# Protocol Owned Liquidity

## How It Works

When liquidity providers (gentlemen) deposit assets to mint TEA tokens, a 4.9% fee is charged. This fee is permanently allocated to Protocol-Owned Liquidity (POL), which participates in the vault as a permanent LPer. Both the depositor's 95.1% and the POL's 4.9% earn trading fees from APE leverage positions.

POL never withdraws. It earns and compounds fees alongside other LPers, creating a growing liquidity floor that benefits everyone:

* **For traders:** Reliable liquidity depth that keeps the [convex zone](https://docs.sir.trading/protocol-overview/liquidity-and-leverage/..#the-limits-of-constant-leverage) wide
* **For LPers:** A stable base that dampens liquidity shocks
* **For the protocol:** Reduced reliance on inflationary incentives over time

## The Growth Cycle

1. Users deposit liquidity → 4.9% goes to POL
2. POL earns fees → its share grows
3. Deeper liquidity → better trading experience (wider convex zone)
4. More traders → higher fee generation
5. Higher yields → attracts more liquidity

As POL compounds over time, it becomes the bedrock of the protocol — a permanent, growing foundation that ensures perpetual operation regardless of market conditions.

## Comparison to Traditional Models

Traditional liquidity mining pays protocols to rent temporary liquidity — high ongoing costs, mercenary capital that leaves when rewards decrease, and unsustainable token inflation. SIR's POL model flips this: a one-time contribution creates permanent value with zero ongoing costs.

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**MegaETH:** On MegaETH, Protocol-Owned Liquidity is optional. LPs can opt out of the POL fee by locking their deposit for a period of time instead. This gives LPs flexibility — pay the fee for immediate withdrawability, or lock up and keep 100% of their deposit.
{% endhint %}