$HEMI is building an economy designed to last — one that doesn’t depend on constant new capital, inflationary rewards, or manual treasury management. In Stage 2 of the Hemi Economic Model, the protocol moves closer to this goal with the introduction of two powerful mechanisms that make the entire system more resilient, predictable, and self-sustaining: the Short-Term Pool (STP) and the Protocol-Owned Liquidity (POL) Treasury.
Together, these components turn Hemi’s economic engine into a living, breathing system — one that automatically balances inflows and outflows, grows its own liquidity reserves, and distributes incentives to those who strengthen the network.
This stage is all about automation, sustainability, and long-term alignment.
💡 Why Stage 2 Matters
Hemi’s economy is constantly in motion. Fees are collected from network activity, incentives are paid to participants, and liquidity moves through vaults and pools. But managing these flows manually — or relying on short-term liquidity incentives — can lead to inconsistency.
One week, the protocol might see large inflows from fees or yield; another week, distributions might outpace those inflows. Over time, that imbalance can hurt stability, rewards, and liquidity.
Stage 2 fixes that. By introducing automated pools and protocol-owned liquidity, Hemi can now stabilize its reward cycle, grow its treasury, and keep liquidity healthy across the network, all without inflating the supply or depending on temporary incentive campaigns.
This is the phase where Hemi’s economy starts managing itself.
💧 The Short-Term Pool (STP): Keeping Rewards Smooth and Reliable
Think of the Short-Term Pool (STP) as Hemi’s heartbeat — constantly pulsing value in and out of the ecosystem in a balanced rhythm.
Its main job is to stabilize incentive distribution by smoothing out the difference between what the protocol earns and what it pays out. Instead of letting rewards fluctuate wildly from week to week, the STP ensures a steady, predictable flow of incentives.
Here’s how it works:
Every two weeks, Hemi calculates its net fee surplus — that’s the total revenue from protocol activity, minus operational costs like ETH data publication and PoP (Proof of Participation) incentives.
This surplus is automatically added to the STP.
Then, 1/13th of the STP’s total assets are distributed across key contributors in the ecosystem:
veHEMI stakers who secure and align with the network long-term
Governance participants who actively vote and guide the protocol’s direction
Liquidity incentives for BTC vaults, USD vaults, and LP pairs
The POL Treasury, which grows the long-term capital base
Between these distribution cycles, the STP doesn’t sit idle. It earns short-term yield on its assets — low-risk, highly liquid strategies that let it grow passively without locking up funds.
In simple terms: the STP makes sure incentives go out consistently, sustainably, and intelligently, even when market activity fluctuates.
🏦 The Protocol-Owned Liquidity (POL) Treasury: Building Hemi’s Financial Backbone
If the STP is Hemi’s heartbeat, the POL Treasury is its foundation. It represents the permanent capital that Hemi itself owns — liquidity that belongs to the protocol, not external liquidity providers.
This is a powerful shift. Instead of “rented liquidity” that disappears when incentives end, the POL Treasury keeps that liquidity inside the ecosystem forever. That means fewer liquidity shocks, lower volatility, and a stronger, more reliable foundation for all of Hemi’s financial products.
The POL Treasury has three key roles:
1. Provide liquidity across the ecosystem — ensuring markets, vaults, and pairs are always deep and efficient.
2. Earn long-term yield from strategic deployments, compounding its value over time.
3. Send a portion of its yield back to the STP — so rewards remain consistent and the cycle keeps running smoothly.
As the POL grows, so does Hemi’s ability to sustain itself. It’s like the protocol is building a permanent treasury that works for the ecosystem 24/7, continuously earning yield, providing liquidity, and supporting incentives — all without external dependencies.
🔄 A Self-Sustaining Economic Loop
Stage 2 introduces a feedback loop that turns Hemi’s economy into a self-sustaining system.
1. Fees Flow In
The protocol collects fees from network operations, vaults, and on-chain activity.
2. Surplus to STP
After covering costs, the remaining surplus is deposited into the Short-Term Pool.
3. Bi-Weekly Distribution
Every two weeks, 1/13th of the STP is distributed across the ecosystem — rewarding veHEMI holders, governance participants, and liquidity providers, while also feeding the POL Treasury.
4. Yield from POL
The POL Treasury invests in long-term strategies that generate yield.
5. Yield Back to STP
A portion of that yield cycles back into the STP, fueling future distributions.
This loop means Hemi’s ecosystem can breathe and grow on its own — using its own activity to fund rewards, deepen liquidity, and expand its treasury base.
No reliance on inflation. No external capital drains. Just organic, on-chain sustainability.
🌱 The Bigger Picture: A Stronger, Smarter Hemi Economy
The combined design of the STP and POL Treasury creates a balanced, intelligent treasury system that benefits everyone in the Hemi ecosystem:
For veHEMI stakers: Rewards become more stable and directly tied to real protocol performance.
For governance participants: Engagement is continuously incentivized, creating more active and decentralized decision-making.
For liquidity providers: There’s always deep, protocol-owned liquidity backing the ecosystem, reducing volatility and slippage.
For the protocol itself: The POL Treasury grows stronger with every cycle, turning Hemi into a capital-efficient, self-funded network.
This approach doesn’t just make Hemi more sustainable — it makes it antifragile. The more the ecosystem grows, the stronger its treasury and reward systems become.
⚙️ Why It Matters for the Future of Hemi
Stage 2 represents a turning point. It’s where Hemi moves from being a protocol that distributes rewards to one that regenerates value — continuously building wealth and liquidity from within.
The introduction of automated pools, owned liquidity, and recurring yield flows positions Hemi as a protocol that can sustain economic growth indefinitely, even in volatile market conditions.
By turning short-term fees into long-term capital, and long-term yield into new incentives, Hemi’s Stage 2 system ensures that every cycle strengthens the network rather than depleting it.
In essence, Hemi is creating an on-chain economy that funds itself, rewards its contributors, and grows its liquidity base forever.
🧭 Looking Ahead
Stage 2 is just one step in Hemi’s long-term economic roadmap — but it’s a foundational one. It establishes a feedback-driven model where liquidity, incentives, and governance all work together in harmony.
As the STP and POL Treasury expand, Hemi’s treasury management will become even more autonomous, setting the stage for a fully self-governing, yield-powered network.
This is how Hemi is redefining what economic sustainability means in Web3 — not through hype or speculation, but through a carefully designed, self-sustaining system that grows stronger with every cycle.
With Stage 2 live, the Hemi ecosystem now has its own economic heartbeat and backbone — pulsing with value, stability, and purpose.
