In many DeFi protocols, governance tokens aren’t just held—they can also be locked up in exchange for a token with the “ve” prefix. The longer the lockup, the more voting power and rewards you get, but your tokens can’t be moved during that time. This design was popularized by Curve and is commonly known as the veToken model.

Related token: $CRV Current price: 0.2571 (24h -3.53%).

▍How did veCRV come about?

On Curve, users can lock up CRV to receive veCRV (vote-escrowed CRV). The maximum lockup period is 4 years: locking up 1 CRV for 4 years gives you 1 veCRV, while locking it up for 1 year gives you just 0.25 veCRV.

veCRV is non-transferable, and its balance decreases linearly as the remaining lockup period gets shorter, reaching zero at expiry. To maintain your voting power, you have to keep extending the lockup. CRV cannot be withdrawn early during the lockup period.

▍What can veCRV do?

First, governance voting. Most importantly, it determines how CRV emissions are distributed among different pools through gauge voting, which updates the weights weekly. Pools allocated more emissions give liquidity providers there more CRV rewards.

Second, it lets holders share in some of Curve’s trading fees. Third, it provides a boost: liquidity providers who hold veCRV can get up to a 2.5x boost when claiming CRV rewards.

▍What are the Curve Wars about?

Since gauge voting determines where emissions go, projects that need deep liquidity—such as teams issuing stablecoins—have an incentive to secure voting power. They can either buy CRV and lock it themselves, or pay veCRV voters voting incentives (commonly known as bribes) to vote for their pools.

This contest for voting power is known as the “Curve Wars.” It gives veCRV voting power a value of its own, and provides people who lock their tokens with an additional source of income from voting incentives.

▍What role does Convex play?

Convex lets users deposit CRV in exchange for cvxCRV. The CRV it receives is permanently locked as veCRV, and the pooled voting power and boost rewards are then distributed among participants. Users who don’t want to lock their tokens for four years can still indirectly receive boosted rewards.

The trade-off is that this process cannot be reversed, and cvxCRV may trade below CRV on the secondary market. How Convex votes its veCRV is determined by votes from vlCVX holders, who receive vlCVX by locking CVX. In effect, this adds another layer of governance on top of the existing one.

▍In a nutshell

The veToken model trades time for power: the longer you lock, the more influence and rewards you get, but you can’t sell your tokens during the lockup, no matter how the price moves. Before participating, think carefully about whether you can really do without those tokens for the entire lockup period. Be skeptical of projects promising stable, high returns.

Anything to add? Let’s talk in the comments.