Problem Definition

1.1 The Liquidity Paradox of Alternative Assets

The alternative asset market exceeds $13 trillion, yet its on-chain adoption faces fundamental barriers.

Limitations of Traditional Frameworks

  • Ambiguous Rights Chain: Unclear mapping between on-chain tokens and off-chain legal entitlements

  • Valuation Black Box: NAV relies on infrequent external audits, causing severe information asymmetry

  • Exit Friction: Quarterly/annual redemption windows conflict with DeFi's 24/7 trading expectations

Challenges of Existing RWA Protocols

Solution Type
Representative Projects
Issue

Pure compliance approach

Securitize

Extremely poor liquidity; secondary market exists in name only

Pure DeFi approach

Early RWA pools

Lacks real asset backing, unsustainable returns

Hybrid approach

Most Projects

Neither here nor there—neither compliant nor liquid

1.2 Paimon's Design Trade-offs

Paimon does not pursue the goal of enabling all assets to "exit instantly like ETH"—the nature of alternative assets makes this objective unfeasible.

Core Principles

  1. Liquidity is a budget, not a right: Instant exit is a limited resource that must be rationally allocated through cost mechanisms

  2. Weakly Coupled Pricing: The intrinsic value (NAV) of PPs and market price (P_mkt) are permitted to diverge, converging under controlled rules

  3. Transparency over promises: Publicly disclose all liquidity budgets and queue statuses, allowing the market to price risk premiums autonomously

Design Philosophy

The key insight is that alternative assets cannot and should not promise instant liquidity. Instead, Paimon creates a transparent, rules-based system where:

  • Users understand the liquidity constraints upfront

  • The cost of liquidity reflects its true scarcity

  • Market participants can price risk appropriately

  • The system remains stable under redemption pressure

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