Curve's model for governance and yield
Vote-escrowed tokens are based on Curve's veCRV design. Holders lock tokens for a period (up to four years) and receive veTokens in return. The longer the lock, the more voting power. Locked tokens also accrue fee rewards from protocol revenue, creating a yield boost for committed holders.
The mechanic aligns incentives: long-term believers lock deeper for more votes and higher yield. Short-term traders have minimal governance power. This is a clever solution to the problem of vote-farming and low participation in governance.
Dilution through voting power concentration
The flip side: whales locking the longest get outsized voting power and fee capture. If a single entity holds 50% of veTokens, they control the protocol's treasury and fee distribution. ve-designs work best when token distribution is already decentralized; they amplify existing concentration.