We asked 100 apes and degens “What is a gauge?” and here were some of the top answers.
“Bribery”, ”An earring”, ”A hippo yawning”, ”Tyre”, ”Shotgun”.
What do you think of when you hear the word gauge?
Lets take a closer look at what a gauge is, how it works on Hermes Protocol and what we can expect in V2.
When it comes to DeFi, the most basic definition of a gauge is an incentive system. This incentive system comes in many different sizes, shapes and forms. The ones we are probably most familiar with are the gauges used on Automated Market Makers (AMM) such as Hermes AMM, Curve AMM and Balancer AMM.
Gauges can be applied on other revenue generating products which we will briefly look at towards the end of the article, but for the purpose of defining what a gauge is and how it works we will look specifically at Hermes V1 AMM.
AMM is the very backbone of Decentralized Exchanges (DEX) as it is the main source of revenue which is generated from the swap fees from the users who trade on the platform. We will refer to them as “Traders.”
