So what is Convex Finance? Let’s find out more about this project with Coincu.
What is Convex Finance?
Convex Finance is a one-of-a-kind platform that allows Curve.fi LPs to earn trading fees as a return. These LPs may also claim increased CRV benefits without locking up CRV tokens. Dividing trading costs between users and LPs increases capital efficiency. It also maintains a healthy balance between liquidity providers (LPs) and CRV token holders.
Convex is also noted for its low cost. The platform charges no costs for withdrawals and keeps performance fees to a bare minimum. CVX stakeholders often get performance fees, sometimes known as gas fees. Surprisingly, on Convex, both LPs and CRV stakeholders earn CVX as a mining return. CVX is also the Convex Finance ecosystem’s native coin. The tokens also act as governance tokens, with holders responsible for allocating veCRV tokens.
Convex Finance was founded in Curve Wars with the ability to increase earnings for Curve Finance and Frax Finance token holders, CRV and FXS, respectively. Moreover, Convex maximizes earnings for LPs on Curve and Frax. Convex has been quite successful despite having a significantly different operating paradigm than other platforms at the same time.
How does it work?
Convex Finance and Curve Finance
Convex has an interaction with two items on Curve Finance, including CRV holders and liquidity providers. And now we’ll look at how Convex works with each of the items listed above.
CRV holders
Convex enables consumers to lock CRV on their platform for a bigger payout than Curve Finance offers. And the following is Convex’s method of action for CRV holders:
Curve Finance liquidity providers
Convex interacts with liquidity providers on Curve Finance in addition to CRV holders. And the operating method on Curve Finance between Convex Finance and liquidity sources is as follows:
- Step 1: LPs will get LP Tokens reflecting their liquidity on Curve Finance after supplying liquidity on Curve Finance. After that, the user transfers and bets the LP Token on the Convex Finance platform.
- Step 2: Convex Finance will provide a reward as part of the money generated by the Curve Finance protocol, as well as certain incentive tokens such as LDO, SNX, and so on. Moreover, the token is the incentive that LPs get. CVX. Particularly appealing are the $0 deposit and withdrawal fees.
- Step 3: At any moment, users may unlock their LP Token.
Frax Finance and Convex Finance
Convex, like Frax Finance, features two products for FXS holders and also provides liquidity on Frax Finance.
FXS holders
When users lock FXS on the Convex platform, a number of events occur, including:
- Step 1: The user deposits FXS into the Convex platform, and Convex locks permanently on the Frax Finance platform to receive veFXS.
- Step 2: The customer will get a 1 – 1 ratio cvxFXS with the FXS put into the platform.
- Step 3: The user is rewarded with the platform’s CVX; moreover, if the user’s cvxFXS is introduced to create liquidity on Curve for the cvsFXS – FXS pair, they will be rewarded when they directly stake FXS on Frax Finance as FXS.
- Step 4: Users may exit their cvsFXS position by trading the cvsFXS – FXS pair on Curve Finance.
Frax Finance liquidity providers
This method is analogous to how Convex interacts with LPs on Curve Finance. This mechanism works as follows:
- Step 1: You must take this quantity of LP Token if you are staking your LP Token on Frax Finance.
- Step 2: Make a deposit of your LP Token with Convex Finance.
Highlights
Convex enables Curve.fi LPs to earn transaction fees and claim higher CRV without locking up the CRV. With little effort, LPs may increase their CRV and liquidity mining returns.
Convex enables users to gain transaction fees as well as a portion of the CRV increase obtained by LPs if they desire to stake CRV. This results in a better balance between LPs and CRV stakeholders, as well as improved capital efficiency.
Liquidity Providers (LPs)
The Convex ecosystem is supported by LPs and stakers. On Convex, LPs will receive trading fees as well as increased CRV. As previously indicated, LPs are not required to lock up any CRV tokens in order to get these benefits. On Convex, LPs will:
- Staking for higher rewards is automatically triggered when Curve LP tokens are deposited into Convex Finance.
- Get CRV as well as other tokens as prizes (SNX, PNT, BOR, LDO,…).
- Prizes are obtained from the Curve gauge on a regular basis and transferred to the Synthetix-inspired Reward contract, with rewards given after seven days.
- Add and remove liquidity quickly and conveniently, with no extra deposit or withdrawal fees.
- Get a CVX – Convex token based on the CRV received by the user.
CRV Stakers
- Submitting CRV to Convex will result in it being locked indefinitely and returned to cvxCRV.
- cvxCRV should be deposited into the Reward contract (can be withdrawn at any time).
- Take advantage of the CRV incentive.
- Get the same transaction fees as if you owned a veCRV.
- Although permanently closed, users may trade at Pool cvxCRV/CRV if they desire to return to CRV.
- Get a CVX – Convex token based on the CRV received by the user.
CVX Stakers
Stake CVX to get platform transaction fees in the form of cvxCRV. Despite the fact that it was just recently introduced, Convex’s TVL has developed significantly. Convex’s TVL is now $3.27B, ranking 7th on DefiLlama, indicating that Curve’s user base is quite huge and they require a location to enhance revenues.
Moreover, 16% of the farm reward from CRV will be removed and distributed in the form of CRV as follows:
- 10% off on cvxCRV.
- CVX Stakers get a 5% discount.
- 1% gas cost reimbursement for collecting and delivering prizes under Reward contracts.
Liquidity Pools on Convex
Convex Finance’s pools will be determined by a user’s unique objectives, risk tolerance, and other choices. Nonetheless, certain pools have regularly supplied consumers with large reward chances without incurring small impermanent losses. These are a few of Convex’s most popular and successful pools:
- Tricrypto pool (USDT+BTC+ETH): This pool enables users to stake three highly liquid assets: USDT, BTC, and ETH, and earn trading fees, CRV, and CVX in exchange for trading fees, CRV, and CVX. This pool gives players equal exposure to USDT, Bitcoin, and ETH while paying a 13.5% APR.
- stETH pool (ETH/STETH): Users may stake stETH, a wrapped version of ETH that can be used to generate yield on the Lido staking platform. At 5.4% APR, the stETH pool has delivered the greatest dividends for ETH investors.
- 4pool (DAI/USDC/USDT/SUSD): This pool enables users to stake DAI, USDC, USDT, and SUSD, four extremely liquid stablecoins. This pool has delivered its participants with a 3.8% APR return with no impermanent loss.
It’s important to note that the returns of these pools might fluctuate over time, and consumers should always do their own research and assess the risks before investing in any pool. While selecting a pool, consumers should also consider liquidity, token price stability, and the project’s overall long-term viability.
CVX token
Key Metrics
- Ticker: CVX.
- Blockchain: Ethereum.
- Contract: 0x4e3fbd56cd56c3e72c1403e103b45db9da5b9d2b.
- Token Standard: ERC-20.
- Token Type: Utility, Governance.
- Total Supply: 100,000,000 CVX.
- Circulating Supply: 78,493,982 CVX.
Token Allocation
- Curve LP rewards: 50%.
- Liquidity mining: 25%.
- Treasury: 9.7%.
- veCRV holders: 1%.
- veCRV voters: 1%.
- Investors: 3.3%.
- Convex Team: 10%.
Release Schedule
- 25% for Liquidity Mining will be distributed gradually over 4 years
- 9.7% for Treasury distributed in the first 1 year
- 1% for veCRV Voters and veCRV Holders are distributed at the time of TGE
- 3.3% for Investors distributed gradually over 1 year
- 10% for Convex Team is distributed gradually over 1 year.
Use Cases
CVX may be staked on Convex Finance in exchange for CRV and FXS from Curve and Frax LP. CVX may also be locked for extra Curve and Frax LP awards.
Team
Convex Finance’s team is not publicly known, and the project is regarded to be an anonymous team. The team’s anonymity is widespread in the DeFi field, and it is thought to be done to avoid regulatory scrutiny and possible legal difficulties. Having said that, it is usually assumed that the development community behind Curve Finance is the entity responsible for implementing and maintaining the protocol.
Conclusion
Convex is a platform that was formed when Curve Wars burst, and it is still growing today because to the vigor of Curve Finance. After then, the project continues to expand on Frax Finance. Finally, Convex Finance is a well-known DeFi protocol that focuses on maximizing yield production for Curve.fi liquidity providers and CRV stakeholders, with over $4 billion in total value locked. The platform allows users to optimize their profits with minimum effort and great capital efficiency by offering tokenized deposits, increased CRV incentives, and its native CVX token.
DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
