Liquity v2: take two is starting to take off, with BOLD eclipsing the v2.1 circulating supply. Friendly forks are rolling out and PIL incentives are beginning to attract bribes for LQTY stakers. To understand the implications for LQTY holders, it is useful to examine the bribe business and what drives it.

The overarching metric in the bribe economy is incentives directed per dollar bribed. This shows the efficiency that bribers are able to receive on their investment, and inversely, the efficiency token holders are getting on the value they are stewarding.

In a perfectly efficient market, this number will asymptote to $1. The market will never pay more for incentives than they are worth, so it will remain above $1. From the token holder’s perspective, the $1.02-$1.06 range achieved during the peak of the CRV wars is nearly the best case scenario. CRV lockers were almost breakeven on the bribe business for a short time, before accounting for linear decay.

Notably, this means veToken and emissions based bribe markets are always a net negative for token lockers, one of the main cruxes of my anti-veToken stance. Liquity is distributing protocol revenue rather than emissions, so this is a far less frothy take on the bribe economy and clever way to justify the existence of LQTY.

Note: From the perspective of the tokenholder/voter, the efficiency of votes is better expressed as the bribes earned per $ incentives stewarded (the inverse of incentives directed per $ bribed – 1/$1.02=$0.98). On Dune dashboards and bribe economy dialogue, incentives directed per dollar bribed is the standard metric, likely because it paints the practice in a positive light and obfuscates losses to tokenholders. For consistency, we will use incentives directed per $ bribed throughout.

But this isn’t about veTokens, it’s about bribe economy design. There will always be a market for incentives to some degree, since projects can spend 1 d