An Alternative Implementation of veToken Economics

APR 19, 2022 • 21 Min Read

Jeremy Ong + 1 other

DISCLOSURE: MEMBERS OF OUR TEAM HOLD CRV & CVX. THIS STATEMENT IS INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.

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Curve and veToken Economics

The rise of crypto and tokenization has blown the design space for protocol economics wide open, allowing projects to incentivize specific behaviors. Yet, many DeFi protocols reward all token holders equally, independent of the value they add to the project. More often than not, this involves little to no lockups in exchange for receiving governance power and protocol revenues. We believe the optimal design aims to dilute mercenary capital and speculators, while rewarding value additive and long-term oriented participants.

One such model we feel encourages this behavior is the vote-escrowed implementation introduced by Curve. This model allows CRV holders to lock up their tokens as vote-escrowed CRV (veCRV) for up to 4 years. The longer a user locks their CRV for, the more veCRV they receive. In exchange for taking on liquidity risk and removing CRV supply from the market (showing their long-term commitment to the pl

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Jeremy Ong + 1 other