Protocol Owned Liquidity or POL, is a strategy crypto protocols employ to ensure their basic liquidity needs are met.
Protocols acquire liquidity through bonding and use this liquidity to facilitate trades on their own exchanges. They thus benefit from a constant and reliable source of liquidity backed by their treasury. Even better, the treasuries can now generate revenue via trading fees.
POL does bring risks. Bonds must be appealing to investors for the protocols to acquire their liquidity. As the protocols issue more bonds, existing bond holders become diluted and new users become less likely to purchase bonds.
Protocols are most likely to use a mix of POL and traditional staking to provide liquidity going forward.