Protocol-Owned Liquidity (Treasury Vault)
Every Paragon swap pays a base AMM fee of 0.30%. This doesn’t just reward LPs — it also builds protocol resilience through Protocol-Owned Liquidity (POL) held by the Treasury Vault.
Fee distribution (base AMM fee)
0.25% → Liquidity Providers (LPs) of the pool that executed the trade
0.05% → Protocol (Treasury Vault) for XPGN buybacks and long-term liquidity
The Treasury Vault uses its share to acquire XPGN and form protocol-owned LP positions (POL), strengthening depth and reducing reliance on mercenary liquidity.
Flow surplus (when using Flow / Shield mode)
When trades are settled via Paragon Flow (intents + batching), the solver may beat the user’s minOut. The extra output is surplus and is split independently of the base fee:
60% → Trader (instant cashback)
30% → LPs of the exact pools used (Flow LP rebates)
10% → stXPGN / veFlow lockers (execution yield)
(DAO-governed option: a small protocol skim from surplus, e.g., 0–5%. Testnet: 0% skim.)
Important: POL is funded from the 0.05% base fee, not from trader rebates. Surplus sharing is additive and user-aligned.
Why Protocol-Owned Liquidity matters
Deflationary support for XPGN. The vault buys XPGN with fee revenue, creating structural demand.
Deep, sticky liquidity. POL anchors the book so swaps stay efficient even in volatile markets.
Downturn resilience. The protocol is less exposed if external LPs scale down.
As volume scales, the Treasury Vault flywheel compounds: more fees → more XPGN buybacks → deeper POL → better execution → more volume.
Treasury Vault: dual mandate
1) Buyback & Liquidity Formation
Accumulates fee revenue (the 0.05% slice)
Periodically buys XPGN and pairs it (e.g., with stablecoins) to mint POL LP tokens
LP tokens are held by the protocol (time-locked / governed)
2) Shield Fund (Insurance Layer)
Maintains a reserve for Paragon Shield initiatives (MEV loss coverage experiments, slippage-band refunds, incident response)
Parameters and triggers are DAO-governed; testnet uses capped pilots only
Operations & transparency
Non-custodial trading: Users always self-custody. The Treasury Vault only manages protocol-owned assets.
Programmatic policies: Buyback cadence, target LP mixes (e.g., XPGN/USDT, XPGN/BNB), and Shield allocations are set on-chain by governance.
Timelocks & multisig: Changes flow through timelocked governance; addresses are published in the Deployments page.
Reporting: A dashboard will show fee inflows, buybacks executed, POL positions, and Shield balances.
Testnet parameters (current)
Base fee: 0.30% (0.25% LPs / 0.05% Treasury Vault)
Flow surplus split: 60% trader / 30% LPs / 10% lockers
Surplus protocol skim: 0% (disabled on testnet)
POL actions: simulated / small-scale to validate flows
FAQ
Does POL take anything away from LPs? No. LPs still receive 0.25% from the base fee plus Flow LP rebates when applicable.
Does the protocol dump XPGN? No. The default policy is net-buy XPGN and pair it to create POL. Rebalance logic (e.g., target weights) is DAO-governed.
How does Shield use the Treasury? A small, governed allocation funds pilot protections (e.g., slippage band credits). Any policy that spends funds is proposal-gated and transparent.
What if Flow finds no surplus?
The trade still executes at or above minOut (or reverts). Base fees apply as usual.
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