Paladin is building on top of Curve and Balancer. What makes these decentralized exchanges unique compared to Uniswap is their weekly native token emission of $CRV and $BAL. These weekly emissions are controlled by the holders of each respective token. But in order to exert influence, these tokens need to be locked. With this locking function, users can lock their tokens for up to 4 years which enables them to not only influence the weekly emissions but also receive a revenue share from the entire protocol.
Over the last months, other protocols started seeing value in having power over these weekly emissions. Since start-up protocols can’t spend millions of dollars acquiring and locking these assets for years, a new meta-governance ecosystem has emerged where protocols that want influence over these emissions have started incentivizing holders of locked $CRV and $BAL to vote on their behalf.
As an example, Lido sets up an offer where people can receive $50,000 worth of $LDO tokens in return for voting for Lido’s stETH/ETH pool on Curve. As a result, holders of locked $CRV vote for the stETH/ETH pool in the gauge system and will receive the $LDO incentives. By voting for the stETH-ETH gauge, this pool will receive additional $CRV emissions for the next week. These supplementary emissions of $CRV often hold a greater value than the $50,000 of $LDO offered as an incentive. This is one of the most efficient ways to onboard more users and fuel the growth of a protocol’s ecosystem. From another point of view, the incentives can be considered marketing expenses, since this strategy can be seen as a much more lean and efficient way to promote a protocol than buying advertisements on Twitter.
The second biggest players, after Curve and Balancer, are Convex ($CVX) and Aura Finance ($AURA). They both offer the same service of “liquid locking” but provide a value-add in terms of liquidity. When locking your $CRV and $BAL on Curve and Balancer directly, you can’t exit this position until the lock expires. If you lock your position on Convex and Aura, you can sell your position thanks to their liquidity pools.