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A lot of us building in the blockchain space believe that Markets are Eating the World and this is made possible by the money-ness of onchain assets. You cannot have ”trustless exchange of value” without markets and prices and well, liquidity.
Liquidity is why tokenised organisations are traded at multiples of the valuation the same company will fetch offchain. Liquidity is what creates economic opportunity, attracts builders to integrate your product, enables the delivery of smoother user experiences and encourages speculators to buy your token. In short - liquidity is life, for protocols and tokens alike.
Liquidity is why we use blockchains and why you have a governance token in the first place, so trying to decouple governance from liquidity is treating a core feature as a bug.
Since I began building governance infrastructure in 2021, I’ve been struck by how most people working on governance are willingly blind about the hyper-financialised nature of our industry.
Financial incentives matter more than most are willing to admit, and they are the primary driver of capital entering the industry, whether it's the ambitious founder, the “value-add” venture capitalist, the dopamine-chasing retail “investor”, or the eloquent grants “farmer.”
Building systems for better collective decision-making cannot succeed while ignoring the main optimisation objective of most market participants - personal financial gains. Designing with this in mind isn’t just pragmatic - it’s essential.
We know that the token's primary role is capital formation @RuneKek wrote about it back in 2019. However, in a post-ICO era, Compound convinced us that “governance” is utility enough, and it was a story that made sense for those launching and funding projects. You get money, and in exchange, you mint a token with a vague promise of future “utility”. It is an unspoken truth that most governance tokens don’t have any real power over the underlying protocol or the associated cash flows (@LidoFinance and @SkyEcosystem being among the few notable exceptions).
To make it worse, in the name of “improved participation”, we got stuck with forum lobbying governance where favors get traded in DM groups between service providers and protocol politicians (often intertwined). The pitfalls of the delegate model are hidden by its obscurity, process complexity and the slow pace at which these projects decline. Even well-intentioned delegates struggle, and who wouldn’t when you have to decide on issues ranging from “what constitutes bullying” to “who should be paid $600k per year to invest in gaming”.
When your primary value add is “making decisions”, you will find a way to monetise it. Delegate governance might work well with investor protection for tokenholders and court enforceable fiduciary responsibilities of paid delegates in place. But it hasn't proven successful for a capture-resistant onchain future independent of government enforcement.
With most DAOs being in essence a bloated and underperforming spending committee, we might as well look for a governance framework focused on resource allocation.
The gauge model pioneered by @CurveFinance, where token holders lock their stake in exchange for control over incentive inflation rewards, has been given a second chance. Locker design innovation and low L2 fees brought @AerodromeFi a hot gauge summer. Projects saw a successful case, demonstrating the inseparable nature of governance and tokenomics. This gave a second chance to a more transparent governance system based on true disintermediation.
The most straightforward implementation of a gauge system is the allocation of inflation incentives across a set of eligible pools (can be abstracted to reward an arbitrary onchain action the protocol wants to incentivise). Gauges present a meaningful improvement for both teams and token holders:
Create a much-needed liquidity sink to balance out new supply hitting the market (through vesting schedules), and protocol value creation.
Introduce actual “governance utility” as token holders have hard power over financial flows from day one, accruing some value to the token.
Return decision-making power to those with skin-in-the-game.
Provide better incentive alignment by rewarding loyalty and increasing exit costs.
Narrow the decision-making scope and clearly frame the trade-offs in resource allocation, creating a more structured and straightforward governance process for both humans and autonomous agents.
A suite of tokenomics-first governance primitives will empower entrepreneurs who want to build wealth creation games onchain and ignore the status games at the social layer. In Q5 the launch of @berachain embedding such primitives at the very core of the protocol will only accelerate the ve-Renaissance.
The Programmable Money Industrial Revolution

The basic components of a Tokenomics First Governance system are:
Locker - while many flavours exist (ve, vev, veNFT, vb, stk, etc), in essence, the locker is a contract where tokenholders can acquire increased voting power or enhanced yield in exchange for foregoing the liquidity of their position.
A second layer which reintroduces liquidity can emerge through a liquid staker token (CVX, Aura) or a market where locked positions are sold at a discount.
Gauge voting is a module where tokenholders vote for their preferred outcome from a list of options. At pre-defined intervals (“epochs”) a snapshot of the expressed tokenholder preference is taken. Votes could be reset each epoch or remain allocated to the selected option until tokenholders express a new preference.
Voting can be rewarded both by the underlying protocol and through a bribes marketplace where interested parties pay tokehnolders to vote for their preferred outcome. This can be further automated by enabling tokenholders to delegate to an “autovoter” contract that optimises the vote placement to maximise the received rewards.
Executor, as the name suggests, is a module that takes the preference snapshot of a gauge and triggers an action onchain. Most often it is distributing incentives but can be any arbitrary onchain action.
By combining a “locker” with multiple pairs of “voting gauges” and “executors”, one can design a complex governance system where each type of decision is narrowly defined as a trade-off among available options. Furthermore each “voting gauge” can include different multipliers on the voting weights, further unlocking diversity of decision flows. Some interesting implementations in the works include:
Protocol governance determining the canonical versioning of the code base
Automating KPI based funding
Token curated registries used for whitelisting eligible assets for integrations
These modular components enable the creation of complex systems of financial railways that follow pre-defined logic or are enforceably governed – true programmable money.

So why are governance tokens valuable, or rather how can they become valuable?
I love @js_horne hyperstructure thesis as much as the next guy. We even based the first version of Aragon’s strategy on it, betting that “the hyperstructure for governance will be a permission management system”. His original piece had a linchpin hypothesis that governance is valuable because of the “threat of the fee”. However, when the governance instrument is part of the most highly paced and volatile financial market we have ever seen as a species, that hypothesis becomes shaky. Projects that reach sufficient maturity or adoption will have to turn that switch on. The billion-dollar valuations some of the networks enjoy cannot be justified without a robust value accrual process.
Governance won’t be valuable because of the right to flip a fee switch but because of the right to decide how that fee will be generated and distributed.
Tokenomics-First Governance is not a silver bullet. It’s not a perfectly fool-proof product that “simply works". If your protocol fails to create or capture value it won’t save your TVL, token price, or community engagement. However, it is an important primitive for those recognising that liquidity is not a bug – it is a feature of building onchain. It also offers a more transparent and honest starting point for decentralization compared to the forum-lobbying model that dominates today. Over the next 12 to 18 months, the industry at large will embrace the significance of liquidity and incentives and realise that governance and tokenomics cannot be split. Because of all of that, I am thrilled to step it up and join Aragon to lead the growth and adoption of Tokenomics-First Governance solutions, where we are cooking with GOATed teams like @modenetwork, @puffer_finance and many more in stealth, proving that token fundamentals matter!
Special thanks to @rusgarian @JordanImran2 and @noturhandle_ for reviewing early drafts! Also thanks to those who knowingly or not have contributed to this piece and the thinking behind it: @Figue_me @0x_degenz @D333z @bbeats1 @111_no_space @k06a @rafathebuilder @Jai_Bhavnani
A lot of us building in the blockchain space believe that Markets are Eating the World and this is made possible by the money-ness of onchain assets. You cannot have ”trustless exchange of value” without markets and prices and well, liquidity.
Liquidity is why tokenised organisations are traded at multiples of the valuation the same company will fetch offchain. Liquidity is what creates economic opportunity, attracts builders to integrate your product, enables the delivery of smoother user experiences and encourages speculators to buy your token. In short - liquidity is life, for protocols and tokens alike.
Liquidity is why we use blockchains and why you have a governance token in the first place, so trying to decouple governance from liquidity is treating a core feature as a bug.
Since I began building governance infrastructure in 2021, I’ve been struck by how most people working on governance are willingly blind about the hyper-financialised nature of our industry.
Financial incentives matter more than most are willing to admit, and they are the primary driver of capital entering the industry, whether it's the ambitious founder, the “value-add” venture capitalist, the dopamine-chasing retail “investor”, or the eloquent grants “farmer.”
Building systems for better collective decision-making cannot succeed while ignoring the main optimisation objective of most market participants - personal financial gains. Designing with this in mind isn’t just pragmatic - it’s essential.
We know that the token's primary role is capital formation @RuneKek wrote about it back in 2019. However, in a post-ICO era, Compound convinced us that “governance” is utility enough, and it was a story that made sense for those launching and funding projects. You get money, and in exchange, you mint a token with a vague promise of future “utility”. It is an unspoken truth that most governance tokens don’t have any real power over the underlying protocol or the associated cash flows (@LidoFinance and @SkyEcosystem being among the few notable exceptions).
To make it worse, in the name of “improved participation”, we got stuck with forum lobbying governance where favors get traded in DM groups between service providers and protocol politicians (often intertwined). The pitfalls of the delegate model are hidden by its obscurity, process complexity and the slow pace at which these projects decline. Even well-intentioned delegates struggle, and who wouldn’t when you have to decide on issues ranging from “what constitutes bullying” to “who should be paid $600k per year to invest in gaming”.
When your primary value add is “making decisions”, you will find a way to monetise it. Delegate governance might work well with investor protection for tokenholders and court enforceable fiduciary responsibilities of paid delegates in place. But it hasn't proven successful for a capture-resistant onchain future independent of government enforcement.
With most DAOs being in essence a bloated and underperforming spending committee, we might as well look for a governance framework focused on resource allocation.
The gauge model pioneered by @CurveFinance, where token holders lock their stake in exchange for control over incentive inflation rewards, has been given a second chance. Locker design innovation and low L2 fees brought @AerodromeFi a hot gauge summer. Projects saw a successful case, demonstrating the inseparable nature of governance and tokenomics. This gave a second chance to a more transparent governance system based on true disintermediation.
The most straightforward implementation of a gauge system is the allocation of inflation incentives across a set of eligible pools (can be abstracted to reward an arbitrary onchain action the protocol wants to incentivise). Gauges present a meaningful improvement for both teams and token holders:
Create a much-needed liquidity sink to balance out new supply hitting the market (through vesting schedules), and protocol value creation.
Introduce actual “governance utility” as token holders have hard power over financial flows from day one, accruing some value to the token.
Return decision-making power to those with skin-in-the-game.
Provide better incentive alignment by rewarding loyalty and increasing exit costs.
Narrow the decision-making scope and clearly frame the trade-offs in resource allocation, creating a more structured and straightforward governance process for both humans and autonomous agents.
A suite of tokenomics-first governance primitives will empower entrepreneurs who want to build wealth creation games onchain and ignore the status games at the social layer. In Q5 the launch of @berachain embedding such primitives at the very core of the protocol will only accelerate the ve-Renaissance.
The Programmable Money Industrial Revolution

The basic components of a Tokenomics First Governance system are:
Locker - while many flavours exist (ve, vev, veNFT, vb, stk, etc), in essence, the locker is a contract where tokenholders can acquire increased voting power or enhanced yield in exchange for foregoing the liquidity of their position.
A second layer which reintroduces liquidity can emerge through a liquid staker token (CVX, Aura) or a market where locked positions are sold at a discount.
Gauge voting is a module where tokenholders vote for their preferred outcome from a list of options. At pre-defined intervals (“epochs”) a snapshot of the expressed tokenholder preference is taken. Votes could be reset each epoch or remain allocated to the selected option until tokenholders express a new preference.
Voting can be rewarded both by the underlying protocol and through a bribes marketplace where interested parties pay tokehnolders to vote for their preferred outcome. This can be further automated by enabling tokenholders to delegate to an “autovoter” contract that optimises the vote placement to maximise the received rewards.
Executor, as the name suggests, is a module that takes the preference snapshot of a gauge and triggers an action onchain. Most often it is distributing incentives but can be any arbitrary onchain action.
By combining a “locker” with multiple pairs of “voting gauges” and “executors”, one can design a complex governance system where each type of decision is narrowly defined as a trade-off among available options. Furthermore each “voting gauge” can include different multipliers on the voting weights, further unlocking diversity of decision flows. Some interesting implementations in the works include:
Protocol governance determining the canonical versioning of the code base
Automating KPI based funding
Token curated registries used for whitelisting eligible assets for integrations
These modular components enable the creation of complex systems of financial railways that follow pre-defined logic or are enforceably governed – true programmable money.

So why are governance tokens valuable, or rather how can they become valuable?
I love @js_horne hyperstructure thesis as much as the next guy. We even based the first version of Aragon’s strategy on it, betting that “the hyperstructure for governance will be a permission management system”. His original piece had a linchpin hypothesis that governance is valuable because of the “threat of the fee”. However, when the governance instrument is part of the most highly paced and volatile financial market we have ever seen as a species, that hypothesis becomes shaky. Projects that reach sufficient maturity or adoption will have to turn that switch on. The billion-dollar valuations some of the networks enjoy cannot be justified without a robust value accrual process.
Governance won’t be valuable because of the right to flip a fee switch but because of the right to decide how that fee will be generated and distributed.
Tokenomics-First Governance is not a silver bullet. It’s not a perfectly fool-proof product that “simply works". If your protocol fails to create or capture value it won’t save your TVL, token price, or community engagement. However, it is an important primitive for those recognising that liquidity is not a bug – it is a feature of building onchain. It also offers a more transparent and honest starting point for decentralization compared to the forum-lobbying model that dominates today. Over the next 12 to 18 months, the industry at large will embrace the significance of liquidity and incentives and realise that governance and tokenomics cannot be split. Because of all of that, I am thrilled to step it up and join Aragon to lead the growth and adoption of Tokenomics-First Governance solutions, where we are cooking with GOATed teams like @modenetwork, @puffer_finance and many more in stealth, proving that token fundamentals matter!
Special thanks to @rusgarian @JordanImran2 and @noturhandle_ for reviewing early drafts! Also thanks to those who knowingly or not have contributed to this piece and the thinking behind it: @Figue_me @0x_degenz @D333z @bbeats1 @111_no_space @k06a @rafathebuilder @Jai_Bhavnani
7 comments
Anyone have good DAO starter packs to share?
What to do and what not to do with tokens & incentives https://paragraph.xyz/@vemedici/ve-renaissance-tokenomics-first-governance
Great summary of the state of tokens and governance! Conclusion was spot on: "If your protocol fails to create or capture value it won’t save your TVL, token price, or community engagement." This is the most important part of the message that everyone misses! All the tokenomics, governance, and TVL in the world won't save your product/community if it doesn't actually do something that generates value.
Governance should be an amplifier to growth, not just a “don’t go to jail” side quest
Thank y'all @capitulation @trigs.eth ! I'm exploring projects addressing trust/identity issues on chain to understand how they actually achieve proof of personhood, rank contributors etc, e.g., Creds, soul-bound-tokens, or other reputation systems. Feel free to share any links you think could be relevant!
Tokens can be valuable if designed well: https://paragraph.xyz/@vemedici/ve-renaissance-tokenomics-first-governance
Governance won’t be valuable because of the right to flip a fee switch but because of the right to decide how that fee will be generated and distributed.