ve 代币模型失效复盘：Pendle、PancakeSwap、Balancer 为何集体放弃

Author: Pink Brains

Translation: Deep Tide TechFlow

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Pendle, PancakeSwap, Balancer abandoned the ve token model within 12 months, with the combined TVL of these three protocols once reaching billions of dollars. This article provides the most systematic post-mortem analysis in the market: where each protocol’s specific breakpoints are, what alternative mechanisms replaced them, and whether the underlying failure logic is the same. The conclusion is not “ve tokens are dead,” but a more precise judgment—what kinds of protocols can use it, and what kinds cannot.

The full text is as follows:

Three major DeFi protocols abandoned the voting escrow model within 12 months. Pendle, PancakeSwap, and Balancer each faced different breakpoints, but ultimately reached the same conclusion.

Voting escrow token economics (ve tokens) was supposed to be the ultimate solution for DeFi token economics. Lock tokens, gain governance rights, earn fees, align incentives permanently, all without centralized governance. Curve proved it could work, and dozens of protocols replicated this model from 2021 to 2024.

But this has changed.

In the 12 months of 2025, protocols totaling billions of dollars in TVL have recognized that this mechanism does more harm than good. Not because the theory was wrong, but because execution failed: low participation rates, governance capture, emissions flowing into unprofitable pools, tokens plummeting as usage grew.

Pendle: vePENDLE → sPENDLE

Where did the problem lie

Pendle team disclosed that despite a 60-fold increase in revenue over 2 years, vePENDLE had the lowest participation rate among all ve token models—only 20% of PENDLE supply was locked.

This mechanism, designed to align incentives, excluded 80% of holders. The fatal blow was based on detailed data from liquidity pools: over 60% of emission-accepting pools are unprofitable.

A few high-performing pools subsidize most of the value-destroying pools. Highly concentrated voters mean emissions flow to large holders with positions—these are wrapper products, then distributed to end users.

In comparison, Curve’s veCRV lock rate is over 50%, Aerodrome’s veAERO lock rate is about 44%, with an average lock duration of about 3.7 years. Pendle’s 20% is too low. Compared to the opportunity cost in yield markets, the lock-in incentives lack attractiveness. As of March, Aerodrome had distributed over $440 million to veAERO voters.

Alternative: sPENDLE

14-day withdrawal window (or instant withdrawal, with a 5% fee)

Algorithmic emissions (reducing about 30%)

Passive rewards, only for key PPP votes

Transferable, composable, re-stakable

80% of income → buyback PENDLE

sPENDLE is a 1:1 liquid staking token with PENDLE, with rewards supported by income-backed buybacks, not inflationary emissions. The algorithm reduces emissions by about 30%, while directing funds into profitable pools. Existing vePENDLE holders get loyalty bonuses (up to 4x multiplier, decreasing over 2 years from the January 29 snapshot). A wallet linked to Arca accumulated over $8.3 million in PENDLE within six days.

But not everyone agrees with this decision. Curve founder Michael Egorov believes ve token economics is a very powerful mechanism for aligning DeFi incentives.

PancakeSwap: veCAKE → Token Economics 3.0 (Burn + Direct Staking)

Where did the problem lie

PancakeSwap’s veCAKE is textbook bribery-driven resource misallocation. The Gauge voting system has been captured by Convex-style aggregators, most notably Magpie Finance, which siphons off emissions while providing minimal liquidity benefits to PancakeSwap.

Pre-closure data: pools earning over 40% of total emissions contributed less than 2% of CAKE burned. The ve model created a bribery market, where aggregators extract value, and the pools generating fees are insufficiently incentivized.

However, this closure was deliberately designed. Michael Egorov called it a “model governance attack,” claiming CAKE insiders erased existing veCAKE holders’ governance rights and might forcibly unlock their tokens after voting. Cakepie DAO, one of the largest CAKE holders, challenged the vote on grounds of irregular behavior. PancakeSwap offered up to $1.5 million in CAKE compensation to Cakepie users.

Alternative: 100% fee revenue → CAKE burn

Team directly manages emissions

1 CAKE = 1 vote (simple governance)

Approximately 22,500 CAKE daily (target 14,500)

100% fee revenue → CAKE burn, no dividends

Goal: 4% annual deflation, reach 20% by 2030

All locked CAKE/veCAKE positions can be unlocked without penalty, with a 6-month 1:1 redemption window. Revenue dividends are replaced with burns, with key pools’ burn rate increased from 10% to 15%. PancakeSwap Infinity was launched simultaneously, adopting a redesigned pool architecture.

Post-transformation results: net supply decreased by 8.19% in 2025, continuous deflation for 29 months, permanently burning 37.6 million CAKE since September 2023, with over 3.4 million burned just in January 2026, total trading volume of $3.5 trillion (2025: $2.36 trillion).

While the deflation plan looks promising, CAKE price remains around $1.60, down about 92% from its all-time high.

Balancer: veBAL → Risk Liquidation (DAO + Zero Emission)

Where did the problem lie

Balancer’s failure was a cascade of governance capture, security incidents, and economic collapse.

The first wave was whale warfare. In 2022, whale “Humpy” manipulated the veBAL system, directing $1.8 million worth of BAL to its controlled CREAM/WETH liquidity pool within six weeks. In comparison, the same pool generated only $18,000 in revenue for Balancer during that period.

Next was a vulnerability exploit. A rounding flaw in Balancer V2’s swap logic was exploited across multiple chains, resulting in about $128 million being drained. TVL dropped by $500 million in two weeks, and Balancer Labs faced severe legal risks again.

Alternative: 100% fee → DAO treasury

BAL emissions cut to zero

100% fee distribution to DAO treasury

Buyback BAL at fixed price for exit

Focus: reCLAMM, LBP, stable pools

Maintain a lean team via Balancer OpCo

The old DeFi model based on token rewards is being phased out. Despite tokenomics issues, Martinelli pointed out that Balancer “still generates real income,” exceeding $1 million in the past three months: “The problem isn’t that Balancer doesn’t work; it’s that the economics around Balancer don’t work. These are fixable.”

Can a lean DAO sustain $158 million TVL without incentives? It’s an open question. Notably, Balancer’s market cap ($9.9 million) is currently below its treasury ($14.4 million).

Underlying mechanisms

The three exits above are symptoms; the root cause is structural.

Cube Exchange recently analyzed three scenarios where ve token models might fail.

Assumption 1: Emissions must retain value. If token prices collapse, emissions lose value → LPs exit → liquidity, trading volume, and fees decline → more sell pressure. This is a classic negative flywheel (seen in CRV, CAKE, BAL).

Assumption 2: Locking must be genuine. If locked tokens can be wrapped into liquidity versions (Convex, Aura, Magpie), “locking” becomes meaningless and exploitable.

Assumption 3: There must be genuine distribution issues. The ve model’s effectiveness depends on protocols continuously deciding incentive flows (e.g., AMMs). Without this, gauge voting becomes unnecessary overhead.

Diagnostic test: Does the protocol have a real, recurring distribution problem that community-led emissions can generate significantly more economic value than team-led allocations? If not, ve token economics only adds complexity without adding value.

Fee-to-Emission Ratio

The fee-to-emission ratio is the dollar value of fees generated by the protocol divided by the dollar value of emissions distributed. When this ratio exceeds 1.0, the protocol earns more from liquidity than it spends to attract it. Below 1.0, it is subsidizing losses.

Here’s a detail revealed by Pendle’s exit: the overall ratio masks the true situation of each pool. Pendle’s overall fee efficiency exceeds 1.0 (income > emissions). But when broken down pool-by-pool, over 60% of pools are unprofitable on their own. A few high-performing pools (likely large stablecoin yield markets) subsidize others. Manual gauge voting directs emissions to pools benefiting large voters rather than those generating the most fees.

PancakeSwap experienced the same, only reflected in CAKE burns.

Liquidity Lock-in Contradiction

ve token economics create a problem: capital locking is inefficient. Liquidity lock products solve this by wrapping locked tokens into tradable derivatives. But while solving capital efficiency, they create governance centralization issues. This is the core paradox of every ve token model.

In Curve’s case, this paradox results in a stable (though concentrated) outcome. Convex holds 53% of all veCRV, StakeDAO and Yearn hold additional shares. Governance is mediated via vlCVX. Convex’s incentives are aligned with Curve’s success, and its entire business depends on Curve functioning well. Centralization is structural, not parasitic.

In Balancer’s case, this paradox is destructive. Aura Finance became the largest veBAL holder and de facto governance layer. But lacking other strong competitors, a hostile whale (Humpy) accumulated 35% of veBAL independently and manipulated gauge limits to extract emissions.

In PancakeSwap’s case, Magpie Finance and its aggregator captured gauge votes through bribery, directing emissions to pools that bring minimal value to PancakeSwap.

ve token economics require capital locking to operate, but locking is inefficient. Intermediaries emerge to unlock it, and in doing so, they centralize governance power that should be dispersed. This creates conditions for capture.

Curve’s rebuttal on why ve token economics still matter

Curve’s conclusion: the amount of veCRV tokens continuously locked is always about three times the amount that a destruction mechanism could remove.

Lock-based scarcity is inherently deeper than burn-based scarcity because it simultaneously generates governance participation, fee distribution, and liquidity coordination—not just supply reduction.

In 2025, Curve’s DAO removed the veCRV whitelist, expanding DAO governance access. Protocol metrics are impressive: trading volume grew from $119 billion in 2024 to $126 billion in 2025; pool interactions more than doubled to 25.2 million trades; Curve’s share of Ethereum DEX fees rose from 1.6% at the start of 2025 to 44% in December, a 27.5x increase.

But there’s a counter-argument: Curve occupies a unique position as the backbone of stablecoin liquidity on Ethereum, and 2025 was the year of stablecoins. Gauge-led liquidity has genuine, market-driven, organic demand. Stablecoin issuers like Ethena structurally need Curve pools. This creates a bribery market rooted in real economic value.

The three protocols that abandoned ve token economics lack these features. Pendle’s value proposition is yield trading, not liquidity coordination; PancakeSwap is a multi-chain DEX; Balancer is programmable pools. None of them have a structural reason for external protocols to compete for their gauge emissions.

Conclusion

ve token economics is not universally dead. Curve’s veCRV and Aerodrome’s ve(3,3) are functioning well. But the model only works when gauge-led emissions can generate real economic demand for liquidity. On the other hand, other protocols are choosing income-backed buybacks, deflationary supply mechanisms, or governance tokens as alternatives to ve token economics.

Perhaps it’s time for DeFi to develop a new incentive mechanism that benefits both protocols and token holders’ long-term interests.