Quote: The Dilemma of DeFi and the Need for a New Paradigm

Over the past two years, decentralized finance (DeFi) has experienced a downturn after a period of rapid growth, exposing structural challenges: the single-token model has led to inflation and sell pressure, on-chain circularity has caused value stagnation, and ecosystem fragmentation has hindered sustainable growth. Many protocols resorted to aggressive token issuance incentives for short-term Total Value Locked (TVL) growth, triggering a nightmare of "inflation-sell-off-death spiral." Once market sentiment reverses, liquidity rapidly drains out, leaving remaining token values to plummet or even hit zero on a death curve. The DeFi space urgently needs a paradigm shift at the protocol level to reverse this negative feedback loop and achieve a healthy, sustainable growth trajectory. Aeternum Protocol has caught attention in this context: it claims to provide DeFi with an intrinsic stability and shock-resistant architecture through a novel sealed liquidity provision system and dual-token model. So, can Aeternum Protocol become the new benchmark for a mechanism-level paradigm shift in the next stage? This article will explore the mechanism design, token model, security, sustainability, and other aspects.

Mechanism Innovation: Sealed Liquidity Provision System

The key breakthrough of Aeternum Protocol lies in its original "Sealed Liquidity" mechanism. The term "sealed" refers to the protocol's built-in triple sealing mechanism. The "Time Lock, Reflux Loop, External Injection" rules constrain liquidity and trading behavior, cutting off the destructive negative feedback loop seen in traditional DeFi. The following will explain how these three seals operate:

· Time Lock: Imposes a time-based restriction on large fund inflows and outflows. For example, when a user wishes to withdraw a large amount of liquidity, the protocol sets a waiting period or staggered release mechanism to avoid instant deleveraging sell pressure. This "delayed settlement" acts as a buffer lock on trading activity, allowing the market time to self-adjust and preventing panic emotions from spreading instantaneously. The time lock seal ensures that any significant liquidity change must go through a time window, significantly reducing the impact of sudden sell-offs within a single time frame.

· Reflux Loop: Introduces a transaction value reflux mechanism where a portion of each transaction's value does not leave the system entirely but is cycled back into the liquidity pool. For example, in Aeternum Protocol's liquidity provision contract, whenever a token exchange occurs, the protocol extracts a portion from the transaction slippage or fees and automatically reinjects it back into the pool as depth. This process can be represented by a simplified code snippet:

As shown above, each transaction will "leave a little value" in the protocol, forming a closed-loop feedback mechanism. This means that not all value is taken away when selling; a portion is sealed in the protocol pool. Similarly, a buy transaction will contribute to thickening the pool. This mechanism essentially establishes a transaction-as-saving effect: the more frequent the transactions, the more assets accumulate in the underlying liquidity pool, raising the overall system's value "water level." Due to the continuous feedback loop replenishing the pool, when the market faces selling pressure, the deep reserves in the pool can support the price, breaking the negative feedback loop of linear price decline in traditional AMMs.

· External Injection: The "Eternal Protocol" ingeniously designed a set of positive feedback mechanisms for external capital injection. In the primary market, participants earn USDT rewards through staking LP tokens such as DM/USDT, rather than receiving additional token incentives, fundamentally avoiding the sell pressure issues seen in traditional DeFi due to token rewards. This means that the LPs' earnings are directly realized in stablecoin form, without needing to sell DM for cash, thus alleviating sell pressure on the secondary market at its source. Meanwhile, the protocol mechanism utilizes transaction fees to continuously repurchase and burn DM on the secondary market, achieving ongoing token deflation. This makes the circulating supply of DM increasingly scarce, providing a more solid price foundation. Under this supply-demand dynamic, the secondary market price of DM steadily rises, attracting more external investors to buy DM in the secondary market, further driving up the market price. The price increase of DM in turn stimulates new primary market liquidity providers to stake, expand the LP pool size, enhance the potential returns and arbitrage opportunities for primary market participants, and strengthen the attractiveness of liquidity.

The above loop forms a linkage and positive feedback loop between the primary and secondary markets: the market-making behavior in the primary market supports and drives up the secondary market price, with the secondary market rise attracting more funds back to the primary market for liquidity provision, continuously reinforcing the cycle. This feedback loop makes the overall ecosystem's capital flow more efficient and robust, constituting a sustainable mechanism for external capital injection that does not rely on inflationary incentives or exorbitant interest rate commitments but is naturally driven by market behavior for value capture and reinvestment. The current market data for DM also initially confirms the operation of this structure: since its launch, the DM secondary market price has shown a steady upward trend, recently maintaining a level of around $0.56 USD (a significant increase compared to the initial issuance), with a 24-hour trading volume also remaining at the level of several million USD (recently about $6 million USD), reflecting sustained external buying interest. At the same time, the depth of the DM/USDT liquidity pool has rapidly expanded, with liquidity now increased to around $8 million USD. The strengthening price and simultaneous growth of pool liquidity demonstrate that more external funds are being attracted into this ecosystem, providing empirical support for the beginning operation of this positive feedback mechanism.

Sealed Liquidity Mechanism

The Eternal Protocol implements a "seal" on fund flow through a triple mechanism of time lock, re-entry loop, and external injection. The buy transaction is instantly executed to boost the price, while the sell transaction is delayed by a time lock and influenced by partial value re-entry into the pool, thereby slowing down the downward impact. External funds are irregularly injected into the pool, further enhancing liquidity. The three seals together ensure the stability of liquidity and price support, effectively blocking the negative cycle of sell-off, price drop, and panic seen in traditional DeFi.

Through the aforementioned triple seal, the Eternal Protocol's liquidity provision system exhibits an intriguing feature: smooth sailing during price increases and cushioned impact reduction during price drops. Driven by buying pressure, the price can freely rise based on market demand; however, once selling pressure emerges, the sealing mechanism automatically slows down the outflow of funds and simultaneously returns value to the pool, inhibiting the extent of the price decline. In traditional DeFi, token prices often free fall without a support base, triggering more selling pressure. However, the design of the Eternal Protocol ensures that each transaction inadvertently "bottoms" the system: for every price increase, a portion of the increment is locked as a buffer for the next retracement. As pointed out by community analysis, the Eternal Protocol's contract has the mechanism "hardcoded," automatically burning a portion of DM tokens and replenishing the liquidity pool with each purchase, "gradually thickening the bottom pool, thus stabilizing the price." Conversely, when selling pressure arises, the accumulated assets in the bottom pool and the delayed redemption mechanism act as shock absorbers, preventing flash crash-style price plunges. From a systemic perspective, these three seals collectively construct a shock-resistant automated market maker, representing a mechanistic overhaul of the traditional AMM model.

Tokenomics: The Value Breathing System of DM and DP

The Eternal Protocol adopts a dual-token layered model, consisting of two tokens: DM and DP. Unlike traditional DeFi, which consolidates all functions into a single token, the Eternal Protocol splits the token functions: DM serves as a utility token, while DP serves as a governance token, each performing its roles but operating synergistically to form a dynamically balanced value system akin to a "breath."

· DM: The Robust Flywheel of Utility Token – DM is the "fuel" for the operation of the Eternal Protocol ecosystem. It is used to pay transaction fees, on-chain gas fees, and ecosystem internal payment methods in high-frequency scenarios. Design-wise, DM is endowed with strong deflationary and positive incentive attributes, embodying the logic of "rising strongly and falling weakly." On the one hand, DM faces no inflationary pressure—its initial total supply is constant with no reserve or private sale, and the vast majority of tokens were permanently locked and destroyed through a "black hole address" at launch, ensuring a very scarce circulating supply. Subsequently, the protocol will not mint additional DM, and incentives come from the ecosystem's business itself, rather than borrowing from future value. This fundamentally eliminates the issue of token inflation diluting value. On the other hand, DM has a built-in buyback and burn mechanism: whenever the ecosystem generates revenue (e.g., transaction fees, protocol earnings), a portion is converted into a market buyback of DM, which is then directly burned. According to audit reports, the DM contract has a high security score of 96 and no backdoors.

All buy transactions will automatically trigger the real-time burning of DM tokens, reducing its circulating supply continuously, making it "rarer with each purchase." DM's supply evolution can be represented by a simple formula:

Where $\Delta_{burn}(t)$ is determined by the current transaction volume and a preset fee rate, for example, $x\%$ of each transaction amount will be used for buyback and burn of DM. This means that the supply of DM decreases with ecosystem activity, while demand increases with ecosystem growth, thus forming a typical positive feedback loop of supply and demand imbalance. In more visual terms, each transaction is like stepping on the gas pedal of a flywheel—DM is consumed and burnt, and the remaining tokens increase in value due to scarcity;

The price increase of DM further boosts holder confidence and ecosystem fund inflow, driving transaction volume growth. Under this flywheel effect, the upward momentum of DM price is solidified by the mechanism, while downward pressure is relatively weakened due to the lack of incremental supply and the presence of a floor support pool.

DP: Governance Token's Value "Anti-gravity" Mechanism – Compared to DM, DP is more like the "reservoir" of the entire ecosystem value and governance rights. DP holders have protocol governance rights and profit distribution rights. The Eternal Protocol has ingeniously designed DP's "anti-gravity" feature, a mechanism where the price baseline consistently rises over time. The term "anti-gravity" does not mean that the price will not fall but rather that DP has a value baseline that gradually increases over time: regardless of short-term market fluctuations, the intrinsic baseline value of DP will progressively rise, leading to an upward trend in long-term price centering. This is achieved by directly linking the protocol's actual earnings to DP's value. On one hand, whenever the ecosystem generates profits (such as transaction fee revenue, external injection revenue), according to the tokenomics, a certain proportion of this value will belong to DP holders—either distributed as dividends or used for DP buyback and burn, thereby enhancing the intrinsic value represented by each DP. On the other hand, the issuance and burning mechanism of DP ensure that its circulating supply will not inflate: DP usually has a fixed total supply (or a capped growth), and when protocol profits are used for DP repurchase, these DPs are effectively removed from the market, increasing the net asset value per remaining token. The evolution of DP's price floor $P_{floor}$ can be quantitatively described:

The protocol's net income injected in period t, $N_{DP}(t)$, is the amount of DP in circulation for that period (which may decrease due to buyback and burn). Each period, newly injected income either increases the amount of assets allocable per DP (raising intrinsic value) or directly reduces the circulating supply (increasing scarcity). Both effects cause the baseline value of DP to monotonically increase. The long-term result is that the underlying baseline price of DP exhibits a continuous uptrend, even if the market price occasionally fluctuates. As the ecosystem expands and income accumulates, its intrinsic value support becomes stronger. It is important to emphasize that this does not mean the DP price only rises and never falls; rather, it indicates that the underlying support value of DP is constantly accumulating, providing a floor for downward movement and substance for upward movement. This design can be considered a "counter-gravity device" for DP, resisting the dilution of value experienced by traditional governance tokens due to lack of income support. What's even more remarkable is that DP and DM do not operate in isolation but form a symbiotic relationship: the more vibrant the consumption of DM, the more enriched the equity pool represented by DP becomes. The appreciation of DP value further enhances the ecosystem's attractiveness to long-term capital, in turn promoting industry application landing and the growth of DM consumption. The combination of DM's rise and DP's stability is like the ecosystem's breathing, driving the value growth of the entire system in dynamic equilibrium.

DM-DP Synergistic Flywheel

The Eternal Protocol achieves a separation synergy of functional consumption and value capture through a dual-token model: user transactions and payments lead to continuous consumption of DM, the deflation of DM drives its appreciation, thereby promoting ecosystem growth. The prosperity of the ecosystem increases the value of the governance token DP, boosting investor confidence, attracting more external capital and new users to the ecosystem, resulting in more business volume and creating a new round of demand for DM. This cyclical process forms an endogenous value flywheel. Compared to the traditional DeFi models driven by inflation incentives, this positive feedback loop is more sustainable.

It is worth noting that the dual-token mechanism of the Eternal Protocol avoids the self-hedging contradiction in the traditional single-token model, where the token has to both bear application consumption and capture ecosystem value. DM focuses on application consumption and maintains scarcity appreciation through mechanisms, while DP focuses on long-term value retention and governance, allowing the "consumption" and "value" paths to coexist and complement each other. As a result, in the Eternal Protocol, DP is no longer continuously sold off for payment purposes like traditional platform tokens; instead, its value support grows stronger as ecosystem activities become more active. This design provides a new steady-state structure for the DeFi token economy: a continuous value creation driven by functional consumption and a steadily rising value carrier supporting ecosystem growth, creating a long-term, robust economic system.

Safety and Sustainability: Anti-Collapse Architecture and Permissionless Design

Underneath its intricate mechanics, the Eternal Protocol also places great emphasis on security and sustainability, incorporating multiple layers of protection from both a technical and financial design perspective.

Firstly, from a technical security standpoint, the Eternal Protocol has achieved a fully permissionless deployment. Its smart contracts operate without human intervention once deployed, with no so-called super administrators able to interfere with funds; the code is the law. This permissionless design eliminates the possibility of human malfeasance or single points of failure, ensuring that the protocol operates automatically according to established rules. Furthermore, the core contract of the Eternal Protocol has undergone multiple rounds of audits and rigorous testing. According to audit results disclosed by the community, the Eternal Protocol smart contract has received a high security score of 96, with clean and backdoor-free code. Common vulnerabilities such as reentrancy attacks and overflow errors have been eliminated, providing maximum security for user funds. This "code-is-law," audit-verified security model enables the Eternal Protocol to truly achieve intervention-free operation and highly isolated asset protection.

Secondly, on the financial security front, the Eternal Protocol has established various mechanisms to enhance the system's robustness and risk resistance. One such mechanism is liquidity isolation: the protocol manages the liquidity of different asset pools and functional modules relatively independently, avoiding a single market fluctuation from dragging down the entire ecosystem. For example, the DM–USD trading pool is isolated from other high-risk asset pools, such that the drastic movement of one pool does not directly deplete the liquidity of the entire protocol. This modular isolation design, akin to dividing a ship into multiple watertight compartments, ensures that if one compartment takes on water, it does not cause the entire ship to sink rapidly but rather buys time for risk mitigation. Additionally, the protocol's stable asset reserves are also managed independently to ensure that even if certain high-risk portions encounter issues, the stable assets remain ample, preventing chain reactions triggered by a bank run.

At the same time, the Eternal Protocol has introduced a dynamic yield adjustment mechanism to achieve economic sustainability. In simple terms, the protocol dynamically adjusts user incentives and yield rates based on actual revenue and market conditions to prevent the overdraft and Ponzi risks associated with fixed high-interest rates. When the market is active and profitable, the protocol can moderately increase liquidity providers' yield rewards to share in the growth dividend. Conversely, in a market slump or declining profits, the protocol will correspondingly reduce incentives, ensuring that expenditures do not exceed the actual value created. In this way, the yield distribution curve of the Eternal Protocol becomes a stable function closely correlated with actual business performance, rather than a rigid commitment made by humans, allowing it to automatically converge with changes in the environment and avoid the accumulation of long-term deficit risks. Coupled with the aforementioned external value injection mechanism, when external revenue increases, internal yield distribution can also be raised in sync, and vice versa, always maintaining the entire system's operation within a healthy yield coverage range. This dynamic adjustment mechanism shapes the resilience of the protocol's economy: it can both maintain attractiveness to users in periods of high growth and automatically reduce burdens during difficult times, ensuring that there is no collapse due to overcommitment.

Lastly, it is worth emphasizing the anti-front-running design of the Eternal Protocol. In addition to the sealing mechanisms mentioned earlier, the protocol also sets a series of risk control thresholds and mitigation strategies during operation. For example, when market volatility exceeds a normal range, the protocol can trigger temporary fee increases or withdrawal limit adjustments to encourage liquidity retention and punish short-term arbitrage behavior, acting as a "safety valve" during extreme market conditions. Furthermore, the Eternal Protocol does not adopt the fragile partial reserve model used by traditional algorithmic stablecoins but instead strives to ensure that each liability is adequately backed by assets (including on-chain overcollateralization and off-chain asset support). Due to its strong underlying reserves and various circuit breakers and mitigation mechanisms, even in the face of extreme market shocks, the protocol has a high probability of maintaining the stability of its base, avoiding a collapse-style run on the bank that some DeFi projects have experienced in the past.

Eternal Protocol Price Support

The Eternal Protocol employs multiple mechanisms to ensure that token prices and returns follow a robust long-term trend. While market prices may experience short-term fluctuations, the protocol's buyback support and value injection gradually increase the floor price. This price stabilization function is derived from the protocol's continuously accumulated liquidity and value reserves, causing the token price to rise over time. For long-term participants, this means higher resilience to risks and expected stability.

In conclusion, the design of the Eternal Protocol in terms of security and sustainability can be described as layered and complementary: the decentralized and audited codebase, coupled with isolation, regulation, and sealing mechanisms at the protocol level, establishes firewalls and shock absorbers. This multi-layered anti-fragility structure significantly enhances the protocol's ability to withstand extreme market conditions and internal imbalances, setting a standard for the DeFi sector as a "hard-to-crack, hard-to-break" model.

Conclusion: Research Assumptions for the New DeFi Paradigm

What the Eternal Protocol demonstrates is a comprehensive reconstruction of the DeFi rules of the game. From the sealing-based market-making system that disrupts the negative feedback loop to the DM-DP dual-token model balancing value flow, and the security and reward mechanisms ensuring long-term stability, it provides a set of structural solutions to many persistent issues that have plagued DeFi in the past. Compared to incremental innovations that address specific issues, the Eternal Protocol is more like a protocol-level "combination remedy," attempting to solve the fundamental problems of unsustainable liquidity and unstable expectations.

Of course, the implementation of any new paradigm is not achieved overnight. Whether the Eternal Protocol can realize its mechanistic advantages in the actual market remains to be tested over time and practice. However, its bold design provides the industry with a fresh perspective—ensuring value equilibrium through the protocol's inherent mechanisms rather than relying solely on market sentiment or external hype. If the core issue of DeFi in the past has been the loss of liquidity and stability of expectations, has the Eternal Protocol already provided a path-dependent solution at the protocol level? This proposition deserves continuous tracking and contemplation by every researcher interested in the evolution of crypto finance. It can be foreseen that in the exploration of the new DeFi cycle, protocol innovations like the Eternal Protocol may become the touchstone for measuring the next "new benchmark," guiding the entire industry towards a more mature and resilient future.

This article is contributed content and does not represent the views of BlockBeats.

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