Time-Boost

This model applies a direct multiplier to staking rewards based on commitment length. Unlike veTokens, the staked asset itself is not transformed.

• Aave's stkAAVE: Users stake AAVE and choose a cooldown period and unstaking window. Longer cooldowns can correlate with governance power.
• Synthetix v3: Stakers commit SNX for a set escrow duration to earn fees, with penalties for early exit. The boost is a function of the chosen duration.

Time-Boost is applied directly to liquidity provision (LP) positions. Users lock their LP tokens in a gauge to earn amplified emissions.

• Balancer: Uses the veBAL model, where locking BAL boosts rewards for associated LP positions.
• Solidly-style DEXs: veNFT holders direct emissions to specific liquidity pools. Their share of rewards is boosted based on their lock duration and size. This ties the boost directly to capital efficiency and long-term alignment.

Protocols like Olympus historically used a rebasing mechanism where staked tokens (sOHM) automatically increase in quantity over time, representing the reward accrual. While not a pure time-lock, it incentivizes long-term holding. Modern implementations often combine this with explicit lock-ups, where the reward rate or multiplier decays as the unlock date approaches, creating a continuous incentive to re-lock.

Implementations differ in how they handle the lock commitment.

• Fixed & Immutable: Curve's veCRV model; the lock duration and amount cannot be changed, requiring a new lock post-expiry.
• Extendable / Addable: Some protocols allow users to increase the lock amount or extend the duration of an existing lock, often resetting the time-based multiplier.
• Early Exit with Penalty: Models may allow unlocking early subject to a slashing penalty (e.g., loss of a percentage of principal or all accrued rewards).

Time-Boost mechanisms serve specific protocol economics:

• Reduce sell pressure by immobilizing governance and reward tokens.
• Align incentives between long-term holders and protocol health.
• Create predictable tokenomics for emission schedules. Common critiques include:
• Liquidity fragmentation between locked and free-floating supplies.
• Voter apathy if veToken holders delegate voting.
• Whale dominance in governance due to size-and-time-weighted power.

Time-Boost's primary advantage is the elimination of the opportunity cost trade-off between staking and borrowing. Users can deposit an asset like ETH to earn staking yield while using the same asset as collateral to borrow stablecoins, effectively leveraging their yield-bearing position. This creates a single, productive position from what were traditionally two separate, competing uses of capital.

Unlike undercollateralized lending, Time-Boost maintains a high collateralization ratio, requiring users to deposit more value than they borrow. This built-in buffer:

• Protects the protocol and other users from liquidation cascades.
• Provides stability during high volatility by ensuring loans are backed by sufficient assets.
• Reduces systemic risk compared to models with lower collateral requirements.

Time-Boost positions are designed as composable financial primitives. The yield-bearing collateral token (e.g., a liquid staking token) and the debt position can interact with other DeFi protocols. This allows for advanced strategies like:

• Using borrowed stablecoins in yield farms or liquidity pools.
• Recursive strategies to increase exposure.
• Integration with automated vaults and yield aggregators for optimized returns.

The mechanism enables a dual-yield stream: the native yield from the staked collateral (e.g., consensus rewards) plus the yield generated from deploying the borrowed capital into other productive activities. This can significantly increase a user's Annual Percentage Yield (APY) compared to simply holding or staking the base asset, as the yield is earned on the total collateral value, not just the net equity.

Time-Boost provides liquidity for assets that are typically illiquid or have long unbonding periods. For example, a user staking in a Proof-of-Stake (PoS) chain with a 21-day unbonding period can use Time-Boost to access the value of their staked assets immediately without exiting the staking position, solving a major pain point in PoS ecosystems.

All risk parameters—Loan-to-Value (LTV) ratios, liquidation thresholds, interest rates, and eligible collateral—are set on-chain and are transparent. This allows for:

• Clear calculation of health factors for positions.
• Predictable liquidation mechanics.
• The ability for other smart contracts to programmatically assess and interact with Time-Boost positions based on these verifiable rules.

The primary trade-off is between immediate reward acceleration and the opportunity cost of locked capital. Users must weigh the boost multiplier against what that capital could earn elsewhere (e.g., in DeFi yield protocols). This creates a complex optimization problem where the optimal boost level depends on volatile variables like base APR, boost cap, and external market yields.

Systems that base boosts on simple token holdings are vulnerable to Sybil attacks, where a user creates many addresses to game the distribution. Common mitigations include:

• VeToken models: Locking tokens for non-transferable voting power.
• Time-weighted averages: Measuring consistent, long-term commitment rather than snapshot balances.
• Quadratic mechanisms: Diminishing returns on large holdings to favor broader distribution.

Accelerating emissions via Time-Boost directly increases the protocol's inflation rate. If not carefully managed, this can lead to sell pressure that outpaces organic demand, diluting token value. Sustainable models often pair boosts with strong value accrual mechanisms (e.g., fee revenue, buybacks) or implement decaying emission schedules to balance short-term incentives with long-term health.

On-chain boost calculations add computational overhead and gas costs for every transaction involving reward claims or balance updates. This is especially impactful on Ethereum L1. Optimizations include:

• Off-chain computation with on-chain verification (e.g., Merkle proofs).
• Epoch-based systems that calculate boosts at set intervals, not per transaction.
• Layer-2 deployment to leverage lower base fees.

For non-technical users, boost mechanics can be opaque. Key UX challenges include:

• Clearly communicating the boost formula and its variables.
• Providing real-time simulations of how actions (staking, locking) affect future rewards.
• Managing the complexity of unstaking periods or lock-up cliffs associated with high boosts, which reduce liquidity and flexibility.

Aggressive marketing of boosted yields can attract regulatory attention, particularly regarding whether the offered returns constitute unregistered securities. Protocols must navigate how they present Time-Boost—framing it as a loyalty reward or governance incentive rather than a guaranteed financial return. The legal status of locked staking arrangements remains an evolving area in multiple jurisdictions.

veTokens are non-transferable, time-locked governance tokens. They are the direct output of a Time-Boost mechanism. Users lock their base tokens (e.g., CRV, BAL) to receive veTokens, which grant:

• Voting power in protocol governance.
• A share of protocol revenue or fees.
• The ability to direct liquidity mining incentives. The voting power decays linearly to zero as the lock period ends.

The lock-up period is the specific duration a user commits their tokens for in a Time-Boost system. Key characteristics:

• Longer lock-ups grant a higher boost multiplier to voting power and rewards.
• It creates protocol-owned liquidity by reducing circulating supply.
• It aligns long-term incentives between users and the protocol's success. Typical maximum lock periods range from 1 to 4 years.

Voting power decay is the linear reduction of a user's governance influence as their lock expiration approaches. This is a core design of the Time-Boost model.

• At lock creation, power is at its maximum.
• It decreases in a straight line to zero at the unlock timestamp.
• This decay encourages users to re-lock tokens to maintain influence, creating a sustainable governance system.

A reward multiplier (or boost) is a factor that increases yield for liquidity providers based on their veToken holdings. It is a critical application of Time-Boosted voting power.

• Users with more veTokens (from longer locks) get a larger share of liquidity mining rewards.
• Protocols like Curve Finance use this to incentivize deep, stable liquidity in preferred pools.
• It directly ties long-term token commitment to enhanced economic returns.

Gauge weights determine the proportion of a protocol's token emissions allocated to specific liquidity pools. In Time-Boost systems, veToken holders vote weekly to set these weights.

• This is the primary governance action for veToken holders.
• Voting power (boosted by lock time) dictates the influence over emissions.
• Directing emissions is a powerful tool for shaping a protocol's liquidity landscape.