Author: arndxt, Crypto KOL

Compiled by: Felix, PANews

The yield war may reignite. If you've been in the DeFi space long enough, you'll understand that total locked value (TVL) is just a vanity metric. In the competitive world of AMMs, perpetual contracts, and lending protocols, what really matters is who can control the flow of liquidity, not who owns the protocol, and not even who distributes the most rewards. It's about who can persuade liquidity providers (LPs) to deposit funds and ensure TVL stability. That is the origin of the bribery economy.

What was once informal ticket-buying behavior (Curve wars, Convex, etc.) has now professionalized into a mature liquidity coordination market, equipped with order books, dashboards, incentive routing layers, and even gamified participation mechanisms in some cases.

This is becoming the most strategically significant layer in the entire DeFi stack.

Change: From issuance to meta-incentives

During the period from 2021 to 2022, protocols guided liquidity in traditional ways:

  • Deploy a funding pool

  • Issue tokens

  • Hoping that profit-driven LPs will remain even after yield declines

But this model has a fundamental flaw: it is passive. Each new protocol competes against an invisible cost: the opportunity cost of existing capital flows.

I. The origin of yield wars: The rise of Curve and the voting market

The concept of yield wars began with the Curve wars in 2021 and gradually took shape.

The unique design of Curve Finance

Curve introduced voting escrow (ve) token economics, allowing users to lock CRV (Curve's native token) for up to 4 years in exchange for veCRV, which grants users the following advantages:

  • Increase rewards for Curve pools

  • Governance rights with voting weight (which pools receive earnings)

This creates a meta-game around yields:

  • The protocol hopes to gain liquidity on Curve

  • The only way to gain liquidity is to attract votes to their pools

  • Thus, they started bribing veCRV holders to vote in support

Thus, Convex Finance was born (a platform focused on enhancing Curve protocol yields):

  • Convex abstracted veCRV locking (simplifying the use of Curve) and aggregated users' voting rights.

  • It became the 'kingmaker of Curve', wielding significant influence over the direction of CRV earnings.

  • Various projects began bribing Convex/veCRV holders through platforms like Votium.

Experience 1: Whoever controls the voting weight controls liquidity.

II. Meta-incentives and the bribery market

The first bribery economy

Initially just manual operations to influence issuance, it gradually evolved into a mature market where:

  • Votium has become an off-chain bribery platform for CRV issuance.

  • The emergence of Redacted Cartel, Warden, and Hidden Hand has extended this model to other protocols like Balancer and Frax.

  • Protocols no longer just pay issuance fees, but strategically allocate incentives to optimize capital efficiency.

Beyond Curve's expansion

  • Balancer adopted a voting escrow mechanism through veBAL

  • Frax, Tokemak, and other protocols have integrated similar systems

  • Incentive routing platforms like Aura Finance and Llama Airforce further increase complexity, turning issuance into a capital coordination game

Experience 2: Earnings are no longer related to annual percentage yield (APY), but rather to programmable meta-incentives.

III. How yield wars unfold

The following is the competitive approach of the protocol in this game:

  • Liquidity aggregation: Aggregating influence through wrappers similar to Convex (e.g., Aura Finance for Balancer)

  • Bribery activities: Budgeting for ongoing bribery behavior to attract issuance when needed

  • Game theory and token economics: Locking tokens to establish long-term consistency (e.g., ve model)

  • Community incentives: Gamifying voting through NFTs, raffles, or reward airdrops

Today, protocols like Turtle Club and Royco are guiding this liquidity: no longer blindly issuing but auctioning incentive mechanisms to LPs based on demand signals.

Essentially: 'You bring liquidity, and we direct the incentive mechanisms to where they are most needed.'

This releases a second-order effect: protocols no longer need to forcefully acquire liquidity but instead coordinate it.

Turtle Club

Turtle Club has quietly become one of the most effective bribery markets, yet few mention it. Their funding pools are often embedded with partnerships, with a total locked value (TVL) of over $580 million, adopting dual-token issuance, weighted bribery, and unexpectedly high LP stickiness.

Their models emphasize fair value redistribution, meaning that the distribution of earnings is determined by votes and real-time capital turnover rates.

This is a smarter flywheel: the rewards LPs earn are related to the efficiency of their capital, not just the size of the capital. This time, efficiency is incentivized.

Royco

Royco's total locked value (TVL) surged to over $2.6 billion, a 267,000% increase month-on-month.

Although some of the funds are driven by 'points', what is important is the underlying infrastructure:

  • Royco is a liquidity-preferred order book.

  • Protocols cannot just distribute rewards and hope for capital inflows. They issue requests, and then LPs decide to invest funds, creating a market through this coordination.

Here are the reasons why this narrative is not just a yield game:

  • These markets are becoming the meta-governance layer of DeFi.

  • Hidden Hand has accumulated over $35 million in bribes between major protocols such as Velodrome and Balancer.

  • Royco and Turtle Club are shaping effective issuance schemes.

Mechanisms of the liquidity coordination market

1. Bribery as a market signal

Projects like Turtle Club allow LPs to understand the flow of incentives, make decisions based on real-time metrics, and earn rewards based on capital efficiency rather than just capital size.

2. Liquidity requests (RfL) as an order book

Projects like Royco allow protocols to list liquidity needs, just like posting orders in the market, with LPs executing these orders based on expected returns.

This becomes a two-way coordination game rather than a unilateral bribery.

If you can decide the flow of liquidity, you can influence who survives in the next market cycle.

Related reading: The migration of on-chain liquidity: After 15 months of ups and downs, who stands firm after the hype fades?