ABRA Locking: why it’s essential and how it increases your yield
DeFi platforms offer numerous opportunities to earn, and one of the most effective mechanisms is token locking within the ve(3;3) tokenomics model. Let’s explore what token locking is, why it’s essential, and most importantly, how it helps generate yield.
What is Token Locking?
Token locking is the process of “freezing” your tokens for a specified period within a DeFi platform. In return, you gain specific privileges, such as voting rights on platform-related decisions and access to enhanced rewards. On Cadabra, when locking ABRA tokens you receive veABRA tokens, which guarantee that your tokens will “unfreeze” and become unrestricted at the end of the locking period.
For example, on the Cadabra 2.0 platform, locking ABRA tokens and receiving veABRA allows you to participate in voting that determines the rewards from external yield generated by strategies.
Locking is more than just freezing assets—it’s a tool that lets you influence platform operations while increasing your potential yield.
Why Does the Platform Need Token Locking?
Token locking serves several critical purposes below but not limited by that:
Token Utility The ABRA token becomes a tool for generating yield and managing the protocol, liquidity and streams of yields. Locking drives demand and enhances its functionality within the platform.
Economic Stability When users lock tokens, the overall supply of circulating tokens decreases, helping to mitigate sharp price fluctuations.
Long-Term Engagement Locking motivates users to remain active participants in the platform’s ecosystem and contribute to its growth.
How to Earn with ABRA Locking
Participate in Voting and Receive Rewards from External Protocols
This is the primary way to generate additional yield, and it works as follows:
Users provide liquidity to a strategy and receive ABRA token rewards from weekly emissions.
You vote for a strategy or a source of yield.
Strategies collect rewards from external protocols forwarding them liquidity in Cadabra strategies.
At the end of each weekly cycle, or epoch, these rewards are distributed among the voters.
Distribution is based on the proportion of your votes relative to the total votes cast for the selected strategy.
After the cycle ends, your veABRA becomes available for voting again.
For example: A strategy manages $100,000 and generates $1,000 in weekly rewards (external APR ~50%). If the total number of votes equals $50,000 (USD spent to buy ABRA tokens for locking and getting voting right), then:
the yield per locked veABRA effectively doubles (APR ~100%) because the $1,000 is distributed over a smaller base of $50,000.
Rebase Yield
As soon as you lock ABRA (and get veABRA), you start receiving rebase yield. This yield does not depend on voting and provides passive earnings based on ABRA token emission parameters and the total amount of existing veABRA. Rebase yield makes locking a safer and potentially profitable mechanism, compensating the potential inflation of the ABRA token.
Boost the Yield of Your Strategies
If you have deposits (liquidity) in Cadabra strategies, you can influence the yield (APR) of that strategy in ABRA tokens. A significant portion of the weekly emissions is allocated to liquidity provider as rewards. The portion allocated to each strategy depends on the voting results—the more votes a strategy receives, the more ABRA tokens it is awarded.
Here’s how it works:
You earn ABRA tokens from your strategy deposits.
You may lock those ABRA tokens to receive veABRA.
You may use veABRA to vote for your strategy, increasing its yield.
This way, you not only boost the APR of your strategy but also earn additional rewards from external protocols for voting.
Airdrop
Locking allows you to earn airdrop points, which can be exchanged for ABRA tokens at the end of the airdrop campaign. Details are available in the Gitbook, but briefly, the number of points depends on the locking duration, with up to 100x points available per ABRA token locked.
Referral Rewards
If you choose to build a team and earn additional referral rewards, then locking can enhance your earnings:
Your rank, which determines the percentage of referral bonuses, partially depends on the number of locked ABRA tokens.
The volume of ABRA tokens locked by your team directly affects the total amount of referral rewards you receive.
More details are available in the Gitbook, along with a dedicated article.
Conclusion
Token locking is not just a contribution to platform development but a real opportunity to generate additional rewards. It’s a simple yet powerful tool for earning yield on the Cadabra platform.
At the launch of Cadabra 2.0, the yield from locking will be particularly high due to the combination of increased ABRA token emissions for the first month and external protocol rewards. Now it may be a good time to start leveraging this tool.
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