veTokens — The DAO regulators

Remember when we talked about DAO?

How that for a user to gain the full access to a DAO, the user must have a governance token.

BUT

Smart users or preferably people who wants quick money tend to dump these governance tokens immediately they find opportunities and this leads to the opposite of token upsurge!

How do DAO solve this problem then?

veTokens

veTokens also known vote escrowed tokens are locked tokens that give holders full governance rights.

Let’s say users are expected to lock tokens for 1–4 years to gain full governance power as seen in Curve Protocol.

Curve Protocol is the first mover of veTokens, they let users lock their CRV tokens for veCRV hereby getting a % of protocol fees and yields(in boost), depending on how long you lock your tokens.

How does veTokens work?(curve finance as case study)

• User buys CRV tokens.
• Selection of the number of years to lock, eg: 2 years for 2.5x boost.
• User now gains certain % of protocol fees and yields boosts

Benefits of veTokens

• Maintenance of token price.
• Full Governance power.
• Access to gain protocol fees
• User can stake veTokens to expand their previous yield.
• User can get incentives for engaging in DAO proposals.

Drawbacks:

• People with large amounts of veTokens have the upper hand of authority and can manipulate gains to their advantage.
• You can’t swap veTokens back to native tokens unless the period is over. Let’s say project have issues and there are rumors of rug, you can’t SELL!

veTokens are very paramount in DAO maintenance and forward movement.

Thank you for hanging in there…Have a nice day ahead ❤️