Weekly Gauge #3: The Golden Ratio
The bribe economy built on veTokens may look kind of controversial in its fundamental principles. Most tend to compare political decisions to economic ones.
Curve Finance brought fresh air to the whole ecosystem with their veTokenomics, splitting economic and political decisions. This allows people to maximize their capital efficiency by delegating the control over the inflation of the protocol to bigger entities. These entities battle to acquire one of the most valuable underlying assets of DeFi: the CRV token.
We saw in Weekly Gauge #2 that the efficiency of your veCRV was diluted for two reasons:
The constant decrease of your voting power overtime;
To stay relevant, every project needed to manage their bribe budget taking into account various parameters.
Many projects are paying more for veCRV votes than emissions they are acquiring. This is not a marketing stunt but a provable problem plaguing the sustainability of the gauge wars. By pushing bribers to over-pay, the value of the market is slowly diminishing, making it less sustainable than it should be.
For example, let’s have a quick look at Gnosis incentives to direct CRV emission to their pool:
Currently there are 4.3M CRV emitted every week and 487M veCRV voting. This means every veCRV is directing 0.0088 CRV. At a price of 1.1$ per CRV this means 0.0097$ per veCRV.
Considering that the proposed future gauge weight for their pool is 0.71% (which means 3.45M veCRV), paying 0.011$ per vote or 0.0013$ above the received value leads to a loss of 4.5k$ every week or 233k$ a year.
So, what’s the main point of this article? Know your Golden Ratio, stay profitable and contribute to the sustainability of the system for everyone.
The formula is quite simple:
CRV emission/total veCRV = X
Your Bribe budget/veCRV acquired = Y
Keep X >= Y and we’re golden ;)
How does it work in practice? Paladin Quest allows you to stop being dictated by irrational markets and offer more aligned rates to capital allocators. It is as simple as that my fellow degens !
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