Productive assets in crypto and how do they work?

There are many different types of tokens in the world of crypto, some of them are completely non-productive like a Dogecoin, some of them have usage like the ability to vote, which Governance tokens give to its holders.

Let’s compare two tokens of very popular decentralized exchanges, Uniswap and SushiSwap tokens.

Uniswap and Sushiswap

Like other governance tokens, the UNI tokens simply representing the right to participate in governance (their holders have the right to vote). Most of the crypto tokens are non-productive assets, even some of the governance tokens like UNI (Uniswap), COMP (Compound), etc. are non-productive, which means they only give you the ability to participate in voting. Possession of these tokens doesn’t give you cash flow right.

In turn, the SushiSwap token represents not only the right to participate in governance but also the right to get on-chain cash flows. Unlike its competitor, Sushiswap allows its users to stake SUSHI tokens and get passive income in return. Usually, decentralized exchanges giving users who staking their native tokens income in the form of protocol fees, and in some cases inflation.

For example, stakers of SUSHI token are getting rewards from protocol fees, 0,05% of the swap fees are distributed as SUSHI to their share of the SushiBar. When SUSHI (“token#1”) is staked into the SushiBar users who staked it will receive xSUSHI (“token#2”) in return for their voting rights (because only holders of SUSHI, not xSUSHI tokens have the right to vote) and a fully composable token that can interact with other protocols. After you unstake you will receive your deposited SUSHI + any additional SUSHI from swap fees.

So as we can see both DeFi tokens represent governance but unlike UNI token SUSHI token is a productive asset because in addition it also represents on-chain cash flow rights.

Let’s take a look at Curve Finance, the decentralized exchange that focuses on assets that are very similar in price, for example, stablecoins or bitcoin and its wrapped version.

Like many others, decentralized exchanges Curve allows its users to be liquidity providers, and earn protocol fees, but in addition, you can also stake your CRV tokens to get veCRV tokens.

Protocol fees are distributed between veCRV tokens holders.

veCRV tokens are representing governance and on-chain cash flow rights.

By locking CRV in protocol and getting veCRV, users not only can participate in voting but also getting the opportunity to use their veCRV tokens to BOOST their rewards in Curve liquidity pools.

You can also choose on what period you want to lock in staking your CRV tokens
In this example, we need to lock 26118 CRV tokens in the protocol for 1 year to get 6529 veCRV tokens and boost our $10000 deposit in 3pool by 2.5x.

By providing liquidity in the pools users are getting their basic APY rewards on protocol transaction fees but they also getting CRV tokens as a reward.

By locking the right amount of your CRV tokens in order to get veCRV, you can boost your annual CRV rewards from liquidity pools up to 2.5x.

As we can see Сurve finance token CRV is actually a productive asset. Besides giving its holders the ability to stake it and get veCRV token which representing governance, it also stands for on-chain cash-flow right. Unlike many other crypto assets, the CRV token has a real value accrual mechanism which is a great addition to the good fundamentals of the project.