Source 2: Protocol-Owned Liquidity (POL) Yields

While the Tolerant Fortress Tax serves as AetherCycle's capital accumulation mechanism, Protocol-Owned Liquidity (POL) is the engine that transforms this capital into a self-sustaining, exponential growth flywheel.

POL is not passive income. It is an autonomous capital appreciation engine, designed with recursive compounding cycles that continuously strengthen the protocol’s economic foundation.

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Design Philosophy: A Self-Sustaining Yield Model

• A common critique of POL models: they rely only on trading fees, which depend on volatile market volume.

• AetherCycle’s model goes further: the PerpetualEngine reinvests POL returns into itself, creating an autonomous compounding loop.

• This ensures capital is always productive, not just fee-dependent.

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Core Mechanism: The Autonomous Reinvestment Cycle

POL operates as a dual-compounding loop:

1. Capital Deployment (Liquidity Acquisition)

   • 40% of all protocol revenue is used by the PerpetualEngine to acquire and lock liquidity in the official AEC/USDC pool.

   • The acquired LP tokens move directly into staking.

2. Asset Staking (Yield Generation)

   • All LP tokens are staked into AECStakingLP under protocol ownership.

   • The position continuously earns staking rewards.

3. Harvest & Reinvestment (Recursive Compounding)

   • As the largest staker, the PerpetualEngine accrues the largest reward share.

   • Rewards are harvested and redistributed under the 20/40/40 Rule.

   • The 40% liquidity allocation buys more LP → staked again → cycle repeats.

        +-------------------+        +-------------------+
        |                   |        |                   |
        |  Protocol Revenue  +------->+  Acquire POL (40%)|
        |                   |        |  AEC/USDC LP Pool |
        +---------+---------+        +---------+---------+
                  ^                            |
                  |                            v
        +---------+---------+        +---------+---------+
        |                   |        |                   |
        |  Harvest & Reinvest+<-------+ Stake POL in LP   |
        |  40% -> Acquire LP |        | (AECStakingLP)    |
        |  Repeat Cycle      |        |                   |
        +-------------------+        +-------------------+

System Architecture: Prioritizing Community Stakers

To ensure fairness, the protocol favors community stakers over the Engine itself:

• Engine Multiplier: The PerpetualEngine’s POL stake is permanently locked in Tier 4 (1.0x multiplier).

• User Multipliers: Community stakers can lock LP for 30, 90, or 180 days to access higher multipliers (up to 1.6x).

This structure ensures that committed users always achieve higher proportional yields than the protocol itself, regardless of the Engine’s size.

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Conclusion

AetherCycle’s POL is:

• Non-extractive — returns are recycled, not drained.

• Self-compounding — liquidity generates returns which are recursively reinvested.

• Fair by design — community stakers gain superior yield potential over the protocol.

Through POL, AetherCycle evolves from simply holding treasury assets into running a perpetual economic expansion flywheel that bootstraps and scales its own liquidity base.