Voting Escrow

Curve first introduced time-weighted voting in 2020 you can read about its original deployment in more detail via their whitepaper.

Unwrapping the Model

The voter escrow model essentially consist of one core change to governance and on-chain voting systems, time-weighted voting.

Instead of voting with token amount A, tokens are lockable in a VotingEscrow, now shown as veA, for a selectable locktime...

Your vote is not only calculating total tokens held, but also the time selected lock period. This means a more active participation of users in the governance process as you continually have to weigh the risk of extending your lock, furthering the period until your converted tokens were to be given back, or allow the full unlock period to take place and continually lose your weighted voting power.

A visual representation can be seen below.

The intended effect of these system changes boils down to creating a risk vs. reward scenario where more governance power is given to active participants continually extending their locktimes out.

How does this work in Pharaoh?

Now that you understand the daunting ve terminology the question probably still persist: what is governance, what am I voting for, how does this benefit me?

Governance or Voting is usually utilized for:

• Directing emissions
• Earning Incentives & Fees
• Vote on protocol changes and steer development efforts

In Pharaoh the design is quite similar with some slight additions and redactions:

• Direct Emissions
• Earn Incentives & Fees
• Dilution Reduction Rebases
• veTOKEN represented as a ERC-721, commonly known as an NFT

Directing Emissions

Prior to Solidly style DEX's users were subject to centralization of farmed emissions. As discussed in our Origins of ve(3,3), the emission token was loaded into designated "farms" by the protocol's team. Meaning a centralization of all farmed rewards. The resulting effect was only certain liquidity pools & tokens were subject to these high paying positions.

Directing emissions is an extremely powerful use case for veTOKEN holders as it gives the governance holders true power over what the platform incentivizes. If a token pair continually underperforms via fees governance holders are going to be less incentivized to vote for that pair and will reduce directed emissions towards it. In a practical world this means: less rewards to XYZ pair -> less APR -> less liquidity positions for that given pair.

Each week, what we call EPOCH, ve holders will make a choice of the currently whitelisted pairs on the platform. Based on that vote which concludes every Thursday 00:00 UTC, the distribution of PHAR emissions will be changed to reflect that. We will discuss Tokenomics & Emissions in more detail later in Core Concepts.

Earning Incentives & Fees

Very few act in the benefit of good will and we shouldn't build under that expectation either. As a governance holder you are aligned with the protocol's best interest via earning Incentives & Fees. Let's briefly break down what each of these mean.

Incentives

On Pharaoh we utilize two different types of Incentives: liquidity pool incentives & voter incentives. A bribe can be in the form of ANY whitelisted token. Pharaoh introduces these systems as part of Solidlys core foundation and is built to offer any protocol or user a chance at earning emissions. As a protocol, you will find that bribing your liquidity pair will attract voters and result in higher directed emissions. We have concluded that this method is by far the CHEAPEST approach for any protocol or user to deepen their liquidity on-chain.

A voter bribe is designated at anytime during the current EPOCH and paid out in lump sum at the start of the following EPOCH. It is displayed after the bribe is made and will begin influencing votes at that time up until epoch rollover.

A Liquidity Pool bribe is another method protocols or users may choose to utilize to boost visibility on a given pairing. Once an LP bribe is made it will distribute that token and the amount deposited for the full 7 days after EPOCH rollover. This is a great way to bootstrap newer pools to the current yield farmers on the platform to build initial liquidity.

Fees

This is one of the differentiating factors of Pharaoh compared to similar style DEX models. We decided at the launch of Pharaoh that we would focus on Concentrated Liquidity and top traded tokens from the launch to be non-reliant on a bribe ecosystem. We believe that in doing so we will allow for a extrmely competitive and profitable protocol that can also highlight and support native protocols looking to build on the platform. The current breakdown of fee dispersion for Pharaoh is as followed:

• 20% Liquidity Providers
• 72% veTOKEN holders
• 8% Treasury

Utilizing this generated profit to distribute back to token holders helps further the efficiency of Pharaoh as voters not only making decisions based around the incentives of protocols, but also by the performance of the pairs themselves. This perpetuates the voters to vote on high fee driving pairs to consistently earn better yield and thus generating more fees to that pair.

Distribution Methodology

Vote Incentives: Users earn vote incentives immediately after the epoch flips. If there is a 1000 USDC bribe on a pair, and you are the only voter, you will receive 1000 USDC claimable at Thursday 0 UTC.

Swap Fees: Voters earn claimable trading fees throughout the week, based on the pool(s) they voted for before the epoch flips. If you vote for a pair in EPOCH X you will then earn swap fees for the entirety of EPOCH Y based on your indiviudal percentage vote compared to total pooled votes for that pair.

Dilution Protection

A key function of the ve(3,3) model is the dilution protection rebases, which occur per epoch, to incentivize users to lock their tokens early on. The rebase is a nod to the OHM (3,3) model that was popularized the past last bull cycle.

A practical example to give you a better understanding of how the system works:

• Assume the Dilution Protection is set to 25% and is set to increase 1% per epoch and a stop at 50% week over week
• You have 1,000 vePHAR, which is 10% of the total supply of 2,000 PHAR at the time.
• During this epoch, another 1,000 PHAR was emitted to gauges, pushing the total supply of PHAR to 3,000
• You can claim your rebase after the epoch ends and receive 500 extra PHAR added to your position.

Here is a crude visual representation of the above in action:

It's an NFT?

A major difference from Curve's model to the Solidly model was adopting the token standard ERC-721 rather than the ERC-20. This means when locking your PHAR tokens into a voter escrow contract you receive your ve position in a veNFT. This allows for your position to be merged, transferred, and openly traded on "Secondary Markets" usually called NFT marketplaces.