Liquidity War 3.0: Bribery Becomes the Market

Author: arndxt, encryption KOL

Compiled by: Felix, PANews

The yield war may soon unfold again. If you've been in the DeFi space long enough, you'll understand that Total Value Locked (TVL) is just a vanity metric. Because in the fiercely competitive modular world of AMMs, perpetual contracts, and lending protocols, what truly matters is who can control the flow of liquidity, not who owns the protocol or even who distributes the most rewards. It is about who can convince liquidity providers (LPs) to deposit funds and ensure the stability of TVL. This is precisely the origin of the bribery economy.

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

This is now becoming the most strategically significant layer in the entire DeFi stack.

Change: From Issuance to Yuan Incentives

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 remain after the decline in yields.

But this model has a fundamental flaw: it is passive. Each 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 wars began with the Curve War in 2021 and gradually became more defined.

The unique design of Curve Finance

Curve has introduced voting escrow (ve) tokenomics, allowing users to lock CRV (Curve's native token) for up to 4 years in exchange for veCRV. veCRV grants users the following advantages:

Increase the rewards of the Curve pool

Governance rights to have voting weight (which pools receive profits)

This creates a meta-game around profits:

The agreement hopes to obtain liquidity on Curve.

The only way to gain liquidity is to attract votes to their pools.

So they began to bribe veCRV holders to vote in support.

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

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

2. Yuan Incentives and Bribery Market

The First Bribery Economy

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

Votium has become an over-the-counter bribery platform for CRV issuance.

The emergence of Redacted Cartel, Warden, and Hidden Hand has extended this model to other protocols such as Balancer and Frax.

The protocol no longer just pays issuance fees, 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 increase complexity, turning issuance into a capital coordination game.

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

3. How to unfold the profit battle

The following is the way the agreement competes in this game:

Liquidity aggregation: Aggregating influence through wrappers similar to Convex (for example, Aura Finance for Balancer)

Bribery activities: Allocate a budget for ongoing bribery to attract issuers 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.

Nowadays, protocols like Turtle Club and Royco are guiding this liquidity: no longer issuing blindly, but auctioning the 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 needed the most."

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

Turtle Club

Turtle Club has quietly become one of the most effective bribery markets, yet few mention it. Their liquidity pools are often 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 LP are related to the efficiency of their capital, not just the scale of the capital. This time, efficiency is incentivized.

Royco

The total locked value (TVL) of Royco in a single month soared to over $2.6 billion, a month-on-month increase of 267,000%.

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

Royco is an order book preferred for liquidity.

Protocols cannot just issue rewards and then hope for capital inflows. They publish requests, and then LPs decide to allocate funds, creating a market through this coordination.

Here are the reasons that make this narrative more than just a profit game:

These markets are becoming the meta-governance layer of DeFi.

Hidden Hand has cumulatively sent over $35 million in bribes between major protocols such as Velodrome and Balancer.

Royco and Turtle Club are shaping an effective issuance plan.

Mechanism of liquidity coordination market

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 receive rewards based on capital efficiency rather than just capital size.

2. Liquidity Request (RfL) as an order book

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

This has turned into a two-way coordinated game rather than a one-sided bribery.

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