Generate Juicy Yield on Governance Tokens
Introduction
If you are into DeFi (and Ethereum DeFi specifically), chances are you are interested in DeFi governance tokens which distribute fees to their stakers/lockers.
Most of them have implemented the voting escrow mechanism (ve) initially developed by Curve though, which means that to get those fees, you have to lock your tokens for a long time (an eternity).
But you still have the choice to either hold these tokens or lock them.
If you choose to hold you don’t get any rewards, you cannot vote on governance decisions and are getting diluted over time as there are inflation rewards and fees being distributed to those who lock.
But you are free to sell as soon as the tokens increase in value.
On the contrary, if you choose to lock, you can vote (and get paid for doing so), take inflation rewards and fees but you cannot sell whenever you want. If you choose to lock you are usually in for a very very long time (4 years which is an eternity in crypto).
However there is a strategy which allows you to get fees and rewards while staying liquid (you don’t need to lock to get paid) and so allowing you to sell your position whenever you wish yielding an annual return over 20% at the moment.
Obviously this strategy is more risky than simply holding the token or locking natively the token into the protocol in question as multiple smart contract interactions multiply the risk to suffer from a bug or hack.
But if you are bullish on governance tokens having implemented veTokenomics. Read below for a 20% annual return on top of the price performance of your favorite governance token.
Juicy.