veToken

A vote-escrowed digital asset in DeFi, representing locked tokens that grant governance rights and enhanced rewards in exchange for reduced liquidity.

What is veToken?

In decentralized finance (DeFi), a veToken (vote-escrowed token) is a non-transferable digital asset created when users lock a protocol’s native token for a fixed period, typically ranging from one month to four years, to gain amplified governance power and a share of protocol revenue or incentives. Introduced by Curve Finance in 2020 with its veCRV model, veTokens incentivize long-term commitment by offering higher voting influence and rewards proportional to the lock duration. For example, locking 1,000 CRV for four years might yield 1,000 veCRV, granting 2.5x voting power and 50% of trading fees, while a one-year lock yields less. As of September 2025, protocols like Curve, Pendle (vePENDLE), and Balancer use veTokens, with Curve’s $1.8 billion TVL reflecting significant adoption.

veTokens are non-tradable and locked in smart contracts, reducing circulating supply and aligning user incentives with protocol stability. Holders vote on parameters like pool rewards or fee distribution, impacting yields (e.g., Curve’s 2-10% APY on stablecoin pools). Pendle’s vePENDLE, for instance, distributes 3% of yield trading fees to lockers, with 168.6 million PENDLE locked as of September 2025. Risks include opportunity cost from illiquidity, governance attacks (e.g., 51% vote concentration), and smart contract vulnerabilities, mitigated by audits and decentralized governance models like Convex Finance’s veCRV delegation, which controls 40% of Curve’s voting power.