Proposal for a “VE” Token System to Incentivize Liquidity Providers and Other Holders to Lock DFX

Proposal for a “VE” Token System to Incentivize Liquidity Providers and Other Holders to Lock DFX

DFX’s big move to massively upgrade DFX’s tokenomics is here. This is a proposal to adopt the “ ve ” model and evolve usage of the DFX token with veDFX!

What is the “ve” model?

Vote escrowed, or ve-tokens, are tokens that have been time locked in exchange for non-transferable voting tokens within the DAO. They also allow boosted rewards for those who lock.

The “ve” model was pioneered by Curve’s veCRV mechanism and quickly became a DeFi standard allowing composability across protocols. We are adopting a widely successful and battle-tested model of tokenomics for DFX.

What is veDFX?

“veDFX” stands for “Vote Escrowed DFX.” veDFX will allow the holder to both vote on proposals within the DFX ecosystem and earn a multiplier on rewards based on their lock-up period. This is done through a system of gauges. The more veDFX you own, the more voting power you have and the higher APY boost you can achieve!

Impact on Governance

By locking DFX tokens for greater durations, increasing amounts of veDFX can be obtained. Any person holding veDFX will enjoy voting rights on gauge proposals (i.e. gauge weights). This ensures long-term alignment as only users who have chosen to lock their DFX will have the ability to vote on gauge proposals.

Proposed Changes

  • Provide a system to allow users to lock DFX and receive veDFX in return.

  • Provide boosted rewards (i.e. APY) based on ownership of veDFX, by way of a ve-style gauge system.

Pros and Cons

Pros –

  • Compatibility with other ve- ecosystems. By embracing the same mechanisms, it makes it simple for protocols like Yearn, Element, Convex, Pickle or any others to integrate with DFX

  • Motivation for other DAOs to take a position in DFX By having protocols aligned with DFX’s long vision, we expect utility and usage of DFX to increase as well.

  • Incentivizes Liquidity Providers to hold and stake their earned DFX tokens versus selling on the open market

  • Incentivizes providing liquidity to liquidity pools due to increased rewards

  • Through the multiplier decay, stakers who to continue to lock additional DFX will gain the most rewards

Cons –

  • It can be a difficult system to understand. We will provide all the information needed to make this a smooth process

Summation of Proposed Incentives & Changes

  • Create a system to reward veDFX to individuals who “lock” their DFX.

  • Give benefits to those holding veDFX, including voting rights and a multiplier on their LP rewards.

  • Pay for the increased rewards by reallocating existing rewards, at the expense of Liquidity Providers who choose not to “lock” DFX and own no veDFX.


Additional References:

WTF are veTokens - by Ben Giove - Bankless

  • Yes
  • No

0 voters

1 Like

Excellent proposal that will greatly benefit the platform both short & long-term.

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Good idee from a great project :+1:t2:

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Like other VE token systems, will it only be available on Ethereum mainnet?

For example, will rewards earned on Polygon need to be bridged to Ethereum for locking to get veDFX?

And will participation in the gauge system be on Ethereum mainnet only?

Awesome idea! Can’t wait! :fire:

1 Like

Looking at Curve and almost 90% of its circulating supply is locked as veCRV.

two thumbs up for me