Author: @!0xWang1| @RealResearchDAO

Foreword

Voting with blockchain technology seems to be a perfect combination. Smart contracts provide perfect technical support for the direct execution of on-chain voting results.

Through smart contracts, problems such as bribery and opaque operations in the real world can be effectively avoided. This is why more and more countries are integrating blockchain technology into the voting process.

But it is worth noting that in the world of blockchain, bribery is no longer a problem that must be avoided. In some DeFi protocols, bribery is shown as part of the speculation, which is quite different from the real world.

Buying votes is a common and corrosive form of election fraud in traditional political systems, with a long history of undermining election integrity around the world. The cost of buying votes is also linked to the benefits of the election. But under normal market mechanisms, the vote-buying system usually collapses gradually for three reasons. First, buying votes is criminal in nature in most cases. Second, in the case of using secret voting, it is difficult to ensure the execution effect of the right seller, voters can accept bribes ostensibly and then vote secretly according to their preferences. Third, even if voters do sell their votes, there is no 100% guarantee that the buyer will pay the bribe as promised.

Such barriers do not arise in a blockchain system. Using the same powerful election management tool, known as the smart contracts, a bribe market can be effectively run. As always, the sophistication of pseudonyms and jurisdiction provides a relative guarantee for the security of vote-buying transactions.

If you want to understand the method and practical application of on-chain voting bribery, it is inevitable to avoid the famous battle for liquidity, known as the Curve Wars, which gave birth to the mechanism of on-chain voting bribery. And there are also services around the Curve Wars and the bribery system, such as a series of on-chain aggregation platforms and corresponding election bribery tools. This article will start with Curve Wars, and introduce what is on-chain election bribery and the participation and practical application of on-chain election bribery.

Curve Wars, the battle for liquidity is also a battle for the right to speak

In the summer of 2020, the DeFi ecosystem has ushered in its own highlight period - DeFi Summer. Various innovative DeFi protocols and applications emerged in an endless spring, and major DEX platforms were also competing for users, attracting as many users as possible and directing funds to empower their liquidity pools. As an AMM focusing on low-slippage stablecoin exchanges, Curve arose naturally in the DeFi summer banquet.

The governance mechanism of Curve is as follows:

• Curve provides CRV token issuance (token incentives) for all Curve LP (liquidity provider) pools;
• CRV holders vote with their tokens to decide where the CRV distribution goes;
• The more CRV you hold, the greater the impact on the whereabouts of CRV issuance;

This governance mechanism creates a flywheel effect in Curve, which continuously enhances the market's purchasing will for CRV.

Curve issued its native token CRV in August 2020 to incentivize liquidity supply. CRV is both a governance token and a utility token. However, to achieve both benefits, CRV holders must stake CRV into veCRV. In addition, the veCRV lock-up period is limited from one year to four years. The longer the user locks up the CRV, the amount of veCRV they obtain will increase linearly.

Accumulating liquidity is one of the main priorities for any DeFi protocol. veCRV voting is very powerful for DeFi protocols that want more liquidity to trade their tokens, forming up the foundation of Curve War - the more veCRV you have, the greater voting power you have to direct more liquidity to your tokens.

The release of CRV tokens is a very valuable incentive for LP (liquidity) mining pools, so various DeFi protocols compete for CRV in order to direct the release to their preferred mining pools, which is a great example of effective governance.

Based on the positive circular utility of CRV tokens for DeFi protocols, the first shot of "Curve Wars" was quietly fired in DeFi Summer.

The bribery mechanism born in Curve Wars

For developers of DeFi protocols, if they want to increase their income in Curve, it seems to be the most intuitive way to increase the CRV incentive of the liquidity pool by holding veCRV votes. However, due to the flywheel effect mentioned above, if you want to govern voting by simply purchasing a large number of CRV tokens to stake in order to obtain veCRV, as the price of CRV rises, the cost will become higher. and the corresponding return rate will decrease. This process is not only cumbersome, but also amplifies the risk exposure of the protocol. While the purpose of the protocol is merely to obtain votes to increase the market-making returns of its corresponding liquidity pool, hence empowering liquidity, and that’s it.

The market will always go out in the direction of the least friction, so the "bribery vote" came into being.

The "bribery" here is not the traditional, shady, transactional vote bribery that people think. This is a scheme that operates on a transparent, auditable, permissionless mechanism, and it hopes that assets that acquire liquidity can pay CRV holders for liquidity.

Rather than calling it “bribery”, it is better to think of it as an on-chain dividend distribution mechanism.

Convex stands out in Curve Wars

The Curve Wars, which focus on the battle for liquidity, has created a whole new area in DeFi: bribery platforms. These platforms help users obtain higher returns in exchange for a greater right to speak in the direction of CRV distribution.

Convex Finance is an aggregator developed and designed by anonymous members. It mainly provides services for users around the liquidity-related aspects of the Curve platform, obtains additional DeFi income through Curve's unique governance mechanism, and rewards platform users.

Convex aggregates the scattered CRV tokens in the hands of users convert them into a considerable amount of veCRV and then invests them in Curve War to maximize profits through Curve's unique mechanism and increase the yield of Curve LP token holders. For Convex users, it is no longer necessary to stake their CRV in their hands on the Curve platform for a long time up to four years to realize the maximum return.

According to statistics, as of now, veCRV held by Convex Finance has accounted for 53.77% of the total supply. It can be said that it has firmly grasped the strongest voice in Curve War and has become the biggest winner.

Convex's generous rewards for users

So, how does Convex work?

For CRV holders,

• Users deposit CRV tokens into Convex.
• Convex provides users with cvxCRV in exchange and stakes users' CRV as veCRV (veCRV is now owned by Convex).
• Users can then stake their cvxCRV to share in all veCRV rewards earned by Convex.
• Users can sell and exchange cvxCRV for other tokens at anytime and anywhere on the Convex platform without locking.

It is worth noting that even if cvxCRV can be freely exchanged into other currencies, the CRV staked on the Convex platform is one-way, that is, the part of CRV tokens converted into cvxCRV cannot be redeemed, and this part of CRV will be then managed by Convex and locked in the Curve protocol, serving as the "military reserve" for Convex in the Curve Wars.

For Curve LP,

Convex provides multiple passive incomes for Curve liquidity providers. Users who provide liquidity to the Curve liquidity pool supported by Convex will receive the following income:

• Curve benchmark rate.
• Transaction fee sharing on the Curve platform.
• Convex boosted CRV rewards.
• CVX tokens are rewarded by the Convex platform.

The outstanding model presented by Convex has successfully helped it absorb a large amount of CRV and became the largest protocol with CRV holdings. Through Curve LP voting, it can increase the income of its own agreement and also increase the income for users who support the Convex platform.

DeFi voting aggregator Redacted Cartel follows the example

Interestingly, in Curve Wars, the war on liquidity doesn't just happen in Curve. As the biggest winner in Curve War, Convex, which made its fortune with the voting mechanism, has also introduced the voting mechanism into its own governance system. More protocols will now focus on Convex rather than Curve, which has the largest voice in the Curve Wars. Users who have staked CVX in Convex can vote to determine the amount of liquidity pool rewards on the Curve platform, thereby affecting the liquidity of different pools on Curve. The "Convex Wars" for the voting rights of Convex is also being launched. The control over Convex means to control Curve, and the Convex Wars has gradually become a part of Curve Wars.

However, as an ordinary user, you may feel confused about which pool to vote for is more beneficial to you, or feel troublesome about the complicated operation of collecting and voting on the Convex platform. The "voting aggregator" Redacted Cartel has thus appeared to help users solve a series of voting problems.

Accumulate through bonds and high staking returns

Just like Convex controlling Curve, in order to have a large number of Convex voting rights, Redacted Cartel also needs a large number of CVX and CRV tokens. To absorb a large number of these tokens, Redacted Cartel draws on the Bonding (bond) system of the Olympus protocol. Users can lock their CRV and CVX tokens in Redacted Cartel in exchange for the discounted purchase rights of Redacted's native token BTRFLY. At the same time, Redacted Cartel provides attractive high yields for BTRFLY stakers.

Derivative tokens for different clients

The Redacted Cartel team introduced different locking mechanisms for the token system during the governance process: glBTRFLY (governance-locked) and blBTRFLY (bribery-locked)

• The governance-locked glBTRFLY token will be more of a DeFi protocol-oriented product, allowing its holders to leverage Redacted Cartel’s voting power for their own internal needs. (Certificate of Governance Right).

• Bribery-locked blBTRFLY tokens will be more suitable for retail investors who want to earn a portion of all profits generated by the protocol. (Certificate of Income).

A more flexible "bribe market"

As an extension of the Convex platform in Curve Wars, Redacted Cartel is not only targeting the control over Convex but plans to provide corresponding vote-buying services for more similar protocols and devote themselves to more "Curve Wars".

Redacted Cartel acquired the Votemak protocol for governance voting in Tokemak and expanded its capabilities to create a new decentralized "bribe exchange market" - HiddenHand. In HiddenHand, Redacted Cartel has expanded voting transactions for protocols other than Convex.

The process of voting bribes at HiddenHand:

1. Users delegate voting assets to HiddenHand
2. HiddenHand sells voting rights to protocols who have external needs, and in return HiddenHand gets Bribe rewards
3. HiddenHand redistributes the Bride rewards provided by the buyers: partially to the user, partially to the Redacted Cartel Treasury, and then to the holders of BTRFLY
4. At the same time, Redacted will also take 4% of the total value of Bribe transactions as a trading fee, 2% will be allocated to Redacted Treasury, and 2% will be allocated to BTRFLY stakers (blBTRFLY)

In HiddenHand, buyers of voting rights (various protocol project parties) can conduct bribery operations more flexibly, and the mode of entrusting voting rights also provides more convenient and quicker operation options for users who provide voting rights that have smaller assets.

Conclusion

Judging from the benefits and impact of Curve Wars, whatever the perception of Curve Wars, this battle will likely continue for quite some time (until new projects have the ability to change the overall picture of liquidity incentives situation). The DeFi game is like nesting dolls that maintain their vitality in the form of subcontracting the right to speak. Will DeFi, which emphasizes decentralization, gradually become a tool for stakeholders to manipulate liquidity in the Curve Wars? Will this system that seems to be a positive circular incentive for the protocols eventually become an illusion without practical means? For the current situation and a series of possible follow-up results, what we can do is to sit, wait, and see, or actively participate in or guide the transformation of the entire system.

However, for the on-chain election bribery system, a dazzling "by-product" of Curve Wars, the space for free development and imagination has just opened. Various trading markets with freely delegated trading rights and the accompanying financial derivatives (trading rights) will follow up. A series of interesting development directions such as price options, trading rights, and price bonds also confirm the vigorous vitality of the development of the Web3 world. These are still worthy of our attention and expectations.

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