The ve(3,3) Model in DeFi

In DeFi, some protocols adopt the ve(3,3) design—a game theory-inspired model combining “vote-escrow” (ve) mechanics with the well-known “(3,3)” meme from Olympus DAO. Essentially, ve(3,3) encourages users to lock tokens for governance power in exchange for boosted rewards (bribes, fees, etc.). The longer you lock, the greater your voting influence and share of incentives.

However, while ve(3,3) fosters long-term alignment and deeper liquidity for the protocol, it introduces two major challenges:

Illiquidity for veNFT Holders

Locking tokens mints a veNFT (often ERC-721). Despite the NFT format, there is no mainstream marketplace for easily trading or “un-locking” its underlying value. Even in forks where the veNFT is transferrable, the principal remains inaccessible until the lock’s expiry—capital is effectively “trapped.”

Governance vs. Trading

By design, ve(3,3) prioritizes governance and protocol health over user liquidity. Holders reap boosted rewards and voting power, but at the cost of frozen capital, limiting their ability to pivot or redeploy funds in new opportunities.

This tension between maximizing governance incentives and providing liquidity can stifle DeFi participants who need flexible access to funds. VeVault bridges the gap by unlocking partial or immediate liquidity for veNFT holders—maintaining the governance benefits of ve(3,3) while offering a robust, on-chain path to capital efficiency.

1. Connect Wallet
   Users log in with a standard decentralized wallet (e.g., MetaMask).

2. Scan for veNFTs
   VeVault automatically detects any veNFTs from Aerodrome’s VotingEscrow or other MetaDEX sources.

3. Select veNFTs to Deposit
   On the “Deposit” page, users see all recognized veNFTs and can choose one or multiple (batch deposit).

4. Approve
   If not already approved, users grant the VeVaultStaker contract permission to manage those veNFTs.

5. Deposit
   In a single batch transaction, the chosen veNFTs move to VeVaultStaker, launching the core liquidity and governance logic.

6. Receive veVaultNFT
   Immediately after depositing, users receive a veVaultNFT that grants them voting rights in the VeVault DAO.

Two Additional Paths

• Provide Liquidity
  Users can also deposit ETH, which is converted into a liquidity position and staked in the protocol. They then receive a veVaultNFT representing their share—complete with DAO voting power.

• Redeem Later
  At any time, holders can burn their veVaultNFT to unlock the underlying tokens on a vesting schedule. Once redeemed, they lose DAO voting rights, reflecting their exit from the locked position.

Fee Share & DAO Structure

• Earning Yield
  By locking veNFT positions, VeVault earns yield and rewards from the underlying MetaDEX. 90% of these yields are distributed to veVaultNFT holders, and the remaining 10% is reinvested into protocol liquidity.

• DAO Governance
  All major protocol parameters—including reward distribution, integrations, and upgrades—are determined by holders via on-chain votes. This creates a community-driven, decentralized roadmap for VeVault.

By blending batch deposits, partial liquidity unlocks, and DAO-based governance, VeVault offers users both capital flexibility and a powerful voice in shaping the protocol’s future.

Frontend

• Tech Stack: Next.js (App Router), TypeScript, React, Tailwind CSS, Wagmi
• Design Focus: A clean, user-centric interface for scanning veNFTs, batch depositing, and redeeming positions.
• Interaction Flow: Each operation (approve, deposit, redeem) is orchestrated by Wagmi hooks for straightforward on-chain calls.

Smart Contracts

1. Aerodrome VotingEscrow
   • VeVault builds directly on top of this contract for veNFT creation and lock mechanics.
2. VeVaultStaker
   • Central contract handling user deposits (including batch transfers) and partial liquidation logic.
3. YoloLP
   • Manages liquidity provisioning, fee collection, and reward emissions within the VeVault ecosystem.
4. Yolo Token (ERC-20)
   • Represents the user’s redeemed position, tradable or usable in DeFi. Serves as the counterpart to locked veNFTs, offering partial liquidity over time.

This modular architecture allows VeVault to extend or adapt to new DeFi environments without sacrificing clarity or security.

• Aerodrome (VotingEscrow)

  • We tap directly into Aerodrome’s VotingEscrow contract to detect user veNFT balances and manage lock data.
  • This underpins the primary liquidity and governance model that VeVault builds on.

• Slipstream

  • Used behind the scenes for liquidity provisioning and management, ensuring deep and stable markets for locked positions.

• Self-Contained On-Chain Protocol

  • Beyond reading Aerodrome’s data, VeVault is largely independent of third-party APIs or centralized services.
  • All critical logic (batch deposits, redemption, fee distribution) executes on-chain within VeVault’s smart contracts.

1. Full DAO Structure

   • VeVault is built from the ground up to operate under a DAO framework.
   • Governance decisions (e.g., fees, reward distribution, integrations) are determined by veVaultNFT holders via on-chain voting.

2. Cross-MetaDEX Compatibility

   • Rather than being limited to a single protocol, VeVault can integrate with multiple ve(3,3)-style forks and diverse liquidity ecosystems.
   • This broad approach lets users tap into different DEX rewards and lock models using the same VeVault infrastructure.

3. Batch Deposits

   • Users can deposit multiple veNFTs in one transaction.
   • This cuts down on gas fees and makes large-scale liquidity positioning far more efficient than one-by-one deposits.

By combining DAO governance, multi-DEX flexibility, and batch deposit capabilities, VeVault offers a uniquely scalable and community-driven solution for unlocking veNFT liquidity.

1. MVP Over Complexity

• For the hackathon, we concentrated on core functionality: depositing and basic liquidity flows.
• Future enhancements—like automated voting strategies, more advanced DAO mechanisms, and full audits—are planned once the prototype proves stable.

2. Custom Deployment

• We did not use Hardhat due to time and compatibility issues. Instead, we handcrafted a proxy-upgradeable deployment script for rapid iteration.
• This allowed us to adapt quickly whenever we encountered errors during the hackathon crunch.

3. Epoch Constraints & Mock NFTs

• Because MetaDEX epochs only refresh once weekly, we needed a mock NFT and Tenderly simulations to emulate real on-chain conditions without waiting days to test each step.

4. Proxy-Upgradeable Contracts

• We opted for an upgradeable approach so we could quickly patch any critical issues discovered under hackathon-induced sleep deprivation.
• While this eases development, it also highlights the need for thorough audits and eventual governance controls to ensure trustless upgrades in a live environment.

Overall, these decisions reflect our hackathon-driven priority to showcase the core value of VeVault as fast as possible, with a roadmap to strengthen security, decentralization, and functionality after the initial MVP phase.