The primary reason people are drawn to decentralized finance is the opportunity to make money. Providing liquidity enables users to earn trading fees and earn yield. However, there are ways to boost that APY, and not all options require users to relinquish their associated governance power either.
Higher APY or Voting?
Most DeFi platforms enable users to provide liquidity. Depending on the protocol, users can earn interest rates, trading fees, special tokens, etc. There are many ways to maximize revenue through these rewards and tokens, with PancakeSwap serving as a primary example. It enables users to provide liquidity and stake their LP tokens.
The staking process enables users to earn $CAKE tokens, which can be staked to compound earnings further. It is a very appealing option, even if it requires users to lock themselves into one ecosystem. However, that also means they can still exert their governance rights, which is crucial. DeFi users should never have to choose between maximizing their APY or participating in governance.
Moreover, users who engage in fixed-term staking for $CAKE can boost farm yields or boost voting power. Both options are appealing, depending on personal preference. However, the next generation of DeFi protocols should emphasize users can have both options without being locked into one ecosystem. DeFi is supposed to be a modular ecosystem where new solutions are built on existing protocols.
Boosting Yield And Voting Power Simultaneously
New decentralized projects such as Aura Finance pave the way for giving users the best of both worlds. They can explore a higher APY as a liquidity provider and retain their voting power. Moreover, they will be exposed to dual-project governance by earning Aura Finance tokens and retaining their voting power for the underlying protocol. It is a new way of empowering users without friction.
It is interesting to be able to control the direction of a project built on top of another protocol. With the dual-pronged approach, users can govern the platform they provide liquidity to – in this case, Balancer – and vote on the treasury and system parameters for Aura Finance. In addition, users retain the ability to sell their Balancer Gauge voting power to other users through secondary markets.
In a trustless world, users can do what they are expecting to do without anyone’s approval. Smart contracts and blockchain technology make that approach feasible. A modular approach to governance is the next frontier for DeFi to conquer. Providing a higher APY and maximizing voting power are crucial building blocks of decentralized finance. Bringing them together in a trustless manner will bring DeFi one step closer to becoming appealing to mainstream users.
Several DeFi protocols have focused on vote locking over the past few months. Unfortunately, their solutions only work within the existing ecosystem, like Curve’s CRV and veCRV. The protocols enabling such functionality for other popular protocols can gain a tremendous first-mover advantage. Users want to access these features without worrying about how and where to do it. That will catalyze broader adoption of decentralized technology and the opportunities it represents.
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