Governance vs VeTokens
Reading: What are governance tokens Understanding CRV and VeTokens Can Curve’s, veToken Model Be the Future of Defi Token Design? About Ve(3,3)
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.