# Protocol Owned Liquidity

On decentralized exchanges, protocol-owned liquidity is a novel method for providing tokens with liquidity.  Rather than depending on market incentives to provide liquidity to liquidity pools, the protocol-owned liquidity model employs a "bonding" mechanism.

Nemesis PRO has always held a substantial amount/supply of the NMSP liquidity through the bonding mechanism. This ensures that users and protocols are always able to exchange NMSP regardless of market and/or external conditions.

The Treasury of Nemesis PRO maintains NMSP liquidity on decentralized exchanges. With [RBS (Range-Bound Stability)](https://nemesisdao.gitbook.io/whitepaper/features/range-bound-stability-rbs), the equilibrium between reserves and liquidity is determined by an algorithm with the purpose of optimizing liquidity and resources for resilience and long-term market stability.<br>

#### The Traditional Form of LP vs. POL

<table><thead><tr><th width="143">Actions</th><th>Traditional form of LP</th><th>POL</th></tr></thead><tbody><tr><td>How</td><td>A. High emission of tokens to incentivize liquidity providers<br>B. Gets liquidity from outside providers and pays continuous bribes. </td><td>Acquire LP tokens via <a href="../basics/bonding">bonding</a></td></tr><tr><td>Impact &#x26; Effect</td><td>A. Stagnant or downward pressure on token price due to inflationary pressure<br>B. Continuous time and resources required to secure liquidity</td><td>Emission from <a href="../basics/bonding">bonding</a> can be modeled and numerous variables within one's disposal, giving a significant degree of control</td></tr><tr><td>Advantages</td><td>None</td><td>A. Relatively maintenance-free once the bond market has been created.<br>B. Ability to let the bond market run until the desired level of <a href="liquidity-management-system">POL</a> is achieved.<br>C. Ability to create upward price pressure via boosting the <a href="auto-buyback-system">buyback mechanism</a>.<br>D. Provide an alternative source of token rewards for ongoing and upcoming pools and features.</td></tr></tbody></table>

### Why

* Renting liquidity is costly, while POL provides an extra revenue stream in the form of swap fees issued by AMMs.
* In times of market distress, liquidity providers have a significant likelihood of withdrawing funds from the pool (which is when liquidity is most needed). Protocol-owned liquidity stops this from happening because the protocol won't reduce its own liquidity and avoid a downward spiral of the price of the token.