> For the complete documentation index, see [llms.txt](https://docs.liquidroyalty.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.liquidroyalty.com/introduction/solution-overview.md).

# Solution Overview

The Liquid Royalty Protocol addresses e-commerce liquidity gaps by tokenizing a share of real-world merchant revenue, derived from captured sales, into tradable digital assets that yield stablecoin dividends. Liquid Royalty Protocol merges traditional finance principles with blockchain's transparency, accessibility, and automation.

**How Liquid Royalty Protocol Works: The Core Mechanism**

<figure><img src="/files/I23t22YR1fWszqkCQBIK" alt=""><figcaption></figcaption></figure>

Liquid Royalty Protocol creates Royalty Tokens distributing regular stablecoin dividends from e-commerce revenue:

1. **Revenue Capture:** Merchant sales revenue is automatically directed via integrations (e.g., payment gateways) to a smart contract controlled bank account.
2. **Automated Processing:** The smart contract then automatically:
   * **Segregates Royalty Share:** Isolates the pre-agreed percentage of revenue - currently set at 10% based on market cap and profit margins of our typical merchant profiles.
   * **Converts to Stablecoins:** Converts this royalty share to stablecoins, transferring them to the Royalty Token Dividend Wallet.
   * **Remits to Merchant:** Returns the remaining topline cashflow (e.g. $90) to the merchant.
3. **Dividend Distribution:** Royalties are captured at the point of sale, settled weekly, and streamed to holders daily, pro-rata to Royalty Token holders and the Liquidity Pool.

This ensures only the agreed royalty is tokenized, merchants receive their operational revenue promptly, and investors earn stablecoin dividends from e-commerce revenue.

**Structured Investment Products**

Beyond the core token, Liquid Royalty Protocol supports structured products: the Senior Vault (snrUSD) with an **11% APY floor · 13% cap**, backed by Junior and the Protocol Reserve (ALAR); and the Junior Vault (JNR), a private variable-return tranche that receives **80% of yield above Senior’s cap** (Protocol Reserve receives the remaining 20% and helps support the floor). These are backed by diversified pools of tokenized royalty shares from various merchants, allowing investors to tailor risk and return.

**Key Features & Benefits:**

* **Direct Royalty Share:** Dividends from clearly defined, auto-segregated merchant revenue.
* **Automated & Transparent:** Smart contracts manage the full flow, all on-chain for auditability.
* **Merchant Benefits:** Access capital by sharing future revenue, with seamless integration and prompt revenue remittance.
* **Accessible Yields:** Opens access to e-commerce profit-sharing yields.

**In Essence:**

Liquid Royalty Protocol captures e-commerce revenue, tokenizes an agreed royalty share for stablecoin dividends, and returns the rest to merchants. It offers automated growth capital for merchants and real-cash-flow-backed yields for investors.

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