What is veToken (vote-escrowed token)?

A token you receive by locking a governance token for a fixed term, granting voting power and a share of rewards that scale with how long you locked.

The model was introduced by Curve Finance in 2020 and copied widely enough that "ve" became a naming convention across decentralized finance. The problem it was built to solve is that ordinary governance tokens give equal voice to someone holding for four years and someone who bought an hour before the vote.

The thing to understand before locking is that the position is genuinely illiquid. This is not staking you can exit with a few days' notice. It is a commitment measured in years, and it cannot be undone.

How it works

You deposit the governance token and choose a lock duration up to the protocol's maximum, commonly four years in the original Curve design. In return you receive a balance of vote-escrowed tokens proportional to both the amount and the remaining time. Lock the maximum and you receive the full amount in voting power; lock for one year out of four and you receive roughly a quarter.

That balance decays linearly as the lock runs down. Voting power at three years remaining is greater than at one, on the identical deposit, so holders who want sustained influence must keep extending. The escrowed balance is usually non-transferable, which is what stops a market forming in voting power directly.

Holders receive some combination of protocol fees, a share of emissions, and boosted rewards on their own deposits. The distinctive feature is gauge weighting: vote-escrowed holders vote on how newly emitted tokens are distributed across pools, which makes their votes directly worth money to whoever wants emissions directed at their pool.

That creates the vote market. Third parties pay lock holders to vote a particular way, a practice known as bribing or incentivizing, and dedicated marketplaces exist for it. Some of the yield a lock earns comes from there rather than from protocol revenue.

Example

Illustrative. You lock 10,000 governance tokens for the four-year maximum and receive 10,000 units of voting power. A holder locking the same 10,000 for one year receives about 2,500.

A year passes. Your balance has decayed to roughly 7,500 and the one-year holder's has reached zero and unlocked. If the token has fallen 60 percent over that year, you are holding a position you cannot sell for three more years, and the fee income you collected has to be weighed against a loss you could not act on. That asymmetry is the actual trade being made.

Why it matters when you buy

Vote-escrowed positions sit well past a first purchase, and the reason to know the term is that advertised yields on these systems are compensation for locking rather than free return. If you are looking at yield on an asset you hold, the yield pages show what exchanges offer for the same assets without a multi-year commitment.

Related terms

• governance token: what gets locked
• lockup vesting: a different kind of locked supply
• fee switch: the revenue lockers often receive
• yield farming: what gauge votes direct emissions toward
• liquidity pool: where those emissions land
• unbonding period: staking's much shorter equivalent

Questions

Can I sell a vote-escrowed position?

Usually not, because the escrowed balance is non-transferable by design. Some protocols wrap positions into tradable tokens, which reintroduces liquidity at the cost of a wrapper's own risks.

Why would anyone pay for my vote?

Because gauge votes decide where token emissions go, and a project wanting emissions directed at its pool can find it cheaper to pay lockers than to fund rewards itself.

Is locking the same as staking?

No. Staking secures a network and can normally be exited after an unbonding period measured in days. A vote-escrowed lock is a governance commitment measured in years with no exit.