History & Evolution

History and Evolution of Vote Escrow Model

Vote Escrow (VE) is a significant innovation in the DeFi landscape, primarily aimed at enhancing community governance and incentivizing long-term holding behaviors. This section provides a brief overview of the VE model, tracing its origin, evolution and inspiration that have shaped StellaSwap’s VE model.

Origin

Vote escrow emerged in response to challenges faced by governance mechanisms in decentralized platforms, particularly around token holder engagement and alignment of interests. Initially popularized by Curve Finance in 2020. VE model was designed to encourage users to lock their tokens for extended periods in exchange for governance rights and rewards. This approach solved key issues in relation to concentration governance power and incentivizing long term holders in return strengthening the token.

Evolution of VE Across DeFi

With time, the vote escrow model evolved to include more complex systems that strengthen token utility and value-accrual for tokenholders. Here’s a look at the progress:

Key Projects and Evolution

  1. Curve Finance: Pioneer of the VE model, Curve introduced the mechanism where users could burn their CRV tokens and lock their LP for a period between one week to four years. Gaining voting power and native token rewards proportional to the length of their lock

  2. Olympus DAO: Notable project that led the DeFi 2.0 movement, introducing an innovative approach called game theory (3,3) aiming to increase holders value by incentivizing long term holding and staking. However, it had faced significant challenges keeping its OHM token stable. Yet, the community engagement and the innovation made everyone in the space take note.

  3. Solidly: Developed by renowned developer Andre Cronje, further illustrates the evolution of the VE model; it expands on principles established by Curve and Olympus DAO. It aimed at creating the most efficient DEX by utilizing the VE model. It integrates two core components that further strengthened the VE model:

    1. Linear Decay: Unlike Curve’s VE model, Solidly is in-built with decay, meaning that one’s voting power decreases in value with time. Users need to constantly lock to ensure they maintain their voting power.

    2. Direct-Pool-Earning: Voters in Solidly earn fees only in the pools they vote, unlike Curve where overall revenue is distributed to all tokenholders. Under Solidly’s model, holders are incentivized to vote for pools with high fee generation to maximize their earnings. Rewards allocation is much more efficient this way, and addresses the structural mis-alignment of incentives under Curve’s model.

  4. Velodrome & Aerodrome: Building on previous innovations of the VE model, Velodrome and Aerodrome emerged with the most polished and mature versions of VE that are hugely successful. In contrast to other platforms; Velodrome made VE the single most important feature of the DEX and tied every other function around it, expanding to emissions and farming.

In designing our new VE model, we draw upon lessons learned from these pioneering projects while also refining and innovating the approach to meet the needs of StellaSwap users. The experience of Curve, Olympus DAO, Solidly, Velodrome and Aerodrome has paved the way for a sustainable and vibrant StellaSwap ecosystem where we aim to cultivate loyal holders who are incentivized to contribute to the long-term success of StellaSwap.

How Does It work

Lock, Vote & Earn

  1. Lock STELLA to receive veSTELLA

Your voting power and earnings potential is dependent on the amount of veSTELLA you hold.

  1. The more STELLA you lock, the more veSTELLA you’ll get

  2. The longer you lock, the more veSTELLA you’ll get

  1. Vote

Actively vote on the most productive pools to maximize your earnings. As you’ll earn directly from

  1. Vote with 100% of your voting power to one pool

  2. Or split your voting power across many pools

  3. Voting will occur every 7 days (Epoch)

  4. Earn

    1. At the end of the voting period, voters will achieve the following:

      1. Direct STELLA rewards towards pools they have voted for

      2. Earn swap fee for the pool they have voted for in USDC

  6. Additional Earning

    1. Extra incentive can be earned from bribes. Platforms or any user can bribe veSTELLA holders for their votes towards a specific pool

Automatic Strategies

If the notion of participating every week to achieve the maximum return is too daunting of a task, you can lock in one of the automatic relay strategies.

Relay strategy: veSTELLA vault that automatically votes on users behalf who have relayed their veSTELLA to it.

At the start there will be two StellaSwap managed relay strategies:

  1. veSTELLA Maxi

    1. Votes for the highest yielding return, converts all earning back to STELLA and locks it in veSTELLA with maximum lock

  3. USDC Maxi

    1. Votes for the highest yielding pools, converts all earning to USDC. Claim anytime

Other strategies can be operated by partner platforms or expert users can be added as well, through a whitelisting process that will be communicated later. Relay strategies have a fee of 1%.

Incentivize/Bribes

Partner platforms looking to deepen their pool liquidity will have two possible ways to do so:

  • Voter Bribes

  • LP Bribes

Voter bribes are paid to veSTELLA holders who vote on bribed pool, with this method a partner platform can attract votes with a bribe to direct STELLA incentives towards their desired pool. Thus, increasing TVL. This will be the only way to get STELLA rewards on your pool.

LP bribes are incentives in any ERC-20 token from StellaSwap’s token list paid directly to LP providers. What’s new is the ability to add these rewards directly from StellaSwap’s interface

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