Bribes are incentive rewards given by protocols to increase liquidity for their token. The main objective of bribes is to attract more users to a specific liquidity pool. ^[1]

Overview

The term "bribes" in the context of DeFi was indeed popularized by users of Curve Finance. Bribes are given to governance token holders of the DeFi platform where protocols have their tokens in a liquidity pool. These token holders have the power to vote for their liquidity pool, and more votes mean more emissions earned by the pool, resulting in higher rewards. ^[1]

Governance token holders, such as those holding Curve's CRV tokens, have the power to vote on which liquidity pools receive more emissions. More votes for a pool result in higher emissions and, consequently, higher rewards for those providing liquidity to that pool. Protocols seeking to boost the liquidity of their pools offer bribes to these voters to secure more emissions. By offering these bribes, protocols can effectively ensure that their liquidity pools attract more liquidity, as the increased emissions lead to higher Annual Percentage Rates (APRs), which are attractive to liquidity providers.^[3]

DeFi Bribes Examples

MIM - Abracadabra

During the bull market, one notable user of bribes was $MIM, the native stablecoin of Abracadabra, a money-market protocol created by Daniele Sesta. The primary goal of $MIM was to become the leading cross-chain stablecoin, requiring deep liquidity pairs and extensive usage. To achieve this, Abracadabra heavily incentivized $veCRV holders to vote for liquidity pools (LPs) that utilized $MIM. This strategy had two significant effects:

1. Increased Liquidity: Trades involving $MIM became extremely liquid, which was crucial during periods of high on-chain activity. This high liquidity ensured that traders did not suffer from slippage and helped $MIM maintain its peg.
2. Profitable LP-ing: Providing liquidity for $MIM pairs became highly profitable and virtually risk-free, offering not only trade fees but also substantial rewards from directed emissions.^[2]

veWOM - Wombat Exchange

Wombat Exchange utilizes a Voting Gauge system that allows protocols to list tokens on the platform to enhance their liquidity. These protocols provide incentives to encourage users to vote for their pools. Only $veWOM users can vote, and increased votes for a pool lead to higher WOM emissions, which in turn boosts the pool's APR and overall liquidity. Through the voting gauge mechanism, stablecoin and liquid staking protocols can bribe veWOM holders to vote for their pools or build positions in yield-boosting protocols to influence Wombat’s gauges.^[4]