Reward Gauge

Gauges often use vote-escrowed (ve) tokens to weight rewards, where longer lock-up periods grant greater voting power and a higher share of emissions. This aligns long-term incentives between liquidity providers and protocol governance.

• Example: Curve Finance's veCRV model, where locking CRV for 4 years provides maximum gauge voting power.
• Creates a time-based commitment that reduces sell pressure and stabilizes the protocol's native token.

The gauge calculates and distributes inflationary emissions (e.g., governance tokens) to liquidity pools in real-time based on pre-set weights and votes. This allows for programmable liquidity mining where rewards can be directed to strategic pools.

• Emission schedules are often controlled by DAO votes on gauge weights.
• Enables protocols to incentivize deep liquidity for specific asset pairs or new listings.

A user's reward share is not based on a snapshot but on their time-weighted contribution. The gauge continuously integrates a user's liquidity balance over time, often measured in ve-token-seconds or a similar metric.

• Prevents snapshot manipulation and reward farming by requiring sustained participation.
• The final claimable reward is proportional to the area under the curve of the user's balance over the epoch.

A separate Gauge Controller contract manages the list of active gauges and their relative weights, which are typically set by governance votes using ve-tokens. This creates a market for liquidity where communities vote to direct emissions.

• Weight votes are usually cast weekly or per-epoch.
• The controller ensures the sum of all gauge weights equals a fixed total (e.g., 10,000 points).

Gauges implement reward distribution in two primary ways:

• Claimable Rewards: Tokens accrue in the gauge contract and users must execute a transaction to claim them.
• Rebasing (Staked) Rewards: Rewards are automatically compounded by minting and staking liquid wrapper tokens (e.g., Convex's cvxCRV). This improves capital efficiency but adds smart contract risk layers.

Gauges incorporate features to prevent exploitation:

• Checkpointing: Balances and accrued rewards are recorded at discrete intervals to limit gas costs and prevent in-block manipulation.
• Kick Mechanisms: In systems like Curve's ve(3,3), inactive users can be 'kicked' to redistribute their unused voting power.
• Minimum Lock Times: Enforce a commitment period to prevent flash loan attacks on gauge weight voting.

Gauges are the primary tool for liquidity mining programs. They measure a user's time-weighted liquidity provision (e.g., via veCRV votes) to a specific pool, determining their share of protocol emissions. This aligns incentives by directing rewards to the most utilized or strategically important pools.

• Example: Curve Finance uses gauges voted on by veCRV holders to distribute CRV tokens to selected liquidity pools.

In the veToken model, users lock governance tokens to receive non-transferable veTokens (e.g., veCRV, vlAURA). These veTokens grant voting power to direct emissions via gauges. This creates a flywheel: locked tokens reduce sell pressure, while gauge votes attract liquidity to earn the emitted rewards.

• Core Mechanism: 1 veToken = 1 vote per gauge. More votes for a pool = higher emissions to its liquidity providers.

Gauge voting power creates a marketplace for bribes. Projects or protocols seeking liquidity can offer bribes (e.g., extra tokens) to veToken holders in exchange for their gauge votes. This allows protocols to bootstrap liquidity without permanently allocating their own token emissions.

• Platform Example: Votium and Hidden Hand are platforms that facilitate bribe aggregation for gauge voters on Curve and other protocols.

Advanced gauge systems can distribute multiple reward tokens simultaneously. Users depositing LP tokens into a gauge earn base trading fees plus additional reward tokens from the gauge. Yield booster contracts (like Aura Finance) can further amplify rewards by aggregating user votes and claiming rewards on their behalf.

• Flow: User deposits LP token -> Gauge measures stake -> Earns protocol token + possible external reward tokens.

Gauge-like mechanisms are used by cross-chain liquidity bridges and staking platforms to incentivize liquidity in specific asset pairs or on specific chains. They measure user deposits across different networks to distribute rewards proportionally, helping to balance liquidity depth in a multi-chain ecosystem.

• Conceptual Use: A bridge protocol might use gauges to reward LPs for the ETH/USDC pool on Arbitrum more heavily to address a liquidity shortfall.

Two critical parameters govern gauge mechanics:

• Gauge Weight: The relative share of total emissions allocated to a specific pool, determined by vote.
• Weight Decay: A reduction in a pool's gauge weight over time unless votes are renewed, ensuring active governance and preventing stale allocations.

These mechanisms ensure emission distribution remains dynamic and responsive to current market conditions and community sentiment.

The entity controlling the gauge's parameters (e.g., a DAO or core team) has immense power. This can lead to:

• Vote-buying: Token holders may be bribed to direct emissions.
• Centralized control: A small group could manipulate rewards to benefit specific protocols or pools.
• Governance fatigue: Voter apathy can lead to low participation, increasing the risk of capture. Security depends on a robust, decentralized governance process to mitigate these risks.

Gauges are targets for economic manipulation to maximize individual rewards at the network's expense.

• Sybil attacks: Users create many addresses to split liquidity and exploit per-address reward caps.
• Mercury (liquidity mercenary) attacks: Capital rapidly moves to the highest-yielding gauge, creating volatility and destabilizing underlying pools.
• Incentive misalignment: Poorly calibrated weights can drain the reward treasury without achieving desired protocol growth.

The gauge's security is only as strong as its code and dependencies.

• Smart contract bugs: Vulnerabilities can lead to the theft of staked tokens or the minting of unauthorized rewards.
• Oracle manipulation: If gauge weights or rewards depend on external data (e.g., TVL oracles), corrupting this data can distort the entire incentive system.
• Upgrade risks: Governance-controlled upgradeability introduces the risk of malicious or buggy implementations being deployed.

Many gauges use a vote-escrow model (e.g., veTokenomics), where governance power is proportional to locked tokens. This creates specific considerations:

• Liquidity lock-up: It reduces circulating supply but can create sell pressure upon unlock events.
• Power law distribution: Large token holders (whales) gain disproportionate control over gauge weights.
• Bribery markets: Platforms like Votium or Hidden Hand formalize vote-buying, which can be a legitimate market or a vector for manipulation.

Best practices for mitigating gauge-related risks often involve operational security controls.

• Multi-signature wallets: Require multiple signatures (e.g., 5-of-9) to execute critical functions like changing reward tokens or weights.
• Timelocks: Enforce a mandatory delay (e.g., 48-72 hours) between a governance vote passing and its execution. This allows users to react to malicious proposals.
• Emergency pause functions: Ability to halt gauge operations in case a critical vulnerability is discovered.

Given their financial impact, gauges require high transparency and rigorous verification.

• Public audits: Code should be audited by reputable firms (e.g., OpenZeppelin, Trail of Bits) before deployment.
• Parameter visibility: All gauge weights, reward rates, and governance votes should be fully on-chain and publicly queryable.
• Continuous monitoring: Use of blockchain analytics and dashboards (e.g., Dune Analytics, DeFi Llama) to track gauge activity and detect anomalies in real-time.