Truly Crypto 101
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Truly Crypto 101

Truly Crypto 101: Lesson 17

History of Bribery in DeFi Governance

When it comes to concepts such as voting rights and bribes, we have to mention the Curve Wars, which is a trending topic. The Curve Wars can be described as the competition amongst several DeFi protocols. By grabbing more votes, the protocols aim to offer the highest amount of CRV rewards in their pools. With the Curve Wars in full swing, the mechanism and products of bribery have been upgrading constantly to engage more users and project teams more efficiently and easily. Today, Truly will walk you through the bribing mechanism.

Where it started: Curve

Curve, an automated market maker (AMM) platform that maintains low slippage, issued its native token CRV in August 2022 to attract liquidity supply. By locking CRV up, liquidity providers (LP) can get a voting token in return called veCRV. veCRV is of great significance to the platform’s liquidity incentive mechanism as it represents the voting power and affects Gauge Weight.

In other words, the more votes from veCRV holders are delegated to a pool, the higher the liquidity incentive. This way, CRV has become essential for other protocols to offer rewards to their stakeholders. The protocols would grab veCRV voting rights to offer more CRV liquidity incentives, thus increasing their APY/APR. Users who have locked up CRV can earn from project teams trading fees, governance rights, and bigger rewards than that earned by other liquidity providers.

Another player: Convex

Convex is a one-stop platform for CRV staking and liquidity mining dedicated to simplifying the use of Curve. When users lock CRV on the Convex platform, they will receive cvxCRV tokens at a ratio of 1:1. Thanks to cvxCRV’s free circulation in the market and its adequate liquidity on Curve, it is pegged to CRV 1:1, which drives CRV holders to deposit their holdings on Convex. With cvxCRV, users receive not only higher returns but also CVX tokens as rewards. As a result, a massive amount of CRV tokens flow to Convex and are locked into cvxCRV, making Convex the actual controller in the battle for Gauge Weight. Since those who have locked CVX get to decide where the veCRV tokens flow into, project teams focusing on increasing Gauge Weight on Curve turned to Convex for CVX.

The birth of bribery: A faster solution offered by Votium and Bribe.crv

So, is there a third way to win more Gauge Weight? The answer is yes. Apart from directly buying CRV or CVX to vote for higher incentives of their liquidity pools, project teams now have a more efficient means to obtain voting rights: bribing platforms Votium and Bribe.crv.

Votium

Votium is an incentives platform where vlCVX and veCRV holders can receive bribes from buyers interested in amassing voting power. To receive rewards, vlCVX holders can vote on Snapshot for their preferred incentive, while veCRV holders can vote for their preferred incentivized pool through Curve’s Gauge Weight vote.

After realizing the benefits of Votium, TUSD soon jumped on board. vlCVX holders, Votium’s direct clients, may participate in the Votium incentive mechanism so that TUSD pools on Curve can get a higher Gauge Weight and more liquidity. Until now, TUSD has joined six rounds of votes organized by Votium, remarkably growing the TVL and APR of the TUSD-3Crv pool.

Bribe.crv

Bribe.crv is a platform for veCRV holders where third parties can offer bribing funds to guide the holders’ voting on Curve DAO proposals and Gauge Weight, which increases CRV rewards in liquidity mining.

The above two are the most common bribing platforms, born due to the increased cost of time and money of buying CRV or CVX directly. As the gameplay for boosting liquidity in the DeFi sphere upgrades, it seems reasonable to incorporate bribery into product design, which enables one-stop services on the platform and better engages project teams and users. Now Truly will give you a glimpse into Velodrome, a decentralized trading platform.

Further evolution: A new trend initiated by Velodrome

Velodrome is the largest DEX by TVL on Optimism, offering services such as token swap, LP deposits, VELO locking, bribes, and LP voting. Liquidity providers in the Velodrome-based pool are rewarded with VELO tokens, which can then be locked for veVELO. The more the veVELO tokens, the more the liquidity provider’s voting power. Holders of veVELO can earn VELO rewards by voting for liquidity pools.

On September 20, TUSD launched its TUSD-USDC LP pool on Velodrome (Optimism-based), for which veVELO holders can vote and receive lucrative returns and rewards. The APY of the newly-launched pool once reached as high as 100.77%.

The Curve ecosystem delegates governance rights to different protocols through its incentive mechanism, significantly reducing cost and improving efficiency. Project teams can obtain better on-chain liquidity at a lower cost and provide users with a smoother trading experience, and higher rewards and yields. FRAX, MIM, and other algorithmic stablecoins have also joined in the turf war of voting rights to boost the TVL of pools and CRV emissions. While Velodrome is leading the trend, the evolution of bribery is still ongoing. Truly is looking forward to more innovative and exciting tools that can push up the Curve Wars and liquidity game to the next level.

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