Weekly Gauge #2: Escape Velocity
veCRV are being doubly diluted. First, veCRV balance decreases with time if you don’t max relock them. Second, because CRV is emitted on a weekly basis, the supply grows and the potential locked tokens follows, which implies that each veCRV controls less and less emissions.
So how to reach escape velocity ?
As most of you know, at Paladin we're very big advocates of sustainable governance. We created Quest to disrupt the status quo of traditional bribe marketplaces. Thus, when we onboard new users to Quest, we try to understand what their gauge goal is and how they can become independent from the Curve Wars and the growing rent system.
In itself, the idea is pretty simple: reaching a point where you own enough veTokens to reach your goal and grow organically enough to counter-act gauge dilution (escape velocity). Here's a few pointers to help you navigate the gauge:
POL : What is your share of the pool
Volume : Qty of CRV lock between rounds
Dilution : How much CRV emission is controlled by 1 veCRV
For example :
At date A :
The total supply of veCRV is 500M, the weekly CRV inflation is 4.3m tokens, you own 20% shares of a pool, this pool acquired 1% gauge weight during this round. This means, 5M veCRV voted for your pool during this round, 43k CRV newly emitted are directed to the pool, and you will receive (without boost : 3,440 CRV) (with max boost : 8,600 CRV).
At date B :
The total supply of veCRV is now 550M, the weekly CRV inflation is still 4.3m tokens, you still own 20% shares of the pool. In order to get the same amount of CRV emitted (3,440 or 8,600) you now need to acquire 1% of the emission which means that 5.5M veCRV votes in your gauge.
These 500k more needed votes are the result of CRV inflation being locked between rounds. Which means the higher the velocity the more expensive it is for you to acquire the same emission.
Weekly stats :
So how do we reach escape velocity ?
Currently there are 487m veCRV actively participating in the gauge vs 449m last week (notice how almost 50m veCRV are currently not voting).This means that the efficiency of your veCRV was diluted by 7.93% in a week (high growth explain in our 1st newsletter :
By growing that much week to week, you are simply keeping your spot in the gauge.
Last week was exceptional, average weekly dilution is only 0.5% normally, which means farming at 26% APY is sufficient to not get diluted. Not that each week dilution is theoretically lower.
To stay relevant, manage your bribes budget depending on your POL, the total gauge weight, the TVL of your pool and the evolution of dilution. The one obvious solution here is to stop making arbitrary bribes in terms of acquired votes. Quest allows you to define your ratios, make your incentives even more capital efficient and aligned to your goals.
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