As some have expressed concern over mercenary liquidity and all the benefits of the program going back to mainnet, it may be useful to look at a previous instance of Curve being the beneficiary of such an incentive program.
From early October 2021 to January 2022, Curve was one of the protocols selected to receive a grant in WAVAX as part of Avalanche’s Rush program aimed at developing DeFi on the chain. The WAVAX grant was redistributed by Curve to liquidity providers of the aave (3pool equivalent with lending) and tricrypto pools. The chart below shows the TVL of these two pools over time, with the highlighted area denoting the duration of the Avalanche Rush program:
As you can see, the incentives (doubled with CRV incentives) proved extremely successful and helped drive the TVL from nothing to over 1 billion dollars. There was a TVL dip in both pools once the rewards ended, but this only proved temporary. By February both pools had recovered and the aave pool went to reach a new ATH in TVL and maintained deep liquidity until the recent market downturn.
Not only did the incentivized pools maintain their TVL long after the incentive program had ended, they also did so in a more competitive environment. Another stableswap platform with veTokenomics, Platypus, launched on Avalanche in January and went on to reach over 100m TVL (they too, benefitted from incentives as part of the Avalanche Rush programs). This should assuage the concern raised by the Velo team above, as it shows that competition is not a zero-sum game It helped increase the overall TVL of the Avalanche protocol while both competitors also increased their TVL. A competitive ecosystem on Optimism will bring more users and more value than a single monopolistic player.
Finally, one should note that the growth of Curve’s TVL as a result of the incentive programs also created many positive externalities as other projects built upon Curve. On Avalanche, Abracadabra, Beefy.finance, Blizz, Yeti.finance, Yield Yak are some of the protocols that offered products relying on Curve pools and yield, which themselves brought more users and liquidity to the chain.
tl;dr Liquidity stays on Curve even after incentives are gone; Curve growth strongly contributes to development of the chain’s ecosystem.