# POL vs PoL: Owning Liquidity vs Renting Liquidity

HOLI's **Protocol-Owned Liquidity (POL)** and Berachain's **Proof of Liquidity (PoL)** both use governance to direct liquidity across a basket of markets.

![Berachain PoL rented incentives (bear and waterfall) versus HOLI POL owned capital (temple of protocol assets)](/pol-vs-pol.webp)

But they govern fundamentally different things:

> **HOLI governs how protocol capital is allocated. PoL governs how liquidity incentives are allocated.**

In HOLI, governance defines the target weights of a portfolio of LP positions held by the Treasury.

For example:

* A / HOLI: 40%
* B / HOLI: 30%
* C / HOLI: 20%
* D / HOLI: 10%

These weights are not APYs or short-term emission targets. They represent the Treasury's desired long-term asset allocation.

As new protocol-owned capital enters the Treasury, HOLI directs that capital toward LP positions that are below their target weights. Over time, the protocol-owned liquidity portfolio gradually converges toward the allocation chosen by governance.

So HOLI governance is effectively answering:

> **What liquidity should the protocol itself own over the long term?**

How names and caps enter that portfolio: [Asset Admission](/treasury-mgmt/admission). How cash becomes LP: [POL Deployment](/treasury-mgmt/deployment). Hub-and-spoke pools: [Protocol-Owned Liquidity](/pol).

***

Berachain's PoL works differently.

Under PoL, BGT emissions are allocated across different Reward Vaults. External liquidity providers deposit LP tokens or other eligible assets into those Vaults and receive BGT rewards. Validators determine how emissions are distributed across Vaults through reward allocation.

The mechanism therefore answers a different question:

> **Where should the next unit of liquidity incentive be paid?**

If Pool A receives more emissions, its effective yield increases and external capital may move into it.

If incentives later shift toward Pool B, liquidity can migrate again.

PoL can therefore be highly effective at **directing the distribution of external liquidity**, but the underlying liquidity still belongs to external LPs rather than the protocol itself.

## Capital Allocation vs Incentive Allocation

This is perhaps the simplest distinction between POL and PoL.

**HOLI POL:**

> Voting → Target LP Portfolio → New Protocol Capital → Protocol-Owned LP

Governance determines **capital allocation**.

**Berachain PoL:**

> Reward Allocation → Emissions → LP Yield → External Liquidity

Governance determines **incentive allocation**.

Both mechanisms can push liquidity toward a target distribution, but they do so in fundamentally different ways.

HOLI uses its own balance sheet to acquire liquidity.

PoL increases the return available to external capital so that liquidity providers are willing to supply it.

## Owned Liquidity vs Rented Liquidity

From a more traditional business perspective, PoL can be understood as a sophisticated form of **renting liquidity**.

The system continuously pays emissions in exchange for external LP capital.

This model is highly flexible. Incentives can move quickly, and liquidity can respond quickly.

But it also has an inherent property:

> **When incentives disappear, there is no guarantee that the liquidity remains.**

External LPs still own their capital and retain the right to withdraw it.

Capital that enters Pool A because of attractive rewards today can move elsewhere tomorrow if the opportunity changes.

HOLI POL is closer to **owning liquidity**.

Instead of continuously paying rent to maintain TVL, the protocol gradually converts its own capital into LP positions that remain on its balance sheet.

Even if governance later stops allocating new capital toward a particular LP, the liquidity already accumulated can remain inside the Treasury.

The protocol is therefore not repeatedly purchasing a temporary liquidity service.

It is accumulating **liquidity as an asset**.

## Is Liquidity an Expense or an Asset?

Ultimately, the distinction between POL and PoL reflects a deeper design question:

> **Should liquidity be treated as an operating expense that must be continuously subsidized, or as an asset that a protocol should gradually accumulate?**

PoL represents a highly efficient version of the first approach.

It uses market-driven emission allocation to coordinate external capital and direct liquidity toward strategically important markets.

HOLI POL takes a different path.

Each new unit of protocol capital can be converted into LP ownership, allowing the Treasury to accumulate not only tokens, but the liquidity infrastructure surrounding those tokens.

This does not mean the two approaches are mutually exclusive.

PoL is particularly effective at **rapidly coordinating and redirecting external capital**.

POL is designed to **slowly but persistently convert liquidity from something rented into something owned**.

One optimizes **liquidity incentives**.

The other accumulates **liquidity ownership**.

A useful way to summarize the distinction is:

> **PoL is a liquidity direction mechanism. POL is a liquidity accumulation mechanism.**

How a third-party community can join that owned-liquidity network: [Why should every community partner with HOLI?](/blogs/partnership). SHROOM and NetNet: [Comparison](/comparison).