> 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/token/platform-mechanics.md).

# Platform Mechanics

**1. Asset Onboarding & Tokenization**

* **Merchant Registration:** E‑shops join the Liquid Royalty Protocol network by registering on‑chain and integrating with revenue tracking [APIs ](/introduction/readme-2.md#api-application-programming-interface)from e-commerce platform (i.e. Amazon, Shopify) and payment gateway (i.e Airwallex, Lianlian). Each merchant's performance is transparently recorded to inform yield distributions.
* **Performance-Linked Stake:** At listing, merchants typically lock a [**Performance-Linked Stake**](/introduction/readme-2.md#performance-linked-stake) (exact size is set per RTGE; “15% of market cap” or similar figures are **illustrative only**). This locked amount is held in the **Automated Liquidity Assurance Reserve (**[**ALAR**](/introduction/readme-2.md#automated-liquidity-assurance-reserve-alar)**)** and is gradually unlocked in installments as the merchant achieves pre‑defined revenue targets. This mechanism not only secures the merchant’s commitment but also acts as a credit enhancement tool for stakers.

**2. Funding & Liquidity Pool Structure**

* **Pooled Staking Model:** Investors (stakers) contribute Royalty Token to the platform's AMM liquidity pool. Unlike traditional financing, these funds are not allocated directly to any merchant; rather, they are managed algorithmically by smart contracts. This structure protects investor capital by eliminating direct exposure to merchant operations while still allowing stakers to benefit from the underlying e‑shop cashflows.
* [**ALAR** ](/introduction/readme-2.md#automated-liquidity-assurance-reserve-alar)\*\* / Protocol Reserve Backing:\*\* The funds locked via the Performance‑Linked Stake, combined with chain partner incentives and stablecoin incentives (e.g., rewards from the use of Ethena USDe), form the **Automated Liquidity Assurance Reserve (**[**ALAR**](/introduction/readme-2.md#automated-liquidity-assurance-reserve-alar)**)** (Protocol Reserve). [ALAR](/introduction/readme-2.md#automated-liquidity-assurance-reserve-alar) helps back the **Senior Vault**’s **11% APY floor · 13% cap**, underpinning investor confidence with a clear yield band.

**3. Yield Generation & Distribution**

* **Multi-Source Yield:** Staking rewards are generated through three primary channels:
  * [**AMM** ](/introduction/readme-2.md#automated-market-intelligence-ami)**Trading Activity:** Swap fees from on‑chain trading contribute to the yield.
  * **NAV Growth:** As the value of the pooled assets appreciates, stakers share in this upside.
  * [**ALAR** ](/introduction/readme-2.md#automated-liquidity-assurance-reserve-alar)**Incentives:** Bonus rewards from [ALAR](/introduction/readme-2.md#automated-liquidity-assurance-reserve-alar)—including chain and stablecoin (USDe) incentives, plus gradual unlocking of merchant Performance‑Linked Stakes—boost overall yields.
* [**Tranche** ](/introduction/readme-2.md#tranche)**Structure:** The staking pool is segmented into risk tiers:
  * **Senior** [**Vault**](/introduction/readme-2.md#tranche)\*\* (snrUSD):\*\* **11% APY floor · 13% cap**, backed by Junior and the Protocol Reserve ([ALAR](/introduction/readme-2.md#automated-liquidity-assurance-reserve-alar)).
  * **Junior** [**Vault**](/introduction/readme-2.md#tranche)\*\* (JNR):\*\* Private, variable returns; receives **80% of yield above Senior’s cap** (Protocol Reserve receives the remaining 20%).
* **Redemption & Exit:** Standard unstaking is available after the lock-up period. To deter short‑term dividend farming, early unstaking (within one week) incurs an urgent liquidation fee of 20% on the unstaked amount.

**4. The Business Hook**

By automating revenue capture and aligning incentives through [ALAR ](/introduction/readme-2.md#automated-liquidity-assurance-reserve-alar)and the Performance‑Linked Stake, Royalty Token redefines asset financing. It replaces traditional, opaque financing models with a fully transparent, decentralized process that ensures robust yield—even in volatile market conditions—while offering liquidity and ease of exit on decentralized exchanges.