1⃣LPs need to lock $CRV for up to 4 years to boosts rewards.
The longer you lock, the more vote-escrowed CRV (veCRV) you get.
2⃣Locking is irreversible and tokens aren't transferrable.
3⃣CRV lockers earn part of the protocol fees.
7/ The goal?
Increase TVL without over inflating $CRV supply.
Curve's lock ups & vesting buys time to grow the protocol, adoption and revenue.
Succeeding means the value proposition for $CRV should be attractive enough not to sell $CRV at all.
8/ By the way, if you want a more detailed explanation, check my blog below or check the table with all projects analyzed (TVL, % of tokens locked, APR, unique features etc.)
veCRV holders vote on which pools get $CRV rewards.
If you're building a #DeFi protocol, you'll need liquidity for that. You can:
• Buy CRV and vote for yourself.
• Bribe veCRV holders
This should increase demand for CRV and yield of $veCRV
10/ Curve changed the liquidity mining game theory.
Best strategy for $COMP mining was to farm & dump.
Then wait for an inflection point.
If the token price is low enough relative to the adoption, then consider buying back.
11/ But with veTokes you have skin in the game.
In short it:
• Encourages long term holding
• LM is more efficient & transparent
• Holders incentivized to become LPs & vice versa
• Revenue incentivizes the team without selling tokens
• Bribe system attracts other protocols
12/The focus on long-term holding has attracted more protocols to adapt veTokenomics.
Quite many of them modified the original Curve model to fit their needs.
Here are the protocols & how they modified the veModel 👇
13/
1⃣Using LP tokens for vote-escrow.
@BalancerLabs locks 80% $BAL and 20% $ETH LP tokens to receive veBAL.
@finance_ref has a two token model: veLPT and LOVE, where veLPT consists of $REF and $NEAR.
Interestingly, the max lock period chosen by both protocols is 1 year.
Velodrome is an improved version of Andre Cronje's failed Solidly project.
By staking $VELO for up to 4 years, users get veVELO: an ERC-721 governance token in the form of an NFT, which uses ve(3,3) rebase mechanism.
18/veVELO voting power diminishes with time, so every rebase you should claim and restake $VELO to restore it.
The veVELO weigh voting encourages bribes to distribute $VELO rewards.
For example, just last week L2DAO bribes in $OP token yielded 162% APY to veVELO holders.
19/ veTokenomics requires significant efforts to maximize returns.
You need to consider:
• How much & how long to stake?
• Claim and sell rewards or restake?
• How often to compound returns?
• Which weight gauges to vote?
• Find out who's offering the best bribes
....
20/ Enter Yield/Governance Aggregators
The mission is to minimize investment strategy efforts and maximize returns.
21/ @ConvexFinance is by far the biggest with $4.42b in TVL and controls 77% of all circulating $CRV.
Even Yearn Finance uses some of Convex vaults now.
In comparison, Aura controls around 27% share of veBAL despite launching not long time ago.
22/ Although with some differences, they do the following tasks:
• Automate & maximize veToken rewards
• Boost and compounds the yield return to LPs
• Vote on gauge weights.
• Receive rewards in bribes and redistributes to vlAggregator token holders.
23/ Once again, for max returns from bribes investors need to participate actively.
Solution: delegate vlAggregator tokens to another platform 'so you can sit back and enjoy the rewards without doing any work.'