10 graphs analyze 4 types of classic Tokenomics models

Original Author: @DodoResearch

#Tokenomics is the backbone of #DeFi projects. It is critical for users to understand where incentives come from and how they are distributed. In addition, the existence of flywheels also helps to prolong the sustainability of the token economy.

Here, we bring 10 Value Flow cases, covering 4 classic Tokenomic models.

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This tweet will cover:

• vote-escrowed model: @CurveFinance, @Balancer
• ve( 3, 3): @OlympusDAO, @VelodromeFi, @ChronosFi_
• es Model: @GMX_IO, @CamelotDEX, @0x AcidDAO, @GainsNetwork_io
• Lending: @AaveAave
• How to draw Value Flow

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vote-escrowed model

In the ve model, users lock protocol tokens in exchange for veToken. Only by owning a veToken, users can earn a share of protocol fees, token surges, and voting rights. Voting rights determine the distribution of token issuance, which is closely related to the profits of veToken holders.

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ve( 3, 3):

(3, 3) implies the most favorable state - only achievable if all participants choose to stake protocol tokens. At this point, both the participants and the protocol are in a win-win situation.

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ve( 3, 3) is the combination of the ve model and ( 3, 3).

It improves the distribution method of protocol fees, users can only enjoy the transaction fees generated by the pool they voted for, and encourage users to vote for the pool with the most liquidity. Based on the classic rebasing mechanism of Olympus, later projects such as Velodrome reduced the reward rate for additional issuance of ve token holders, while Chronos completely canceled the rebasing mechanism.

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is Model:

The key design in the es model is the introduction of unlocking barriers. To attribute the value of esToken, users need to pledge a higher amount of protocol tokens. If the user decides to quit the game, the esToken that has not been vested will remain in the agreement, “saving” the release of the agreement token.

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Lending: In DeFi lending protocols, tokens are mainly used for governance and collateral. In AAVE, users are incentivized to stake $AAVE in the security module for security rewards and protocol fees.

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How to draw Value Flow

When researching Tokenomics, the amount of information and numbers in project documents can be overwhelming. In order to extract key information related to Tokenomics, three questions can be asked: 1) How are protocol fees and token issuance allocated? 2) Who are the recipients of these incentives (LP, locker)? 3) Is there a flywheel and how is it formed?

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Tips：

Mark the generation of protocol fees/token releases and connect them to different recipients; connect participants and outcomes (e.g. veToken holders -> token releases); use different colors to represent Pools, Tokens, participant.

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We think Value Flow is a good basic framework and can be used as a tool to better understand Tokenomics. Here we share with you and encourage you to use our method to draw more Value Flow to decode new DeFi projects. If you have a better idea, or disagree with any part of Value Flow, please feel free to send us a private message or leave a comment below.