What is a Money Market?
A money market protocol allows users to lend and borrow funds from a liquidity pool. Lenders earn interest from supplying tokens, while borrowers pay an interest to borrow tokens after depositing collateral. Lenders are, in reality, depositing their tokens into a liquidity pool – borrowers are allowed to borrow, from this liquidity pool, an amount that is proportionate to what they have supplied..
As a result, users with large amounts of tokens could take advantage of this by controlling the liquidity pool, earning themselves most of the rewards. Afterwhich, they would proceed to dump these reward tokens, usually creating a domino effect of panic selling. The value of the token would take a hit, and smaller participants in the ecosystem bore the brunt of the price impact.
In the original Curve veTokenomics model, users were given the option to lock their assets in the protocol for a period of up to four years. This secures users’ funds for a longer term. In return, investors would be rewarded with boosted yields and voting rights. These voting rights allowed the community to dictate the allocation of the protocol’s “emissions” which refers to the rewards given out to users.
OracleSummit Alpha for DEGEN