Recently, Yearn Finance founder Andre Cronje teased a new token mechanism he plans on launching on the Fantom Blockchain. Entitled ve(3, 3), it combines aspects of the Curve vote-escrow mechanism with OlympusDAO’s (3, 3) staking (which we will cover in a subsequent post).
The proposal has received much attention, and is expected to be a primary driver of the Curve wars on Fantom. Andre has said the top 20 TVL projects will be granted access to the project:
The first part of the proposal is simple. Reduce emissions as a proportion of the total token that's ve-locked. So if all of the tokens are locked, then emissions are 0.
But the second part of the proposal contradicts this. ve-locked token holdings increase in proportion to the emission (i.e. rebasing). How are ve-locked token increases not emissions? At the end of the lock, you are getting a larger amount of the token back. So, categorizing rebasing as not emissions seems disingenuous to me. The end result of both rebases and emissions are the same: inflation.
You might counter that inflation of vote-escrowed tokens are fundamentally different from that of liquid tokens (they aren't really), but the third part of the proposal also weakens that claim: ve tokens are now liquid in the form of NFTs.
The whole point of vote-escrowed tokens is that you cannot capitalize it. It's locked, which diminishes the supply and thereby puts upward pressure on the price. Once you make ve tokens liquid in the form of NFTs, they are no different from regular tokens. So if ve tokens are the same as regular tokens, then emissions are the same as rebasing. Inflation in one is basically the same as the other.
I don't understand how this creates more efficient incentives than the original ve mechanics. If anything, the possibility of a rug pull seems more imminent with this design because ve tokens are more liquid.
That's because anything Andre touches turns into a steaming pile of burning trash (many, many examples from the past...). He thinks he "outsmarted" normal ve-tokens, yet he's building a house of cards which holds no additional value other than a novel mechanism to do the exact same thing.
The same could be said of OHM and its forks really, which are nothing more than glorified hedge funds, and the "interest" is nothing but stock splits which confused people until they realize they've been had.
I'm glad you're not one of those people salivating over anything with "Andre" near it. Shows you come to your own conclusions.
Even with non-transferable locked positions, it's still possible to financialize away the locking--this is exactly what Convex does, replacing a variable, up-to-4-year locking period with a fixed 16 week one. I would expect the trading market for NFTs of locked positions to be very illiquid (b/c things like AMM pools don't really work w/NFTs) so ultimately I'd expect a Convex-style financialization to arise for the ve(3,3) mechanism too that allows greater fungibility. There might be an interesting game to play balancing the locked/unlocked ratio for maximum profit versus maximum control.
And you are completely correct that locked inflation is still inflation :).
Thanks for your comment! I don't think this is *exactly* what Convex does. The conversion from CRV to cvxCRV is irreversible (you never get your CRV or veCRV back), whereas in ve(3, 3), you get your original tokens back at the end of the lock period so long as you have the NFT.
I agree with you though that the NFT market will be less liquid. Maybe this will actually spur development of NFT AMMs? ;-)
I didn't mean that ve(3,3) was the same as Convex, I just meant "Convex is exactly a mechanism that financializes away the locking period".
I don't think NFT AMMs will really ever be much of a thing. Instead, they'll be fractionalized and tranched to form "NFT ETFs" or some similar horror, and those things will then be amenable for use in AMMs.
That's because anything Andre touches turns into a steaming pile of burning trash (many, many examples from the past...). He thinks he "outsmarted" normal ve-tokens, yet he's building a house of cards which holds no additional value other than a novel mechanism to do the exact same thing.
The same could be said of OHM and its forks really, which are nothing more than glorified hedge funds, and the "interest" is nothing but stock splits which confused people until they realize they've been had.
I'm glad you're not one of those people salivating over anything with "Andre" near it. Shows you come to your own conclusions.
Thank you for your comment! I agree there’s a good degree of Ponzinomics going on both here and in OHM.
Even with non-transferable locked positions, it's still possible to financialize away the locking--this is exactly what Convex does, replacing a variable, up-to-4-year locking period with a fixed 16 week one. I would expect the trading market for NFTs of locked positions to be very illiquid (b/c things like AMM pools don't really work w/NFTs) so ultimately I'd expect a Convex-style financialization to arise for the ve(3,3) mechanism too that allows greater fungibility. There might be an interesting game to play balancing the locked/unlocked ratio for maximum profit versus maximum control.
And you are completely correct that locked inflation is still inflation :).
Thanks for your comment! I don't think this is *exactly* what Convex does. The conversion from CRV to cvxCRV is irreversible (you never get your CRV or veCRV back), whereas in ve(3, 3), you get your original tokens back at the end of the lock period so long as you have the NFT.
I agree with you though that the NFT market will be less liquid. Maybe this will actually spur development of NFT AMMs? ;-)
I didn't mean that ve(3,3) was the same as Convex, I just meant "Convex is exactly a mechanism that financializes away the locking period".
I don't think NFT AMMs will really ever be much of a thing. Instead, they'll be fractionalized and tranched to form "NFT ETFs" or some similar horror, and those things will then be amenable for use in AMMs.