What is Vote Escrow (ve)?

• Token Locking for Governance Power: Users lock their tokens for a specified period, receiving non-transferable "ve" tokens in return. The longer the lock duration, the more voting power or "ve" tokens the user receives. For example, locking 1 token for 12 months might yield 1.5 veTokens, while locking for 48 months could yield 3 veTokens2.
• Governance and Rewards: These ve tokens grant users voting rights in protocol governance and may also entitle them to protocol rewards, such as a share of fees or additional token emissions23.
• Incentivizing Long-Term Commitment: The model encourages users to commit their tokens for longer periods, reducing sell pressure and increasing protocol stability. Protocols like Curve DAO, FRAX, and Stake DAO have adopted this model, with significant portions of their circulating supply locked for years (e.g., Curve has 53.8% of its supply locked for an average of 3.56 years)4.
• Custom Implementations: Different protocols may tweak the ve model. For instance, NEAR Protocol’s proposal would reward veNEAR holders with APY sourced from the project’s treasury, and Kagla Finance allows veKGL holders to vote on reward allocations to specific pools2.

Key Benefits

• Enhanced Governance: Voting power is proportional to the amount and duration of tokens locked, aligning incentives between users and the protocol.
• Boosted Rewards: Users who lock tokens for longer can receive higher rewards or APY.
• Reduced Sell Pressure: Locked tokens cannot be sold, helping stabilize token prices.

Example Protocols Using ve Model

Summary