Liquidity War 3.0: Bribery Becomes the Market

Author: arndxt, encryption KOL

Compiled by: Felix, PANews

The battle for yield may unfold once again. If you have been in the DeFi space long enough, you will understand that the Total Value Locked (TVL) is just a vanity metric. In the competitive world of AMMs, perpetual contracts, and lending protocols, what truly matters is who can control the flow of liquidity, not who owns the protocol, and not even who distributes the most rewards. It is about who can persuade liquidity providers (LPs) to deposit funds and ensure the stability of TVL. This is the origin of the bribery economy.

What was once merely informal ticket-buying behavior (such as Curve wars, Convex, etc.) has now become professionalized, evolving into a mature liquidity coordination market, equipped with order books, dashboards, incentive routing layers, and even gamified participation mechanisms in certain cases.

Today, this is becoming the most strategically significant layer in the entire DeFi stack.

Change: From Issuance to Yuan Incentive

During the period from 2021 to 2022, the protocol guided liquidity in a traditional manner:

• Deploy a liquidity pool
• Issue tokens
• Hope that profit-driven LPs can still stay after the yield drops.

But this model has a fundamental flaw: it is passive. Every new protocol competes with an invisible cost: the opportunity cost of existing capital flows.

1. The Origin of Yield Wars: The Rise of Curve and Voting Markets

The concept of yield warfare originated from the Curve battle in 2021 and gradually became more concrete.

The unique design of Curve Finance

Curve has introduced vote-escrowed (ve) token economics, allowing users to lock CRV (Curve's native token) for up to 4 years in exchange for veCRV, which grants users the following advantages:

• Enhance the rewards of the Curve pool
• Governance right to have voting weight (which pools receive profits)

This creates a meta-game around revenue:

• The protocol aims to obtain liquidity on Curve.
• The only way to gain liquidity is to attract votes to their pool.
• So they began to bribe veCRV holders to vote in support.

Thus, Convex Finance was born (a platform focused on enhancing Curve protocol yields):

• Convex abstracts veCRV locking (simplifying the Curve usage process) and aggregates users' voting rights.
• It has become the "Kingmaker of Curve," having a huge influence on the direction of CRV earnings.
• Various projects begin to bribe Convex/veCRV holders through platforms like Votium.

Experience 1: Whoever controls the voting weight controls the liquidity.

2. Yuan Incentives and Bribery Market

The First Bribery Economy

Initially, it was just manual operations to influence the issuance, which gradually evolved into a mature market, in which:

• Votium has become an off-chain bribery platform for CRV issuance.
• The emergence of Redacted Cartel, Warden, and Hidden Hand has extended this model to other protocols like Balancer and Frax.
• The protocol no longer merely pays issuance costs, but strategically allocates incentives to optimize capital efficiency.

Beyond the expansion of Curve

• Balancer adopts a voting escrow mechanism through veBAL
• Frax, Tokemak, and other protocols have integrated similar systems.
• Incentive routing platforms like Aura Finance and Llama Airforce further added complexity, turning issuance into a capital coordination game.

Experience 2: The returns are no longer related to the annualized yield (APY), but are related to programmable meta-incentives.

3. How to Develop the Profit Battle

The following is the competitive method of the agreement in this game:

• Liquidity aggregation: Aggregating influence through wrappers similar to Convex (for example, Aura Finance for Balancer)
• Bribery activities: Allocate budget for ongoing bribery to attract issuance when needed.
• Game Theory and Token Economics: Locking Tokens to Establish Long-term Consistency (e.g., ve model)
• Community Incentives: Gamifying voting through NFTs, raffles, or reward airdrops.

Today, protocols like Turtle Club and Royco are guiding this liquidity: no longer blindly issuing, but auctioning incentive mechanisms to LP based on demand signals.

Essentially, it is: "You bring liquidity, and we will direct the incentive mechanism to where it is most needed."

This releases a second-order effect: the protocol no longer needs to forcibly acquire liquidity, but rather coordinates it.

Turtle Club

The Turtle Club has quietly become one of the most effective bribery markets, yet few mention it. Their liquidity pool is usually embedded in partnerships, with a total locked value (TVL) exceeding $580 million, utilizing dual token issuance, weighted bribery, and surprisingly high sticky LP base.

Their model emphasizes fair value redistribution, which means that the distribution of profits is determined by voting and real-time capital turnover rate.

This is a smarter flywheel: the rewards earned by LPs are related to the efficiency of their capital, not just the scale of the capital. This time, efficiency is incentivized.

Royco

Royco's total monthly locked value (TVL) soared to over $2.6 billion, with a month-on-month growth of 267,000%.

Although part of the funds is driven by "points", what is important is the underlying infrastructure behind it:

• Royco is an order book with a preference for liquidity.
• Protocols cannot simply issue rewards and then hope for capital inflow. They issue requests, and then LPs decide to invest funds, creating a market through this coordination.

Here are the reasons why this narrative is more than just a profit game:

• These markets are becoming the meta-governance layer of DeFi.
• Hidden Hand has accumulated over 35 million dollars in bribes sent between major protocols such as Velodrome and Balancer.
• Royco and Turtle Club are shaping an effective issuance plan.

liquidity coordination market mechanism

1. Bribery as a Market Signal

Projects like Turtle Club allow LPs to understand the flow of incentives, make decisions based on real-time metrics, and earn rewards based on capital efficiency rather than just capital size.

2. Liquidity Request (RfL) as Order Book

Projects like Royco allow protocols to list liquidity requirements, just like placing orders in the market, and LPs execute these orders based on expected returns.

This has turned into a two-way coordinated game, rather than a unilateral bribery.

If you can decide the direction of liquidity, you can influence who will survive in the next market cycle.

Related Reading: The Migration of On-Chain Liquidity: After 15 Months of Ups and Downs, Who Remains Standing After the Speculation Tide Recedes?