by stETH that is earning interest.. It would make ASTR even more deflationary..
If we was fully backed by ETH right now and the price of ASTR dropped 10% against ETH.. There would be an incentive to burn 10% of the ASTR supply :sweat_smile:..

Yeah.. Minting extra ASTR just to use to increase the pool size.. That can be easily be burned in the future..
Really depends how our ecosystem is going to look over there.. Maybe we are directly incentivizing people to pool their ASTR/ETH..

So this is why I set a lower ASTR/ETH amount to start.. Starting with a 1:10 ratio as we accumulate ETH..
The reason being is; if ASTR drops 90% in 2 years then the floor would start sooner than expected.. And people can redeem their ASTR for ETH straight away.. Creating a floor price that would burn 10x the amount that we minted..

But if the price drops below the floor and we’re still minting and updating the ratio dynamically it can’t drop forever basically..

It is true that aetheria is not focusing on fast deflation.. but long term it will be more prosperous and more deflationary..

I’m more concerned about the long term prospects of ASTR if we don’t have liquidity to play with in the future. AI is moving fast. NFTs died. Many of the other 100,000s of altcoin projects have been rugged or hacked or disowned or discontinued or closed down because of operational costs. I think we should be realistic with the fact that ASTR could go to zero in 50 years without something like this..

I think maybe it’s something we can try and if it doesn’t work then the treasury can buy up the ETH and we shut it down.. :laughing:

But first we need to focus our expansion for our ethereum utility..
I think we should run a campaign to reward ASTR/stETH uniswap stakers the same percentage as if they was dapp stakers to see how much interest there is..

11

It seems that you and I are looking at this from quite different perspectives.

I fully agree with this concern. However, once something is executed at the protocol level rather than by an individual, it is not something that can be approached lightly with a “let’s try it and stop if it doesn’t work” mindset. It needs to be discussed carefully and designed in a way that maximizes the chance of success.

Based on the current proposal, it feels like the outcome would either involve taking on a very large risk for ASTR, or succeeding only with a relatively low probability.

That said, I also get the impression that our discussion is not progressing further because we are approaching the issue from fundamentally different angles. For now, I would like to treat this as a temperature check and see how other community members feel about it.

1 Like
12

I’m just trying to understand what more you want to see here.. (especially as you’re the only one replying :laughing:)..
Do you want to see eth smart contract design so that we can speculate on the flaws?
Do you want to see more expected performance/statistics? (based on current market activity?)
Do you think it’s a bad idea to try to focus on the long term success?
I’m getting many mixed signals here..

I think I’ve explained the idea fairly well already so I don’t think you want more of that..
I’m just struggling to understand the “large risk for ASTR” or why it would be unlikely to succeed..

I’m just coming at it from an ASTR hodler perspective..
I don’t want to get too deep on why the price is at an ATL but changes are needed and exploring paths we haven’t seen before could be what pulls us back to ATHs..
I think we should explore all avenues right now..

2 Likes
13

I have created a stETH/ASTR pool.. So anyone can add liquidity to it..

14

Thank you for bringing this proposal forward. The underlying concern regarding ASTR’s long-term sustainability is legitimate and warrants serious discussion.

That said, I have significant reservations about both timing and structure.

Timing Considerations

Implementing a mechanism that converts ASTR to ETH at protocol level during current market conditions means executing at historically weak ASTR/ETH ratios, locking in unfavorable exchange rates while introducing additional sell pressure on an already challenged token.

This creates a pro-cyclical dynamic: declining prices trigger protocol-driven selling, which further undermines market confidence and accelerates price deterioration. The mechanism amplifies downward pressure rather than provides stability.

It’s also worth noting that ETH does not function as a safe haven during broader crypto market downturns. We would be converting one declining asset into another while permanently diluting ASTR holders’ positions.

Sound treasury diversification is executed from a position of strength, when exchange rates are favorable—not during market weakness when conversion costs are highest.

Structural Risks

Beyond timing, several fundamental risks warrant consideration:

  • Liquidity fragmentation: Establishing a stETH/ASTR pool diverts liquidity from existing trading pairs. Reduced depth in primary pairs increases slippage and degrades trading experience, potentially suppressing demand.
  • Impermanent loss exposure: Should ASTR underperform ETH, a pattern observed historically across most alternative tokens, liquidity providers in this pool incur impermanent loss. If the protocol itself supplies this liquidity, this represents direct value transfer out of the ecosystem.
  • Signaling risk: A protocol-level ETH reserve mechanism communicates that the project itself is hedging away from its native token. This may undermine holder confidence and raise questions about commitment to ASTR’s long-term value.
  • Governance attack surface: Significant protocol-controlled reserves create potential targets for governance manipulation. Any implementation requires robust safeguards against value extraction.

Areas Requiring Further Development

Before this proposal can be properly evaluated, additional detail is needed: specific mechanism design, funding sources, risk parameters and circuit breakers, and comparative analysis against alternative treasury strategies.

I remain open to exploring reserve mechanisms in principle. But timing and design matter. Any implementation must not accelerate the challenges it seeks to address.

I recommend revisiting this discussion when market conditions improve and execution can proceed from a position of strength.

Gaius_sama :astr:

Astar Foundation

1 Like
15

Thanks for the feedbacks @Gaius_sama

I appreciate that this proposal is not coming at the most favourable time.
But if this proposal was coming at the top of the market, I feel like it would be perceived negatively as FUD.
As this is basically a long-term DCA strategy. IMO, now is always going to be the best time to start.

Structural:
Liquidity fragmentation - If we allow users to withdraw ASTR from dapp staking and reward the pool holders with the same amount then we could increase liquidity. Maybe we can reward other DEX pairs similarly in the future. As there is currently no incentive to move assets away from dapp staking.

Impermanent loss exposure: - Impermanent loss won’t really be a problem. Because if ASTR drops significantly then we would have more stETH than the value of ASTR that we minted. So we would of accumulated stETH at a more favourable price..

Signaling risk: - I see it as strategically diversifying instead of hedging outside of the native. Which is raising the right kind of questions about ASTR’s long term value.

Governance attack surface: - This is true. Which is why I’ve been adamant on keeping this protocol in the hands of the code and separate from governance to avoid attacks. There will be no voting mechanics involved with the smart contract itself. Just a quantity of ASTR that is sent to the contract that is determined by the governance.

Designed by AI

Part 1 — Simple Smart-Contract Implementation

Contracts (Ethereum side)

You only need one core contract.

AetheriaReserve.sol

Responsibilities

  • Receive ASTR via CCIP
  • Swap ASTR → stETH on Uniswap (TWAP-protected)
  • Provide ASTR/stETH liquidity
  • Allow ASTR → ETH redemption
  • Burn redeemed ASTR

Step-by-Step (Code Logic)

1. Receive ASTR (CCIP)

function ccipReceive(address token, uint256 amount) external {
    require(token == ASTR);
    // ASTR now held by the reserve
}

Governance controls how much ASTR is sent — not what the contract does with it.

2. Swap & Add Liquidity

Called periodically (keeper / automation).

function swapAndProvide(uint256 astrToSwap) external {
    // TWAP-protected swap
    uint256 stETHOut = swapASTRtoStETH(astrToSwap);

    // Add liquidity with remaining ASTR + stETH
    addLiquidity(
        ASTR.balanceOf(address(this)),
        stETHOut
    );
}

Key points:

  • Fixed pool address (ASTR/stETH)
  • TWAP oracle check
  • No routing logic
  • No governance intervention

3. Passive Accumulation (No Code)

Value increases automatically via:

  • Uniswap trading fees
  • stETH rebasing yield

No emissions. No rebalance.

4. Redemption (Burn → ETH)

function redeem(uint256 astrAmount) external {
    ASTR.burnFrom(msg.sender, astrAmount);

    uint256 lpShare =
        astrAmount * lpBalance() / totalASTRSupply();

    (uint256 astrOut, uint256 stETHOut) =
        removeLiquidity(lpShare);

    uint256 ethOut = swapStETHtoETH(stETHOut);
    payable(msg.sender).transfer(ethOut);

    if (astrOut > 0) {
        addLiquidity(astrOut, 0);
    }
}

Economic effect

  • ASTR supply ↓
  • Remaining ASTR claims more ETH
  • No redemption queue
  • No price oracle dependency

One-Line Mental Model

The protocol owns an ASTR–stETH LP, and burning ASTR lets you redeem your proportional share in ETH.

Part 2 — Modifying dApp Staking to Reward the Pool

Current Situation

  • dApp staking locks ASTR
  • No incentive to move ASTR to Ethereum liquidity
  • ETH-side liquidity stays thin

Proposed Change (Minimal)

Add One New Reward Target:

“Liquidity Providers (ASTR/stETH pool)”

How It Works

  1. User withdraws ASTR from dApp staking
  2. User deposits ASTR into the ASTR/stETH pool
  3. LP tokens are staked in a Liquidity Staking Contract
  4. That contract receives the same ASTR emissions dApp staking would

No new inflation.
Just redirecting rewards to productive liquidity.

Example Reward Split

Destination Emissions
dApp staking 70%
ASTR/stETH LP staking 20%
Treasury / reserve 10%

(Exact numbers governance-controlled)

Liquidity Staking Contract (Sketch)

function stakeLP(uint256 lpAmount) external {
    lpToken.transferFrom(msg.sender, address(this), lpAmount);
    balances[msg.sender] += lpAmount;
}

function claimRewards() external {
    uint256 reward = calculateReward(msg.sender);
    ASTR.transfer(msg.sender, reward);
}

This:

  • Deepens ETH-side liquidity
  • Reduces sell pressure
  • Aligns incentives without coercion

Why This Solves the Liquidity Problem

  • Liquidity grows before large swaps occur
  • ETH accumulation doesn’t nuke price
  • Pool becomes redemption-capable over time
  • No forced migration away from dApp staking

Part 3 — Similar / Comparable Designs

Olympus (OHM)

  • Protocol-owned liquidity
  • Burn → backing logic
  • Long-term reserve thinking

Frax (FXS / FRAX)

  • Partial collateral + market dynamics
  • Gradual convergence, not peg chasing

Tokemak

  • Incentivised liquidity direction
  • Emissions guide liquidity where needed

Lido DAO Treasury

  • ETH-native reserve strategy
  • stETH-based capital efficiency

Aetheria is simpler than all of these.

Ultimately I think the price of ASTR/ETH is not that bad if we compare to other dotsama projects. And this should be implemented sooner rather than later. If we start off with a small % of inflation then we can increase when we’re at a more favourable price..