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February 20, 2022

Convex Finance (CVX): What to Know

Convex Finance (CVX) is a novel DeFi protocol built on the Curve Finance stablecoin exchange. Convex’s core concept is to reward Curve liquidity providers and CRV stakeholders with additional DeFi yields.

Convex’s aggressive push to secure as much Curve liquidity as possible has pushed the protocol into a DeFi war with Yearn Finance. Both projects require as many CRV tokens as possible in order to continue raising interest rates for Curve LPs.

Curve Finance has grown to become the world’s largest decentralized exchange in terms of total value locked ($8.76 billion). As a result, any DeFi protocol that absorbs that liquidity into its own protocol will be enormous by default, which is why Yearn and Convex are competing.

The CVX Token

Convex Finance’s native token is CVX. CVX can be used to earn a portion of Curve LP’s CRV earnings by staking it on Convex Finance. As cvxCRV, Staked CVX will receive a portion of the fees (tokenized veCRV). This is done to keep CRV in the system as a boost, but users can trade out their cvxCRV via the cvxCRV/CRV liquidity pool.

Convex CRV fees that would otherwise be returned to CVX stakeholders are locked in veCRV, tokenized as cvxCRV, and distributed to CVX stakeholders. CVX is used to vote on how Convex Finance’s veCRV is allocated to Curve.fi gauge weight votes. To participate, users must vote-lock their CVX tokens. More information can be found on the “Voting and Gauge Weights” page.

How it Works

The product’s features are fairly simple, but the overall goal is to provide an easy way for Curve users to earn more rewards with minimal effort.

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When CRV tokens are staked, CRV stakers are rewarded with a share of the platform. The advantages are as follows:

  • Earn a percentage of Convex platform fees in CRV.
  • Earn trading commissions from the Curve platform (3CRV).
  • Receiving liquid cvxCRV enables anyone to exit their staked CRV position.
  • Take advantage of CVX rewards.
  • Claim veCRV airdrops such as EPS (we will do our best to distribute airdrops). Will necessitate collaboration from the other platforms).

While liquidity providers can earn trading fees and claim increased CRV without locking in CRV. Liquidity providers can benefit from increased CRV and liquidity mining rewards with little effort:

  • Earn a high boost and claimable CRV without locking any CRV.
  • Earn CVX points.
  • There are no deposit or withdrawal fees.
  • There are no fees for additional incentive tokens (SNX, etc).

Closing Thoughts

Convex Finance surpassed $1 billion in Total Value Locked (TVL) in just two weeks after its launch and now has $4.87 billion in TVL. Despite the fact that the project is only a few months old, it has already received enthusiastic support from some members of the crypto community. Convex Finance is a promising DeFi project that acts as a yield optimizer for the Curve protocol.