Governance token alert! Stablecoin trading protocol Curve announces the establishment of a governance organization and the issuance of governance token CRV.

DeFi not only has been steadily growing in the past few months, but also recently attracted the attention of the crypto community and a wide range of investors with the introduction of their respective governance tokens by Compound and Balancer. Similarly, Curve, another popular DeFi project, announced the establishment of the decentralized autonomous organization CurveDAO and the governance token CRV.

CRV Token Distribution

Curve plans to issue 1 billion governance tokens, CRV, with the issuance decreasing annually until the total circulating supply reaches 3.03 billion. Similar to the recent popularity of "liquidity mining" platforms like Compound and Balancer, providing liquidity to Curve.Fi earns you CRV tokens. It's important to note that the CRV token distribution mechanism will be retroactive, meaning users who provided liquidity since Curve's launch in January will receive CRV from the initial issuance.

The decentralized autonomous organization CurveDAO will implement "time-weighted voting" for on-chain governance in the future. This means that users who hold CRV tokens for a longer period will have more voting power than those participating for the first time. While details may change, the goal is to shift from the traditional "one coin, one vote" governance model and reduce the influence of large token holders.

Additionally, Curve may adopt a mechanism similar to Kyber Network, where protocol fees are collected, and the DAO buys back and burns CRV tokens in the market.

How Long Can DeFi Tokens Stay Hot?

There have been reports on DeFi governance tokens such as COMP and BAL. Compound's launch has been the most successful, surpassing long-time leader Maker in terms of token market value and protocol value locked. However, there seems to be an excess of speculation and a cooling-off period.

As a result, Compound governance proposal 011 has been approved. Its main purpose is to restrict users from acquiring COMP through "flash loans" and adjust the COMP distribution mechanism to allocate based on the "asset size" borrowed, aiming to prevent extreme lending rates in a single market, like the high borrowing rate of Brave (BAT) tokens (up to 33%) on the Compound market. This proposal will come into effect this Friday.

Balancer followed Compound in issuing the governance token "BAL," but besides facing large institutions leveraging leveraged tokens in liquidity mining, which led Balancer to urgently establish a "token whitelist," the price of BAL tokens has dropped significantly since its launch.

While the hype around liquidity mining has cooled off, Curve has still introduced a governance token. However, if CRV does not introduce features beneficial to holders such as profit-sharing or creating token economies, and merely serves as a voting tool, it may struggle to generate real demand and could follow in BAL's footsteps.