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In DeFi 1.0, Governance Tokens are used for voting rights - a key element in true decentralization. Governance Tokens were raised by AMM’s like Uniswap and Compound
 
veTokens (vote-escrowed) are a newer model of Governance Tokens, pioneered by Curve’s CRV and aims to instill value into valueless governance tokens. Token-holders take on the risk of locking their tokens in exchange for governance power. Benefits:
  • Encourages long-term-oriented decision-making by incentivizing the same and ensuring long-term commitment to the protocol.
  • It offers greater incentive alignment across protocol participants. The ve-model has proven to be beneficial since it can align incentives across a wide swath of protocol participants and stakeholders.
  • Lastly, it improves supply and demand dynamics by helping numbers go up.
 
 
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