Vote-Escrow (veCRV) and Governance Wars

The essentials

Why lock a token to vote?

In classic governance, a governance token gives a vote to whoever holds it, even for a few minutes. This favors short-term speculation and attacks using borrowed tokens.

Vote-escrow changes the logic: voting power goes to those who agree to lock their tokens for a long time. The idea is to align voters' voices with the protocol's long-term interest, since they can't sell before the lock ends.

veCRV in detail

Locking and calculation

According to Curve's documentation, you can lock CRV (the governance token of Curve, an exchange platform for stablecoins and correlated assets) for a period ranging from 1 week to 4 years. The amount of veCRV you get follows this formula:

veCRV = CRV locked × lock duration / 4 years

So 1 CRV locked for 4 years gives 1 veCRV; locked for 1 year, it gives 0.25 veCRV.

The decay of voting power

veCRV decreases over time as the unlock date approaches. A 4-year lock that isn't extended therefore gradually loses weight: at the halfway point, it is worth only about half. You can extend the duration or add CRV; the amount of veCRV is then recalculated.

Essential point: veCRV is not transferable. You can neither sell it nor get your CRV back before the expiry date.

What veCRV earns

According to Curve, veCRV gives access to:

• a boost on rewards if you also provide liquidity on Curve;
• a share of fees: 50% of trading fees are distributed to veCRV holders, along with 80% of the interest collected on crvUSD, all converted to crvUSD before distribution;
• voting on DAO proposals;
• voting on gauge weights, the point that triggered the "wars."

Gauges: directing emissions

A gauge is a contract tied to a liquidity pool that receives a share of newly created CRV emissions and distributes them to that pool's liquidity providers (LPs).

A gauge's weight determines its share: Curve's documentation gives the example of a pool weighing 72%, which would receive 72% of daily CRV emissions.

The practical rules:

• veCRV holders split their voting power among one or more pools, in basis points (10,000 = 100%);
• updated weights apply every Thursday at 00:00 UTC;
• a vote can be changed only once every 10 days;
• if you add CRV or extend your lock, you need to re-vote to allocate the new power, without resetting your vote to zero, which would trigger the 10-day delay.

A pool that receives a lot of emissions offers a higher yield to its LPs, therefore attracts liquidity, which improves its trading conditions. For a project launching a stablecoin, getting gauge weight becomes strategic.

Governance wars: Convex and bribes

Convex: aggregating veCRV

Locking CRV for 4 years is restrictive. Protocols like Convex positioned themselves as intermediaries: they let liquidity providers get boosted CRV rewards without locking any CRV themselves. Convex thus accumulated a large amount of voting power on Curve.

This power is itself steered by holders of vlCVX ("vote-locked" CVX). According to Convex's documentation:

• the minimum lock is 16 weeks, organized into weekly epochs starting Thursday at 00:00 UTC;
• vlCVX holders vote notably on Curve gauge weights and Curve DAO proposals;
• unlocked CVX left in the contract for more than 4 epochs is exposed to a 0.25% penalty per epoch, in favor of whoever withdraws it.

The result is a governance stack: whoever controls the vlCVX influences Convex's votes, and therefore a significant share of Curve's emissions.

Bribe markets

Since voting brings value to certain pools, projects began to pay voters to vote in their favor. These payments are called "bribes" or, more diplomatically, "incentives."

Votium is a platform of this kind for vlCVX holders. According to its FAQ:

• rounds take place every two weeks, when Convex gauge vote proposals are open, from Thursday 00:00 UTC to Tuesday 00:00 UTC;
• voters can vote manually or delegate to Votium, which tries to vote in a way that maximizes its delegators' yield;
• incentives are distributed within 24 to 48 hours after the proposal ends.

For the paying project, the question is simple: does a dollar spent on incentives bring in more than a dollar of emissions directed to its pool? For the voter, voting becomes a source of yield in its own right.

ve(3,3) variants: Velodrome and Aerodrome

The "ve(3,3)" model combines vote-escrow with game theory ideas. Velodrome (on Optimism) and Aerodrome (on Base) are well-known examples. According to Velodrome's contract specification:

• tokens are locked for up to 4 years in an NFT (veVELO), rather than in a non-transferable balance;
• the protocol runs on weekly epochs starting Thursday at midnight UTC;
• holders vote for pools and receive both the fees and the incentives of the pool they voted for;
• each gauge receives emissions proportional to the votes it gets;
• holders of locked tokens receive rebases (additional emissions proportional to their share of the total locked), meant to limit their dilution;
• an NFT can be switched to a permanent lock: its voting power no longer decays;
• managed NFTs pool the power of several depositors and redistribute the rewards to them, minus fees.

The key difference from Curve: here, the voter is directly rewarded by the fees of the chosen pool, which encourages voting for pools that actually generate volume.

A concrete example

You have 1,000 CRV.

• 4-year lock: you get 1,000 veCRV. Two years later, with no extension, you have about 500 veCRV of voting power left. At expiry, you get your 1,000 CRV back, whatever their price is at that time.
• 1-year lock: you get 1,000 × 1/4 = 250 veCRV, which decays to zero over a year.

With 1,000 veCRV, you vote to split your weight 60% on pool A and 40% on pool B. The new weights apply the following Thursday. If you change your mind three days later, you'll have to wait for the 10-day delay to end.

The point to weigh: for the whole duration of the lock, you bear the full price movement of CRV, with no possibility of selling. The fees and incentives you collect must be weighed against that risk.

The risks

• Total illiquidity: no way out before the lock expires. If the token's price collapses, you suffer it without being able to react.
• Variable returns: fees and incentives depend on volume and on demand for votes, which can drop.
• Smart contract risk: each layer (Curve, Convex, Votium, liquid versions of locked tokens) adds code that may contain flaws.
• Derived "liquid" tokens: protocols offer tradable versions of locked positions. They can trade below the value of the underlying token and the conversion may be one-way; check the terms in the documentation.
• Concentration of power: aggregators and large vote buyers can capture governance.
• Emissions and dilution: emissions directed to pools of little use can weigh on the token's price.

Mistakes to avoid

• Locking for the maximum by reflex without having estimated whether you might need those funds.
• Forgetting the decay: a lock that isn't extended loses voting power week after week.
• Resetting your vote before re-voting on Curve, which blocks any change for 10 days.
• Comparing only the displayed APR without factoring in the price risk of the locked token.
• Leaving unlocked CVX in the contract too long, at the risk of a penalty.
• Using an unofficial interface: voting and incentive-claiming sites are phishing targets.

This guide provides general information and does not constitute investment advice.

Key takeaways

• Vote-escrow grants voting power in exchange for a lock: on Curve, 1 CRV locked for 4 years is worth 1 veCRV, and this power decays until expiry.
• veCRV is not transferable; it earns a share of fees, a boost for LPs and the right to vote on gauges.
• Gauges direct emissions; this is why aggregators like Convex and incentive markets like Votium emerged.
• The ve(3,3) model (Velodrome, Aerodrome) uses NFTs and rewards voters with the fees and incentives of the chosen pool, plus rebases.
• The main risk remains illiquidity: you carry the token's price for the entire lock.

Sources

• Curve Resources — veCRV Overview
• Curve Resources — Gauge weights
• Convex Finance docs — Vote Locking CVX
• Votium docs — vlCVX FAQ
• Velodrome Finance (GitHub) — Contracts specification

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