The role of visionary protocols in today’s DEFI: from the DEFI of individuals to DAOs’ aggregations
The so-called Curve wars have been going on for a while now, it is more and more known that Plenty of DAOs already entered this game of power based on owning the most veCRV or cvxCRV etc..
There is one main reason why these specific wars are being fought and, more than seeking a dominant role, which is ultimately the destination, right now it is Capital efficiency: DAOs need to provide high yields to attract enough investors’ liquidity to survive, and they want cheaper ways to do that more effectively.
DEFI 1.0: The DEFI of individuals
The first wave of DEFI had the individuals as the main characters, their specific liquidity was needed in order to build successful DAOs, think about UNI or Curve itseves, they all started bootstrapping and then attracting liquidity by providing yields firstly from liquidity providing, then from liquidity farming and staking. The DEFI 1.0 worked like a test to see if a decentralized economy could have worked and been able to attract the individual attention and capitals.
DEFI 2.0: The DAOs’ DEFI
What did it change in DEFI 2.0? Now protocols managed to own their own liquidity (think about OHM, Wonderland), they are able to actively participate in the market as the new main characters.They found a way to accumulate the power of individuals into huge docks of liquidity.
So here lies some key questions: is the war for Curve and Convex voting power just a new way for DAOs to try owning their own liquidity?
Could the ability to influence a vote be the springboard for something else to build on?
The whole DEFI now looks more like a race to get a dominating spot in this new financial standard and this race requires faster and faster runners. Now these runners need to smartly use the liquidity they accrued in order to survive, and surviving in the DAO’s ecosystem means being able to change, seeking new ways of capital efficiency.
Capital efficiency in this new competitive environment based on voting powers means being able to influence the vote to change the yields for DAO’s coins, provide new pools etc.. Shortly said they need to be moving their protocol’s visibility in a dominating spot.
From here the concept of bribing and the birth of platforms like Votium, instead or on top of offering yields for users you could ask them to delegate some of their voting power to your DAO in order to raise the odds of having good yields (from the perspective of the delegator) and good visibility (from the perspective of the DAO).
And, as we saw for the Olympus Dao model, the model of bribing works better than anything else in his field, raising capital efficiency for DAOs and giving new and better ways of earning rewards for users.
To understand what does this may mean in future let’s take in examination 2 different protocols that want to offer instruments to make this even more efficient Tokemak and Redacted Cartel:
“From the perspective of a vote buyer, not every vote counts the most — that right is reserved for the vote that decides the outcome. This distinction has important implications for BTRFLY. Since vote-buying is a game of prediction, controlling the deciding vote will usually levy a margin of error. Maybe you buy an extra 10 votes before the deadline, or maybe an extra 100 if you know your opponent is flush with capital. You’re buying an edge, and you’re buying confidence.”
Redacted is an official branch of Olympus Dao and wants to add another Layer to all these processes of acquiring votes, bribing etc, and it does so by proposing itself as an edge being the “decisive vote” that helps a DAO to get dominance in a hypothetical voting round.
This means that it wants to increase the power (vote power) of another protocol (and of itself) that invests in it, and if this model works it may be the catalyst for generating more ask for their token.
This is already a very interesting model of aggregating two DAOs together, and this edge scheme may work especially well for little DAOs that wanna aggregate in order to compete with bigger ones.
From Tokemak we get another example of an idea of DAOs’ aggregations:
Tokemak is a liquidity aggregator, you can gain attractive yields for providing liquidity on one side of their so-called “reactors” in the form of the token you like without any impermanent loss. But it also introduces another player in the equation: the liquidity director. The other side of the reactor is in fact the one in which TOKE holders can pool their TOKE in order to decide where to direct the protocol liquidity,getting rewards by doing so, giving Tokemak the ability to direct liquidity accross all the DEFI.
Found anything familiar? Voters, power to influence and redirect liquidity with the platform token….
Exactly! That is the Curve vote and get-power mechanism!
Tokemak was so named because it is a reactor to power DeFi, both increasing liquidity and making liquidity cheaper for DAOs. As value-flow in web3 is replacing data-flow in web2, liquidity plays the role of bandwidth in this ecosystem. Greater liquidity bandwidth provided by Tokemak benefits everyone, as liquidity leads to tighter spreads, better pricing, and price transparency.
In the article mentioned above the author goes on making a detailed example on how a DAO may benefit from cooperating with Tokemak at 6 different levels, explaining how much that would result in a gain in terms of capital efficiency for both of the DAO and Tokemak.
These bring us to the point of this article:
DEFI 3.0: The DEFI of DAOs’ aggregations
These two protocols are trying to point out that cooperation in the whole field of “getting powerful through voting power” works even better than competing and it shows that pheraps in this crazy race the faster runners may be be the ones who learn how to better run together, adding another possible layer to DEFI, we’ll call it the DAO’s aggregations layer.
