🌱Protocol Owned Liquidity

Building Permanent Liquidity Through Aligned Incentives

Overview

Protocol-Owned Liquidity (POL) represents a paradigm shift in DeFi liquidity management. Rather than perpetually renting liquidity through unsustainable incentives, SIR acquires permanent liquidity that compounds over time, creating an unshakeable foundation for the protocol.

The 9% Mechanism

How It Works When liquidity providers (gentlemen) deposit assets to mint TEA tokens:

1. 91% becomes active liquidity controlled by the depositor

2. 9% is permanently allocated to POL as a one-time contribution

3. Both portions earn trading fees from APE leverage positions

This 9% is not a traditional fee, it is a strategic investment in protocol sustainability that benefits all participants.

Why 9%? The 9% rate balances several considerations:

• Meaningful Accumulation: High enough to build substantial POL over time

• LPer Profitability: Low enough to maintain attractive returns for liquidity providers

• Market Competitiveness: Comparable to or better than withdrawal fees in other protocols

• No Lock-ups Required: Unlike competitors, SIR has no mandatory lock periods

POL as a Permanent Participant

Never Withdraws, Always Compounds Protocol-Owned Liquidity functions as the ideal liquidity provider:

• Permanent Presence: Never withdraws during market volatility

• Continuous Growth: Earns and compounds fees alongside other LPers

• Zero Maintenance: No incentives needed to retain this liquidity

• Market Stabilizer: Provides consistent depth during all market conditions

Growing Share Over Time As the protocol matures, POL's share naturally increases through:

1. New Deposits: Each TEA mint adds to the permanent base

2. Fee Accumulation: POL earns its proportional share of all trading fees

3. Compound Effect: Earned fees increase POL's earning power

4. No Dilution: POL never sells or withdraws its position

Strategic Advantages

For the Protocol:

• Reduced Incentive Costs: Less reliance on SIR emissions over time

• Enhanced Stability: Permanent liquidity floor that can't be withdrawn

• Revenue Generation: POL's fee earnings can support protocol development

• Long-term Viability: Self-sustaining model that improves with scale

For Liquidity Providers:

• Deeper Markets: POL enhances overall liquidity depth

• Reduced Volatility: Permanent base dampens liquidity shocks

• Better Fee Distribution: More stable liquidity means more consistent fees

• Aligned Incentives: Protocol success directly benefits all participants

For Leverage Traders (APEs):

• Reliable Liquidity: Always available capacity for leverage positions

• Tighter Spreads: Deeper liquidity enables better pricing

• Reduced Slippage: More liquidity means less price impact

• Protocol Confidence: Growing POL signals long-term sustainability

Comparison to Traditional Models

Traditional Liquidity Mining Problem: Protocols must continuously pay for temporary liquidity

• High ongoing costs

• Mercenary capital that leaves when rewards decrease

• Unsustainable token inflation

• No permanent value capture

SIR's POL Model Solution: One-time contribution creates permanent value

• Zero ongoing costs for POL portion

• Liquidity that never leaves

• Sustainable token economics

• Continuous value accumulation

Long-term Projections

While exact growth depends on the dynamic split between APE traders and TEA providers, POL's share inevitably increases over time. Starting at ~9% of total liquidity, POL could reach 15-20% by year 3 and potentially exceed 25% by year 5 through continuous fee accumulation. The beauty lies in its predictable growth—every deposit adds to the permanent base, every fee compounds the effect.

The Virtuous Cycle

1. Users deposit liquidity → 9% goes to POL

2. POL earns fees → POL share grows

3. Deeper liquidity → Better trading experience

4. More traders → Higher fee generation

5. Higher yields → Attracts more liquidity

6. Return to step 1 with larger base

Why This Matters

Protocol-Owned Liquidity transforms SIR from a protocol that needs liquidity to one that owns it. This fundamental shift creates:

Antifragility: The protocol becomes stronger during stress, not weaker True Decentralization: Less reliance on individual liquidity providers Sustainable Economics: Reduced need for inflationary incentives Long-term Alignment: Every participant benefits from POL growth

As POL compounds over time, it becomes the bedrock upon which the entire SIR ecosystem thrives—a permanent, growing foundation that ensures the protocol's perpetual operation regardless of market conditions.