Locking governance tokens like CRV or FXS for voting power is a core DeFi primitive, but it comes with a major drawback: illiquidity. Stake DAO Official solves this with its Stake DAO Liquid Staking products, also known as "Liquid Lockers."
Core Concept: The Problem with Vote-Escrow
Protocols like Curve require you to lock CRV for up to four years to get veCRV, which grants you voting power and boosted rewards. Your capital is completely illiquid during this time.
The sdToken Solution
A look at sdTokens Explained shows how Stake DAO abstracts this process:
Deposit: A user deposits a governance token (e.g., CRV) into a Stake DAO locker.
Locking: Stake DAO perpetually locks the deposited CRV for the maximum four-year duration, aggregating it into a massive veCRV position.
Minting: In return, the user receives a liquid token, sdCRV, which represents their claim on the underlying locked CRV.
Reward Distribution: Stake DAO uses its huge veCRV position to claim voting rewards (bribes) and admin fees from Curve, distributing them back to sdCRV holders.
This means you get the benefits of max-locking without the illiquidity. Your sdCRV is a liquid asset you can trade or use in other DeFi protocols, all while earning yield. This is How to use Stake DAO to optimize governance assets.
For a full breakdown of the architecture, please refer to the https://sites.google.com/koinly-tax-reports.org/stakedao/.
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