How the AI MM Agent Works in Detail

1. Mempool Monitoring for Transaction Detection

• The AI MM Agent continuously scans the mempool (pending transactions) to detect potential large trades or sudden changes in transaction patterns.

• When it detects a large transaction or flash loan activity, the agent identifies the token pair (e.g., ETH/USDC or WBTC/USDC) and prepares to react within the same block.

1. Dynamic Liquidity Adjustment

• Narrowing the Price Range:

  • If the mempool reveals an upcoming large transaction, the agent narrows the price range of the LP position to ensure the trade fits within the range. This minimizes MEV (Maximal Extractable Value) risks and ensures that the AI MM Agent captures the fee instead of external arbitrage bots.

• Enlarging the Price Range:

  • In periods of high volatility, the agent adjusts the LP token price range to cover a wider spread, reducing the risk of impermanent loss while still maintaining adequate liquidity.

1. Gas Optimization and Same-block Execution

• The AI MM Agent is designed to spend more gas when necessary to execute critical operations within the same block, ensuring it stays ahead of MEV bots.

• Pulling out and Re-depositing LP Tokens: When alerted by the mempool, the agent:

  1. Withdraws the LP position temporarily to avoid providing liquidity at an unfavorable price range.

  2. Re-adjusts the price range for the LP tokens based on updated market conditions.

  3. Re-inserts the liquidity back into the pool within the same block to maintain continuous market presence.

1. Market Condition Analysis

   • The agent leverages AI to analyze market indicators (e.g., ETH/USDC and WBTC/USDC price movements, volume spikes, and volatility).

   • It adapts the strategy to balance profitability, risk management, and MEV prevention.

2. Continuous Profit Maximization

   • Through active monitoring and dynamic adjustments, the AI MM Agent generates higher fee revenue while protecting its liquidity from arbitrage losses.

   • Profits from these operations are distributed back to vePUNDIAI holders, ensuring token holder incentives are aligned.