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Author: Admin | 2025-04-28
Longer they lock for, the more veCRV they receive, which decays over time until the underlying CRV is unlocked. Vote locking allows holders to vote on governance proposals, direct CRV emission rewards towards specific liquidity pools, and receive a portion of all exchange trading fees. Curve’s “veToken” model offers a unique way to align long-term incentives between liquidity providers and governance participants. Curve has come to make up a significant portion of the DeFi space in terms of Total Value Locked and provides a way for stablecoin protocols to obtain deep liquidity and achieve peg stability. This makes the ability to direct CRV token emissions on its exchange compelling not just for users seeking yield but also for protocols seeking liquidity for their token. This has led to different DeFi protocols competing to capture Curve governance power by incentivizing CRV token holders to stake their CRV on their protocol instead of Curve, commonly known as the “Curve Wars”. Convex Finance, a protocol managing a significant portion of the veCRV supply, allows users to 1-way convert their CRV to cvxCRV, which entitles them to the usual rewards earned from veCRV but also to additional boosted rewards through the Convex platform.The Curve Wars illustrate how the permissionless composability of DeFi and effective incentive alignment through sophisticated yield farming dynamics can create successful strategies for bootstrapping long-lasting communities.Liquidity and Network EffectsIn order to further explore why DeFi protocols are willing to distribute tokens passively to users, it’s important to understand the key importance of liquidity within DeFi. As decentralized applications are fully open-source, their primary defensive economic moat is their community and deposited liquidity. A protocol looking to sustain itself over the long term needs to extend its focus beyond business logic to bootstrapping a lasting network effect tied to its underlying utility.
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