After years in traditional finance and several more watching DeFi’s cycles of hype and reset, I’ve come to believe that the industry’s greatest innovation—permissionless liquidity—has been constrained by a familiar flaw: misaligned incentives. The new wave of ve(3,3) decentralized exchanges (DEXs) aims to address that challenge—not through another technical leap, but by redesigning the underlying economic relationships between users, protocols, and liquidity. ve(3,3) The challenge isn’t technical anymore. Automated market makers (AMMs) work. Smart contracts are battle-tested. What’s been harder is sustainable alignment between protocols, liquidity providers (LPs), traders, and the broader ecosystem. Too often, DeFi optimizes for short-term TVL spikes at the expense of the question that matters most: how do we build systems where everyone wins over the long haul? Where Uniswap’s Model Reached Its Limit Where Uniswap’s Model Reached Its Limit Uniswap’s AMM architecture unlocked billions in daily volume and proved permissionless markets could function at scale. at scale But its economic structure left an open question: how do participants capture value in a durable way? UNI, the protocol's native token, primarily serves as a governance mechanism rather than a claim on protocol revenue. LPs earn trading fees, while UNI holders do not capture those fees directly. New projects often bootstrap liquidity through their own incentives, competing for attention across a fragmented landscape. The result is that protocol thrives, but participant incentives are not always tightly coupled to its success. This isn't a criticism so much as an evolution. Uniswap proved the concept. The next iteration is about refining the incentive model. The ve(3,3) Difference: Alignment Through Tokenomics The ve(3,3) Difference: Alignment Through Tokenomics The ve(3,3) framework, originally popularized by Andre Cronje during the launch of Solidly in 2022, reconfigures how value, governance, and liquidity interact. In many implementations: ve(3,3) popularized by LPs earn the protocol’s native token in addition to trading fees—tokens that have utility beyond passive governance. LPs earn the protocol’s native token in addition to trading fees—tokens that have utility beyond passive governance. LPs earn the protocol’s native token Locking converts tokens into a vested form (veTokens) that grant voting power over where future emissions go, steering incentives toward productive pools. Locking converts tokens into a vested form (veTokens) that grant voting power over where future emissions go, steering incentives toward productive pools. Locking converts tokens into a vested form (veTokens) Vested holders receive a share of protocol revenue, linking long-term commitment to ongoing performance. Vested holders receive a share of protocol revenue, linking long-term commitment to ongoing performance. Vested holders receive a share of protocol revenue Rewards are streamed over fixed epochs (often weekly), smoothing volatility and encouraging “stickier” liquidity. Rewards are streamed over fixed epochs (often weekly), smoothing volatility and encouraging “stickier” liquidity. Rewards are streamed over fixed epochs This creates a flywheel: engaged voters direct emissions to where liquidity is needed; deeper liquidity improves pricing and volume; volume drives revenue; and revenue flows to those who lock and govern. Evidence from the Base network—where Aerodrome’s ve(3,3) DEX model captured more than 50% of Base’s total DEX volume within weeks of launch—suggests that aligned incentives can materially improve liquidity concentration and network efficiency. more than 50% Building on Sui: Speed Meets Sustainability Building on Sui: Speed Meets Sustainability These mechanics are particularly effective on high-throughput, low-latency chains such as Sui, whose parallel execution engine allows sub-second finality and scalable transaction capacity. parallel execution engine By combining performance with incentive alignment, ve(3,3)-style DEXs can serve as liquidity infrastructure for new ecosystems. Instead of every project competing for liquidity in isolation, voters can direct incentives toward emerging pools, helping bootstrap markets efficiently. Projects gain liquidity; traders benefit from tighter spreads; and long term participants earn from coordinating capital toward areas of highest network demand. It’s a cooperative alternative to the zero-sum dynamics of traditional liquidity mining. Team Alignment: Eating Your Own Cooking Team Alignment: Eating Your Own Cooking Alignment must extend beyond token holders. Many teams adopting the ve(3,3) framework now structure their allocations in the vested format, ensuring contributors benefit only as protocol usage grows over time. This discourages short-term speculation, prevents premature token dumping, and rewards builders who maintain and evolve the protocol over multiple years. The structure turns sustainability from a goal into a design constraint. The Public Good Thesis The Public Good Thesis A well-implemented ve(3,3) exchange can function like a public good. Each successful launch with deep liquidity strengthens the overall ecosystem. As activity increases, revenue flows back to the voters and LPs who make coordination possible. The incentives become symbiotic rather than extractive: Traders gain better execution.LPs enjoy steadier yields.Builders access deeper liquidity with less overhead.Voters earn yield for directing capital efficiently. Traders gain better execution. Traders gain better execution. LPs enjoy steadier yields. LPs enjoy steadier yields. Builders access deeper liquidity with less overhead. Builders access deeper liquidity with less overhead. Voters earn yield for directing capital efficiently. Voters earn yield for directing capital efficiently. It’s positive-sum economics encoded in tokenomics. Early Days, Real Potential Early Days, Real Potential I won't pretend ve(3,3) solves every problem in DeFi. The model isn’t a silver bullet. It adds complexity—lock durations, vote weights, emission schedules—that users and interfaces must simplify over time. Gas optimization and UX clarity are ongoing challenges. But complexity in service of alignment can be worthwhile. If DeFi’s first chapter proved decentralized markets could exist, the second must prove they can endure. The ve(3,3) framework is not the end of DeFi innovation—it’s one of the most promising experiments pointing toward sustainable liquidity and incentive design.

This story contains new, firsthand information uncovered by the writer.

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Inside the ve(3,3) Engine for DEXs: A New Model for Sustainable Liquidity

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