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VeToken: Not necessarily a cure, but a cure

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The veToken model is currently in its development stage, and although it has some shortcomings, it is a big step forward compared to the previous Token model.

SnapFingers DAO Research Institute

原文作者： SnapFingersDAO 建设者 Yao#3727（Discord ID）

The fundamental driving force behind the continuous progress of human society is the mechanism of wealth creation. In social and economic activities, money, as a symbol of wealth, represents the right to control assets and labor, while in the digital blockchain world, this symbol becomes Token.

Issue governance Token: cherry delicious tree difficult to plant & NBSP;

DeFi enjoyed its first explosive growth wave in the summer of 2020, when liquidity mining of the DeFi project exploded the market. However, after more than a year's development, people gradually found the disadvantages of liquidity mining. Although the mode of liquidity mining provides a good way for the cold start of the project, and solves the problem of liquidity provision.

However, this incentive model is more about attracting and encouraging short-term participation of mobile miners, most of whom are not real users of the agreement and do not form a sticky symbiotic relationship with the agreement. Many experts now see this as a flaw in the design of the earlier DeFi Token economic model -- constant poaching and selling caused supply to swell and eventually prices to collapse. Token is easy to issue, but its economic model design is really difficult.

Where there is no value, inject value.

VeToken is a major upgrade of the liquidity mining mode of dig and sell, and the first launch of Ve Token mode is now THE largest DEX Curve of TVL. Curve is managed by its native Token CRV. In order to participate in governance and get the full benefits of holding a CRV, the holder needs to lock the CRV for up to four years and the locked CRV gets a veCRV, which is the first veToken. VE stands for "Voter escrowed".

VeCRV holders have three main interests:

· Governance of the agreement

· Share the handling fee generated on Curve

· And get a higher yield when providing liquidity

This last privilege is particularly important because which pool Curve provides rewards to is decided by a vote of veCRV holders. As you can see in "CurveWar", there is added value in the agreement to release Stablecoin with additional CRV rewards.

Advantages and disadvantages of VE mode & NBSP;

· The VE model encourages long-term oriented decision making

This is because by locking up their tokens for a period of time (typically 1-4 years), holders are making a long-term commitment to the agreement. In this way, they have an incentive to take decisions that are in the agreed long-term and best interests, rather than in their immediate and short-term interests.

· Greater alignment of interests among the parties to the agreement

Curve, like the other DEX, uses a third-party provider as a source of liquidity. The highlight of the VE model is that Curve provides an incentive for LP to hold CRV rather than sell it on the open market. This is because if Curve's LP locks their CRV, they will get a CRV rate 2.5 times higher than the unlocked LP.

· Improve Token supply and demand relationship

On the supply side, vote locking acts as a mechanism to remove tokens from the open market. This helps offset the high inflation rate generated by some agreements and reduces the supply of tokens in the secondary market. At the same time, more VE Token privileges will increase the market demand for tokens, improve the relationship between supply and demand, and promote price growth.

Of course, the VE model also has disadvantages such as insufficient liquidity caused by lock-in and voting rights bribery. Voting rights selling (vote buying) is a big deal at DeFi, with platforms such as Votium and Hidden Hand, for example, providing tens of millions of bribes to the Curve, Convex and Tokemak ecosystems, respectively. While this is not problematic for Curve and Convex, and has proved useful in that they do provide agreements with a cheaper way to attract liquidity than traditional ones, such an approach of channising liquidity without managing risk would undoubtedly introduce new systemic risks and undermine the long-term incentives provided by vote lock-in. Given that money markets are only as safe as their weakest collateral, this could also create a situation where tokens come to market that are extremely illiquid, ultimately undermining the security, stability and trust between users of the overall agreement.

Future of VE mode & NBSP;

The veToken model is currently in its developmental stage and despite the shortcomings described above, veToken is a big step forward from previous Token models by encouraging long-term oriented decision making, adjusting incentives among agreement stakeholders, and creating more favorable supply-demand dynamics for price increases. Perhaps veTokens can shape the future of DeFi Token economics.