# 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 are required to lock 15% of their total market capitalization as a [**Performance-Linked Stake**](/introduction/readme-2.md#performance-linked-stake). 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)**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)**)**. [ALAR ](/introduction/readme-2.md#automated-liquidity-assurance-reserve-alar)ensures that the most conservative investment tier—the Super Senior Tranche—receives a fixed yield of at least 11% annually, thereby underpinning investor confidence with a robust yield floor.

**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 2 risk tiers:
  * **Senior** [**Tranche**](/introduction/readme-2.md#tranche)**:** Offers a fixed minimum yield of 11% per annum, guaranteed by [ALAR](/introduction/readme-2.md#automated-liquidity-assurance-reserve-alar).
  * **Junior** [**Tranche**](/introduction/readme-2.md#tranche)**:** Exposes stakers to higher risk in exchange for variable, potentially higher returns, and enhanced governance rewards.
* **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.


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