ve (vote escrow) is most popular tokenomic model that widely applied by famous or emerging protocols currently
For #defi beginner, you may curious about How does this model benefit protocols? What problem it have and Does ve-Model has some alternatives?
Let's find out
👇🧵🧵
For #defi beginner, you may curious about How does this model benefit protocols? What problem it have and Does ve-Model has some alternatives?
Let's find out
👇🧵🧵
(1)
The main purpose of ve Model is bonding protocol development with the interest of long-term token holders.
It’s a gambling theory aims solving a trilemma: Protocol Long-term development/ Token emission with Value capture / Incentives for Protocol participants(LPs & Holders)
The main purpose of ve Model is bonding protocol development with the interest of long-term token holders.
It’s a gambling theory aims solving a trilemma: Protocol Long-term development/ Token emission with Value capture / Incentives for Protocol participants(LPs & Holders)
(2)
Let’s recall back to 2020,lots of protocol introduced yield farming,use high APR to attract liquidity and distribute reward by own native token
Its a unsustainable tokenomics,when whales withdraw liquidity and dump their reward. It leads death spiral and damage the protoocol
Let’s recall back to 2020,lots of protocol introduced yield farming,use high APR to attract liquidity and distribute reward by own native token
Its a unsustainable tokenomics,when whales withdraw liquidity and dump their reward. It leads death spiral and damage the protoocol
(3)
Then #Curve has genius design to solve it and balance protocol TVL with damaging token price
Curve allow users to lock CRV up to 4 years
Lock $CRV in change of $veCRV, and reward for veCRV holders is:
- trading fee of pool
- earn up to 2.5 boost as LP
- vote for governance
Then #Curve has genius design to solve it and balance protocol TVL with damaging token price
Curve allow users to lock CRV up to 4 years
Lock $CRV in change of $veCRV, and reward for veCRV holders is:
- trading fee of pool
- earn up to 2.5 boost as LP
- vote for governance
(4)
ve model bonds protocol and token holder on board. For @CurveFinance, Lock $CRV reduce circulating supply and relief selling pressure of $CRV which provides good condition for curve long term development
For token holders,It bring additional rewards for CRV holders
ve model bonds protocol and token holder on board. For @CurveFinance, Lock $CRV reduce circulating supply and relief selling pressure of $CRV which provides good condition for curve long term development
For token holders,It bring additional rewards for CRV holders
(5)
ve-Tokenomics also brings long-term alignment for token holders and Protocol in the respect of Governance.
Those who are willing to lock $CRV are tend to optimistic for curve long-term development and will vote wisely in DAO governance
ve-Tokenomics also brings long-term alignment for token holders and Protocol in the respect of Governance.
Those who are willing to lock $CRV are tend to optimistic for curve long-term development and will vote wisely in DAO governance
(6)
While some of concerns related to ve Models comes out especially in bear market.
Due to voting power can direct the CRV emissions to specific pool, The bribes always exists
Let’s imaging you are $CRV holders,Lock $CRV for 4 years, and right now it is bear market
While some of concerns related to ve Models comes out especially in bear market.
Due to voting power can direct the CRV emissions to specific pool, The bribes always exists
Let’s imaging you are $CRV holders,Lock $CRV for 4 years, and right now it is bear market
(7)
In bear market, we are willing to maximize our interests and accept bribes rather than participate in governance, which leads to centralization problems finally
Additionally,Convex,a protocol design on the top of veCRV has conflict with the interest of CRV long-term holders.
In bear market, we are willing to maximize our interests and accept bribes rather than participate in governance, which leads to centralization problems finally
Additionally,Convex,a protocol design on the top of veCRV has conflict with the interest of CRV long-term holders.
(8)
@ConvexFinance absorbing large amount of $CRV and control the voting power to directing the emission.
The lock duration of $vlCVX short than $veCRV (16 weeks and 4 years respectively) which leads decrease the incentives for long-term $CRV holders
@ConvexFinance absorbing large amount of $CRV and control the voting power to directing the emission.
The lock duration of $vlCVX short than $veCRV (16 weeks and 4 years respectively) which leads decrease the incentives for long-term $CRV holders
(9)
When veCRV holders found limited long-term alignment, They tend to selling CRV.Those who staked 4 year maxi suffer the loss and lose confidence for protocol and has negative impact on Curve itself and community
When veCRV holders found limited long-term alignment, They tend to selling CRV.Those who staked 4 year maxi suffer the loss and lose confidence for protocol and has negative impact on Curve itself and community
(10)
Several protocols has realized the potential problems of ve-Tokenomics and has some alternative ideas to improve this mechanism.
Let’s take a look 👀👇
Several protocols has realized the potential problems of ve-Tokenomics and has some alternative ideas to improve this mechanism.
Let’s take a look 👀👇
(11)
GMX introduce Multiplier Points as reward for stakers (esGMX).Multiplier Points used to calculate rewards for long term GMX stakers.
It is an additional bonus for GMX stakers and encourage them hold GMX in long run. When GMX unstake,a portion of MPs would be burn as penalty
GMX introduce Multiplier Points as reward for stakers (esGMX).Multiplier Points used to calculate rewards for long term GMX stakers.
It is an additional bonus for GMX stakers and encourage them hold GMX in long run. When GMX unstake,a portion of MPs would be burn as penalty
(12)
Same mechanism has been used in Plutus DAO tokenomics v2.
Compared with veCRV, this mechanism is much more flexible while also has additional incentives for Token holders
Same mechanism has been used in Plutus DAO tokenomics v2.
Compared with veCRV, this mechanism is much more flexible while also has additional incentives for Token holders
(13)
@VelodromeFi 🚴♀️(forked of solidly live in @optimismFND) took ideas from
(3,3) mechanism, a innovation design firstly introduced by Olympus.
$veVELO (a ERC-721 NFT) will receive protocol fees, bribes, rebases, and governance voting power.
@VelodromeFi 🚴♀️(forked of solidly live in @optimismFND) took ideas from
(3,3) mechanism, a innovation design firstly introduced by Olympus.
$veVELO (a ERC-721 NFT) will receive protocol fees, bribes, rebases, and governance voting power.
(14)
voting power of veVELO will decrease by time.
Holders have to re-deposit VELO to regain voting right, and holder of veVELO will receive rebase of voting power dilution. It is a solution for veCRV potential centralized problems.
voting power of veVELO will decrease by time.
Holders have to re-deposit VELO to regain voting right, and holder of veVELO will receive rebase of voting power dilution. It is a solution for veCRV potential centralized problems.
(15)
@Balancer introduced ve-Tokenomics and lock LP token to receive veBAL, users lock 80/20 BAL/ETH LP to get involve in Balancer governance.
It guarantee of Liquidity of Balancer and reduce the price dumping risk of token holders
@Balancer introduced ve-Tokenomics and lock LP token to receive veBAL, users lock 80/20 BAL/ETH LP to get involve in Balancer governance.
It guarantee of Liquidity of Balancer and reduce the price dumping risk of token holders
(16)
@iearnfinance has various design to balance the interest of veYFI holders and protocol itself.
Punishment applied when $veYFI withdraw based on their lock duration.This part of punishment will re-distribute to veYFI holders
@iearnfinance has various design to balance the interest of veYFI holders and protocol itself.
Punishment applied when $veYFI withdraw based on their lock duration.This part of punishment will re-distribute to veYFI holders
(17)
Vault gauges is a kind of design introduced by yearn that different with others. Vault gauges allow depositors to stake their vault tokens and earn YFI rewards according to their veYFI weight.
Vault gauges is a kind of design introduced by yearn that different with others. Vault gauges allow depositors to stake their vault tokens and earn YFI rewards according to their veYFI weight.
(18)
$veYFI holders can vote every two weeks for gauges, Each gauge can get a different amount of bought back YFI to emit.
$veYFI holders can vote every two weeks for gauges, Each gauge can get a different amount of bought back YFI to emit.
(20)
That’s it, The balance among Potential bribes/ Voting centralization/ Protocol Long development and TVL is big problems for new player who uses ve-Tokenomics for their products.While I believe more innovation would emerge in the futures
That’s it, The balance among Potential bribes/ Voting centralization/ Protocol Long development and TVL is big problems for new player who uses ve-Tokenomics for their products.While I believe more innovation would emerge in the futures
(21)
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Some mentions
@DAdvisoor
@DeFiMinty
@DeFi_Dumbledore
@defiprincess_
@Only1temmy
@TheDeFISaint
@ReveloIntel
@rektdiomedes
@zerototom
@WinterSoldierxz
@defi_mochi
@crypto_linn
@archipelabro
@CryptoDragonite
@Crypto_Bandits
If you like the content, pls RT, Like and follow…
Some mentions
@DAdvisoor
@DeFiMinty
@DeFi_Dumbledore
@defiprincess_
@Only1temmy
@TheDeFISaint
@ReveloIntel
@rektdiomedes
@zerototom
@WinterSoldierxz
@defi_mochi
@crypto_linn
@archipelabro
@CryptoDragonite
@Crypto_Bandits
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