Stake DAO|Part I:History of Liquid Lockers

GM, are you taking advantage of DeFi?

Today, I will discuss Stake DAO‘s “Liquid Lockers” service.

Liquid Lockers is one of DeFi’s classic, high-yield asset management tools using liquidity mining.

How high a yield is variable, but the governance token is about this high.

Normal APR without boost is on the left, and after boost is on the right.

This is about the LP tokens of Stablecoin, sorted by APR in ascending order.

The 3pool (DAI+USDC+USDT) is 0.13% for Curve and 0.97% for Convex, 8.72% for Liquid Lockers.

You can see from this alone that this offering a very high rate of return.

APR (Annual Percentage Rate) is the annual rate of return calculated as a simple interest rate. Please note that APR has a different meaning from APY (Annual Percentage Yield), which takes compounding into account.

Stake DAO has less than 4,000 holders of the governance token SDT as of September 21, 2022. Combined with the small number of Liquid Lockers users, this can offer liquidity now on considerably more favorable terms.

There have been some attempts by other yield aggregators to enter the Stake DAO.

Once again, I would like to talk about these Liquid Lockers today.

I will also make sure to convey its true value, which is not merely a small number of users and high interest rates.

For those who have never heard of Stake DAO, know of it but have never used it, or are not familiar with liquidity mining in the first place, I will provide a summary of basic knowledge and actual usage in the first, second and third parts of this report.

In the first part, I will discuss the history of Curve Finance and “Curve Wars,” which cannot be avoided as a prerequisite. The middle part will explain Liquid Lockers and the third part will explain how to use them.

Today’s talk may provide a glimpse into the essence of DeFi, even if you are not familiar with it.

I will explain as carefully as possible so that even those who are unfamiliar with the concept can understand it. I would be happy if you can feel the possibility of decentralized finance, which could not be realized by conventional centralized financial services.

Let’s get right to the explanation. Let’s start with some basic information!

Stake DAO and “Liquid Lockers”

What is Stake DAO?

Stake DAO is a product of Stake Capital, founded in 2018. It is an Ethereum-based yield aggregator that has been active since the same time as Convex Finance and Yearn Finance, which launched in 2020.

As the name implies, it is a DAO (Decentralized Autonomous Organization) consisting of a protocol and a community, with no centralized management entity. Users have complete control over their own assets.

Stake Capital is a startup offering Staking as a Service. CEO Julien Bouteloup is a core team member of rekt, BlackPool, Stake DAO, and Curve Finance. Curve Finance is a super important company in DeFi. I will explain more about them when they appear later.

Staking as a Service is a business model in which assets entrusted by customers are staked on the PoS blockchain and a fee is charged in exchange for a share of the profits. In other words, a company offering Staking as a Service is a validator.

A yield aggregator is a service provider that utilizes various DeFi protocols and strategies to maximize user benefits. The main services of a yield aggregator are staking, yield farming, and liquidity mining. They typically offer a variable or fixed ROI (return on investment) for the reward of locking in funds. This is an indispensable service for all those who manage their assets with DeFi.

The differences between staking, yield farming, and liquidity mining are as follows. Broadly taken, liquidity mining is a type of yield farming, and yield farming is a type of staking. Metaphorically speaking, the relationship is like liquidity mining = Tokyo, yield farming = Japan, and staking = East Asia.

  • Staking – locking assets into the protocol and getting native tokens for their holdings
  • Yield Farming – earn a portion of the transaction fee or interest rate or other compensation in exchange for providing liquidity
  • Liquidity Mining – earn governance tokens in addition to interest in exchange for providing liquidity

The basic concept of Stake DAO is to make the service fees paid by users virtually free. This was not only a market strategy for the benefit of users, but also a countermeasure against the entry of major exchanges that started offering free staking services because their main business was not staking.

Stake DAO is one of the industry’s leading innovators, having developed DeFi services through innovative technology and unique governance. By avoiding competition from large capital firms, Stake DAO’s services have evolved into something more unique and compelling. And its flagship product, Liquid Lockers, is a new invention that takes the existing DeFi system one step further.

Example of a yield aggregator: Akropolis, Alpaca Finance, Alpha Homora, Autofarm, Beefy Finance, GRO Protocol, Harvest, Idle, PancakeBunny, Pickle, Rari Capital, Stake DAO, Vesper,

What is Liquid Lockers?

To explain Liquid Lockers in very simple terms, it is a service that maximizes the “voting rights” and “revenue” derived from governance tokens. As of September 18, 2022, the service supports the Curve, Angle, Frax, Balancer, APWine, and Blackpool protocols, each of which handles governance tokens.

The combination of voting rights and revenues, as well as the liquidity of the governance tokens, is something that could not be achieved in the earlier systems represented by Curve Finance. This is a difficult area and will be explained in more detail later.

To put it in a nutshell without fear of misinterpretation, Liquid Lockers is a Convex where the user owns the voting rights.

I will also explain Convex Finance later. I’ll talk about it in a little bit.

What you can do with Liquid Lockers and their token rewards are as follows.

  1. Converting CRV, ANGLE, FXS, BAL, APW, BPT to sdToken and staking
    →Locker & Strategy Reward: Receive “3CRV”, “SDT”, etc.
    *3CRV is Curve’s LP token that combines DAI, USDC, and USDT
  2. Staking LP tokens for CRV, ANGLE, FXS and BAL
    →Liquidity Reward: Receive a Governance Token for each protocol that provided liquidity
  3. Lock SDT for 1 week to 4 years
    →veSDT reward: receive “sdFRAX3CRV-f”
    *FRAX3CRV is a Curve LP token with 3CRV plus FRAX

I see, so with Liquid Lockers I get both voting rights and revenue?

But I understand that I can keep the revenue, but what’s the happy of getting a vote?

Some may think so.

It is important to note that the weight of the Liquidity Gauge, i.e., the percentage of each pool receiving its tokens relative to the governence token emissions for each protocol, is determined by a vote.

In extreme cases, a person who has 100% of the total voting power can allocate all the tokens that are emitted to the pool he/she has deposited. If only one person is depositing assets there, then all the rewards are his/hers. In other words, the rewards vary greatly depending on the pool you are using and the voting power you have invested in it.

The following graph from the official Curve Finance website shows the voting.

Source: Curve Finance official website – Proposed Gauge Weight changes

And this story stops here for now.

Before we move on from here, I need to explain Curve Finance.

Curve Finance is a DEX (decentralized exchange) specializing in stablecoins. DeFi utilizing today’s mainstream stablecoins cannot be discussed without Curve Finance’s understanding of Tokenomics.

This may sound a bit exaggerated, but it is not wrong considering that Curve and Convex’s TVLs (Total Value Locked) are consistently among the highest in the industry.

And Stake DAO’s Liquid Lockers are an evolution of the veToken model that originated with Curve Finance.

You can check the TVL graphs/charts from the on-chain data analysis at DefiLlama.

Problems Liquid Lockers Solve

Curve Finance’s veToken model

Curve Finance is an Ethereum-based DEX launched in January 2020. DAO was launched in August of the same year. Liquidity mining became widespread in DeFi largely due to the influence of Curve Finance.

To understand Liquid Lockers, one must first know Curve Finance’s governance vote.

In Curve, in exchange for locking in a governance token CRV for one week to four years, you receive an amount of veCRV that corresponds to the amount and duration of the token. This token is called a veToken (vote-escrowed Token). Curve Finance is the first company in the world to introduce the veToken model to Tokenomics.

By holding this non-transferable veCRV token, users will earn 50% of the transaction fees paid to Curve, as well as a boost of up to 2.5 times the reward earned for providing liquidity. They also receive the right to vote on proposals to the DAO and on the distribution of rewards (gauge weighting).

The veCRV is used for governance voting. Other platforms that use the veToken model also use a token named veXXX for voting.

The longer you lock a CRV, the more veCRV you get. As you get closer to unlocking, the veCRV tokens decrease linearly. In other words, the voting rights and earning power weaken over time.

In order to re-strengthen the weakened voting power and profitability, additional CRVs need to be locked in.

If you lock 1 CRV for 1 year, you will receive 0.25 veCRV; for 2 years, 0.5 veCRV; for 3 years, 0.75 veCRV; and for the longest 4 years, 1 veCRV. The specification of a linear decrease over time is also carried over to Stake DAO’s Liquid Lockers.

At first glance, this may seem like a reasonable and sustainable mechanism. However, individual investors rarely, if ever, lock in CRV tokens to get veCRV in practice.

In the current system, the optimal solution for individual investors to increase their rate of return is to use a yield aggregator and operate without the right to vote. If they did vote, they would not be able to compete with large institutional and other investors. The rise of Curve has also spurred non-locking behavior as CRVs have skyrocketed and the threshold for voting and making proposals has increased.

DeFi Wars and Convex Finance

Next, I move on to an explanation of Convex Finance.

Yield aggregators such as Convex Finance hold large amounts of veCRV and provide a boost to users who do not own veCRV. As of September 18, 2022, Convex held approximately 53.8% of the total veCRV. Through these yield aggregators, users can boost their interest rates without the constraint of a long-term lock on their CRVs.

The total supply of CRV tokens has a cap of 30.3 billion and will stop emitting at some point.

For yield aggregators, the battle over voting rights, known as the “Curve Wars”, hinges on how quickly they can acquire more veCRVs and offer higher yields to users.

In exchange for a higher interest rate, Convex has created a mechanism to receive CRV voting rights from users.

Here is a brief explanation of how it works. First, the user “Convert” the CRV in Convex and receives the cvxCRV. By staking the cvxCRV, the user receives the same reward as staking the veCRV, plus an additional reward.

However, it is not possible to revert from cvxCRV to CRV on the Convex platform.

And the right to vote is not in the hands of the user.

The word “Convert” on the site may lead you to misunderstand, but what is actually being done is a “Transfer”. cvxCRV is only a proof of “Transfer” of the CRV to Convex, and the ownership of the CRV and its voting rights remain with Convex. In this way, the user has converted power into wealth.

And so Convex, which grew to a majority of the vote, was the de facto winner of the Curve Wars.

And what happened next was Convex’s CVX token grab. This is because Convex, which holds a large number of Curve voting rights, the decision of which pool to vote for is determined by the vote of the vlCVX holders, which is obtained by locking CVX.

In addition, products like Votium have emerged that allow CVX holders to vote on their behalf by giving them arbitrary tokens without having to own or lock up their CVX. This act of transferring some token to another person in order to get them to vote for the intended voter is commonly referred to as a “Bribes”. Successful companies that have used bribes include Frax Finance, which issues the stablecoin FRAX.

In the midst of these struggles for supremacy, the right to vote was gradually lost of people’s hands.

Forced to choose between “voting rights” and “earnings,” we were forced to take only the latter.

DeFi was supposed to be a financial service open to all. Today, with a few wealthy people in power, this is not the future envisioned. This conflict that originated in Curve is a problem that goes to the very core of the idea of DeFi.

“Liquid Lockers” is one of the solutions to this situation.

You can view the war situation (amount and percentage of governance tokens held) of this meta-war at

This is the end of the first part.

The middle section of the report will then describe Liquid Lockers.