Thanks for this elaborate reply Max! I am curious to hear about more practical examples, especially within the context of borrowed liquidity and how the Hub could set requirements such as the interest that is charged, or how it would enforce its senior debt position.
In my mind, two use cases seem apparent for V1 of the AAT:
- LPs like stATOM / ATOM or amATOM / ATOM with little to no impermanent loss (relatively risk free)
- LP positions like ATOM / NTRN as a way of bootstrapping liquidity while maintaining an active portfolio, using concentrated liquidity to minimize IL at the extremes.
I am wondering what other specific cases of borrowed liquidity you have had in mind that made you consider focussing on the security guarantees the Hub could place on these loans.
On a side note, I actually fully agree with @jtremback in that this is not about ROI, (or ROL), but rather a tool to further increase alignment and bootstrap liquidity in the AEZ. I want to stress that the primary function of the AAT is not direct revenue generation, but rather reducing the economic friction and increasing the attractiveness of the DeFi landscape in the AEZ as well as making ATOM the preferred currency in the Interchain.