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The BAO token and veBAO

Active participants who stake their rewards receive more rewards over time
Long-term-oriented BAO holders control where BAO emissions go.
The Bao token is essential to the Bao ecosystem. It is distributed to liquidity providers who stake their liquidity tokens in gauges.
Bao holders will be able to stake and lock their Bao tokens for up to 4 years and receive veBAO in return, in proportion to the lock length.
veBAO tokens do not trade on liquid markets, nor are they transferable. Instead, they function like an account-based point system that denotes the duration of the tokens' lockdown in the protocol.
When you lock 1 BAO token for 4 years you receive 1 veBAO in return
Your veBAO balance will dictate your share of
Governance power: 1 veBAO = 1 vote, and holders of veBAO will be able to vote on where to direct rewards for Bao synths liquidity. This incentivizes holders to stake their tokens so they can direct rewards to pools that benefit them the most.
Boosts: Rewards for liquidity providers will be increased if they stake their BAO tokens, up to a 2.5x boost for staking BAO tokens for a maximum of 4 years. Again, this will provide a clear incentive for holders to lock their tokens in the veBAO system and help boost liquidity, ensuring that active participants who stake their rewards will receive more rewards over time.
Revenue distribution: Finally, veBAO has introduced a new revenue-sharing model that more fairly distributes revenue generated by the network. This means BAO holders who stake their tokens for longer will receive a larger share of any revenue generated, providing yet another incentive to lock BAO tokens. 100% of Revenue will be collected from all products and distributed in baoUSD to veBAO holders.

Gauges

veBAO improves incentive alignment throughout the protocol. One of the tools it uses to achieve this is gauges. Gauges are smart contracts that reward depositors with BAO tokens (and potentially other tokens) in exchange for deposits such as LP tokens (like Curve LP or Sushi LP tokens), vault tokens (like yearn or beefy vaults), lending deposits (like Aave aTokens or Compound cTokens), and NFTs (such as Uniswap v3 NFT positions).
Gauges help to incentivize behaviors that are helpful to the protocol, such as increasing lending, deepening liquidity in specific pairs, and growing collaborative relationships with other projects.
The amount of BAO allocated to each gauge is called the "gauge weight". veBAO holders can distribute their voting power across gauges however they like, which results in a decreasing influence for users or pools that sell most of their rewards and an increasing influence for those that do the opposite.
veBAO gauges align incentives of veBAO holders so that the most long-term oriented BAO holders control where the BAO emissions go.