What is Metagovernance?

Metagovernance allows protocols to use their governance power to influence decisions across multiple other protocols, creating interconnected ecosystems and strategic opportunities. Sphere Finance leverages metagovernance through platforms like Dyson, enabling users to amplify their impact and rewards by consolidating voting power across DeFi projects.

In DeFi, governance is a crucial mechanism that allows community members to shape the future of protocols through a voting process. With the rise of metagovernance — governance that influences multiple protocols simultaneously — DeFi is evolving into a more interconnected and strategic ecosystem.

The cornerstone of this advancement are veNFTs, which enable users to lock their governance tokens in exchange for voting power, aligning user incentives across multiple platforms.

What is Governance in DeFi?

Governance allows token holders to vote on proposals that shape the protocol’s direction, including key decisions like protocol upgrades, fee structures, and incentive distributions. By giving users a say, governance creates a community-based system within DeFi projects, ensuring they have a role in decision-making processes.

Governance tokens are usually locked for a certain period, allowing holders to receive veTokens, which determine their voting power based on the length of the lock-up.

The veGovernance model was first popularized by Curve Finance and has since become a standard in DeFi. In this model, users lock up tokens to gain voting power, and the longer they lock their tokens, the more influence they have. This incentivizes long-term engagement and creates a stronger, more aligned community.

Extending Influence Across Protocols

Metagovernance takes traditional governance a step further by enabling a protocol to use its influence to vote on other protocols’ decisions.

This is where Sphere Finance has established itself as a central player, positioning itself as a hub of metagovernance through Dyson, the Sphere ecosystem’s yield maximizer and ALM protocol.

Dyson allows Sphere users to leverage their governance power across a wide range of DeFi projects, giving Sphere a significant role in shaping liquidity and incentive flows across protocols.

Metagovernance is particularly beneficial for protocols seeking to increase their influence in the DeFi space, as it enables them to strategically allocate their votes to maximize rewards, improve liquidity, and attract additional participants.

How veNFTs Facilitate Governance

veNFTs (vote-escrowed NFTs) play a pivotal role in both governance and metagovernance by representing a user’s locked voting power as a tradable NFT. When users lock their governance tokens, they receive a veNFT that holds their voting rights for the locked duration. These veNFTs are essential in aligning user incentives because they are used to vote on liquidity pool gauges, determine token emissions, and incentivize liquidity providers.

For instance, Dyson utilizes veNFTs to give Sphere users access to governance across multiple DeFi protocols. This enables users not only to influence Dyson’s internal liquidity decisions but also to drive votes on other protocols, reinforcing Sphere’s strategic objectives across the ecosystem.

The Sphere Advantage

Through Dyson, Sphere provides users with the ability to participate in a metagovernance model where users can lock their $SPHERE tokens, the governance token of the Sphere ecosystem, in a single-sided vault, the $SPHERE locker, to receive $ylSPHERE in exchange.

$ylSPHERE, or yield-locked SPHERE, maximizes governance power by giving users governance over and yield from an expanding suite of DeFi protocols through a single token. As Dyson and Sphere both develop their offerings further with Sphere V3 and $veSPHERE, Sphere can leverage its metagovernance capabilities even more, consolidating its role as a central player in the DeFi space.

veNFTs as the Future of DeFi Governance

In a DeFi ecosystem accelerating towards light speed, veNFTs have emerged as a powerful tool that aligns user interests with both governance and metagovernance goals. Through protocols like Sphere and Dyson, users can maximize their governance impact, benefiting from a streamlined, yield-focused approach that supports sustainable growth. For those looking to help shape DeFi projects and step into the future of the space today, veNFTs provide the means to participate meaningfully and gain rewards.

To stay updated on Dyson and Sphere’s latest developments and maximize the benefits of Sphere’s governance capabilities, join the Sphere community on Discord and become part of the conversation.

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Related reading: Understanding ve(3,3)