Curve governance power shift: 17 million CRV funding proposal rejected, capital side becomes the new decision-making core

Original author: CM (X: @cmdefi)

A few days ago, a grant proposal from Curve was rejected, which aimed to allocate 17M $CRV in development funds to the development team (Swiss Stake AG). Both Convex and Yearn voted against it, and their voting power was sufficient to influence the final outcome.

Since the governance issues with Aave began to ferment, governance has started to attract market attention, and the inertia of simply giving money has begun to break. There are two key points behind this Curve proposal:

1. A portion of the community does not oppose granting funds to AG, but they want to know how previous funds were used, how future funds will be used, whether it is sustainable, and whether it has brought benefits to the project. At the same time, this overly primitive grant model leads to a situation where once the money is given out, there are no constraints. In the future, the DAO needs to establish a Treasury, with income and expenditure being transparent, or increase governance constraints.

2. The large voting powers of veCRV do not want to dilute their value. This is a clear conflict of interest; if the projects supported by the CRV grant cannot foreseeably create benefits for veCRV, they are unlikely to receive support. Of course, Convex and Yearn also have their own interests and influence, but we won't discuss that for now.

This proposal was initiated by Curve founder Mich, and AG has been one of the teams maintaining the core codebase since 2020. The roadmap provided by AG for this grant roughly includes continuing to advance llamalend, including support for PT and LP, as well as the expansion of the on-chain foreign exchange market and crvUSD. It seems worthwhile, but whether it justifies a 17M $CRV grant needs to be calculated separately, especially since Curve's governance has many differences from Aave, with its power distributed among several distinct teams.

Comparing ve with conventional governance models:

To conclude, most conventional governance models currently have no advantages in design. Of course, if a DAO is mature enough, traditional structures can operate well, but unfortunately, there is not yet a project in Crypto that has matured to this level; even the leading project Aave has encountered issues.

If we discuss model design separately, ve has certain advanced aspects. Firstly, it has cash flow; it is backed by liquidity control. When there is a demand for liquidity from the outside, this power will be bribed. Therefore, even if you do not want to lock up your assets long-term, you can delegate your tokens to proxy projects like Convex/Yearn to earn returns.

Thus, ve is a model that binds voting rights with cash flow. The future evolution is likely to follow a "governance capitalism" route, where vetoken binds voting rights with "long-term locking," essentially filtering those with large capital who can withstand liquidity losses and are capable of long-term games. Over time, the result is that governors gradually shift from the ordinary user group to the "capital group."

At the same time, due to the existence of proxy layers like Convex/Yearn, many ordinary users, even loyal users, who hope to earn returns while not losing liquidity and flexibility, will gradually choose to delegate governance to these projects.

From this vote, we can also see some clues; in the future, Mich may not be the main character in Curve's governance, but rather those with large voting powers. When issues arose in Aave governance previously, someone proposed the idea of "delegated governance/elite governance," which is quite similar to the current structure of Curve. Whether this is good or bad will require time to test.