Drop 001: Gauge, by Quarry
Let the veGames begin.
Welcome to the first drop of The Sunday Shipment! Every Sunday, we’ll be dropping a new open-source crypto project from the Ship Capital collective.
We’ll also use this weekly newsletter to highlight interesting Ship Capital project launches and content from the week.
Our goal is to accelerate a culture of shipping in public within Solana and the broader crypto/Web3 ecosystem.
This initiative was heavily inspired by Kanye West’s G.O.O.D. Friday drops:
Bringing the voting escrow wars to Solana: Gauge, by Quarry
The first Sunday Shipment drop is Gauge by Quarry Protocol, the Solana-based open source protocol for launching liquidity mining programs. Quarry, one of the largest protocols on Solana by TVL, is used by top DeFi protocols including Saber, Marinade, Cashio, and Port.
Quarry Gauges allow voting escrows to allocate the rewards of a set of liquidity mining pools. Each voter specifies a weight to allocate to each pool. A user's voting power is converted 1:1 to Quarry rewards share, based on the weights that the user provided.
To give a more concrete example of how gauges work in practice, let’s dive into Curve. Much of the recent tokenomics discourse has been focused on Curve’s voting escrow (ve) token model. To participate in the Curve DAO, holders must lock their CRV tokens to convert into veCRV.
“The veCRV are used to vote in governance, boost governance rewards, earn trading fees and receive airdrops.
The longer CRV is locked, the more voting power holders have and vice versa. One of the major powers given to veCRV holders is the ability to change gauge weights, which determine the amount of CRV rewards allocated to each pool on Curve.
An entity intending to establish control over Curve Finance needs to consistently accumulate CRV and convert it into veCRV.
Thus, yield-boosting application Convex Finance and other DeFi protocols such as Yearn Finance and StakeDAO are luring CRV holders by offering attractive returns on staking. The protocols then deposit the CRV received into Curve Finance and collect veCRV, gaining voting power to allocate more CRV rewards to the pools for which they provided liquidity. That’s akin to a land grab.”
“Recently, the ‘Curve Wars’ have been a hot topic‚” analysts at Delphi Digital said in Monday’s research note. “Simply put, Curve’s stablecoin AMM [automated market maker] rewards its liquidity providers with CRV, which can be 1) sold to realize yield or 2) staked into veCRV (voting escrowed CRV), where a weekly vote decides how rewards are allocated across Curve’s pools,” they wrote.
“Major stablecoin projects have realized this weekly vote allocation is critical to keeping their Curve liquidity high. (Losing that vote means LPs’ yields drop, and capital may move elsewhere.) Now, a so-called ‘war’ has ensued, with various protocols openly bribing votes and rewarding veCRV holders with their native tokens,” Delphi’s analysts added.
(Source: CoinDesk and Delphi Digital)
Quarry’s Gauge brings the concept of Curve’s reward allocation vote to Solana. Gauge is built directly on top of Tribeca, another project from the Ship Capital collective, which was launched last month to bring voting escrow-enabled governance to Solana. This Tribeca system has since been adopted by three different DAO’s: Saber, Cash Cow, and Port.
Now that these building blocks exist on Solana, it will be interesting to see how different DAOs integrate the voting escrow/gauge model, and whether new (or even existing) projects will arise to serve the inevitable Convex role.
For an overview of how Quarry’s Gauge works, you can check out the Tribeca docs.