Original author: arndxt
Original text compiled by: Oliver, Mars Finance
I believe we will witness yield wars again. If you have been involved in decentralized finance (DeFi) for a long time, you know that total locked value (TVL) is just a superficial metric until it really matters. Because in a highly competitive, modular world of automated market makers (AMM), perpetual contracts, and lending protocols, the only thing that truly matters is who can control liquidity routing. Not who owns the protocol, not even who distributes the most rewards, but who can persuade liquidity providers (LPs) to deposit funds and ensure that TVL remains sticky.
This is where the bribery economy begins.
Previously informal voting purchases (like the Curve wars, Convex, etc.) have now professionalized into a comprehensive liquidity coordination market equipped with order books, dashboards, incentive routing layers, and even gamified participation mechanisms in some cases. This is becoming one of the most strategically significant layers across the entire DeFi stack.
Change: From emissions to meta-incentives
In 2021-2022, protocols generally guided liquidity in traditional ways:
Deploy a liquidity pool
Issue tokens
Hope that mercenary-like LPs will stick around after yields decline
But this model is fundamentally flawed; it is passive. Each new protocol competes with an invisible cost: the opportunity cost of existing capital flow.
I. Origins of the yield wars: The rise of Curve and voting markets
The concept of yield wars became concrete during the Curve wars of 2021.
Unique design of Curve Finance
Curve introduced voting locked (ve) token economics, allowing users to lock $CRV (Curve's native token) for up to 4 years in exchange for veCRV, which brought:
Incentive rewards for Curve liquidity pools
Governance power deciding voting weights (which liquidity pools receive emissions)
This creates a meta game around emissions:
Protocols want to acquire liquidity on Curve.
The only way is to attract voting support for their liquidity pools.
Thus, they began bribing veCRV holders to vote in their favor.
Subsequently, Convex Finance emerged
Convex abstracted veCRV locking and consolidated voting power of users. It became the 'backstage operator of Curve,' having a significant influence over where $CRV emissions go. Projects began bribing Convex/veCRV holders through platforms like Votium.
Lesson 1: Whoever controls the weights controls the liquidity.
II. Meta-incentives and bribery markets
The original bribery economy
Initially, manual efforts to influence emissions evolved into a mature market where:
Votium became an off-chain bribery platform for $CRV emissions.
Platforms like Redacted Cartel, Warden, and Hidden Hand expanded this mechanism to other protocols like Balancer and Frax.
Protocols are no longer just paying for emissions but are strategically allocating incentives to optimize capital efficiency.
Expanding beyond Curve
Balancer adopted a voting lock-up mechanism through $veBAL.
Frax, @TokemakXYZ, and others have integrated similar systems.
Incentive routing platforms like Aura Finance and Llama Airforce further increased complexity, turning emissions into a game of capital coordination.
Lesson 2: Yield is no longer solely about annual percentage yield (APY) but rather programmable meta-incentives.
III. How yield wars unfold
Here’s how protocols compete in this meta game:
Liquidity aggregation: aggregating influence through wrappers like Convex (e.g., @AuraFinance for Balancer).
Bribery activities: budget allocated for continuous purchase of votes to attract the desired emissions.
Game theory and token economics: locking tokens to create long-term consistency (e.g., ve model).
Community incentives: gamifying voting through NFTs, lotteries, or additional airdrop games.
Today, protocols like @turtleclubhouse and @roycoprotocol guide liquidity: they do not blindly emit but auction incentives to LPs based on demand signals. Essentially: 'You bring liquidity, and we will direct incentives to where they matter most.'
This unlocked secondary effects: protocols no longer need to forcibly attract liquidity but rather coordinate it.
Turtle Club
A little-known but extremely effective bribery market. Their liquidity pools often embed with partners, boasting a TVL over $580 million, utilizing dual-token emissions, weighted bribes, and surprisingly sticky LP bases. Their model emphasizes fair value redistribution, with emissions guided by voting and real-time capital velocity metrics. This is a smarter flywheel: LPs earn rewards based on their capital efficiency rather than just scale. Efficiency is finally incentivized.
Royco
Within a month, its TVL skyrocketed to $2.6 billion, an astonishing 267,000% month-over-month increase. While partly 'points-driven' capital, what truly matters is the infrastructure behind it:
Royco is an order book for liquidity preferences.
Protocols cannot simply distribute rewards and hope for outcomes. They issue requests, and LPs decide to invest capital; coordination becomes a market.
The significance of this narrative goes beyond yield games:
These markets are becoming the meta-governance layer of DeFi.
@HiddenHandFi has guided over $35 million in bribes across major protocols like @VelodromeFi and @Balancer.
Royco and Turtle Club are shaping the effectiveness of emissions.
Mechanisms of liquidity coordination markets
Bribery as a market signal
Projects like Turtle Club allow LPs to see where incentives are directed, make decisions based on real-time metrics, and earn rewards based on capital efficiency rather than just capital scale.
Liquidity requests (RfL) as an order book
Projects like Royco allow protocols to list liquidity demands as if listing orders in a market, with LPs filling these demands based on expected returns. This becomes a two-way coordination game rather than a one-way bribery.
If you decide where liquidity flows, you influence who can survive in the next market cycle.
