Convex, which was born less than a month ago as a foolproof “peripheral service” specifically around Curve, has performed quite amazingly.
Written by a poplar tree
The Block data shows that as of June 10, the total market capitalization of stablecoins across the network reached $105.5 billion, a nearly 10-fold increase in one year compared to the market volume of $11 billion in the same period in 2020.
At the same time, Curve, the leading project in the stablecoin exchange circuit, has also seen its total lock-up volume rise to $10 billion, especially since May 19. Even though the secondary market has been volatile, Curve’s lock-up volume has been less volatile than other DeFi leader agreements, and it has quickly recovered its lost ground after the market stabilized.
However, Curve is not perfect. For a long time, Curve’s aesthetically retro UI and its “anti-human” pledge operation logic have discouraged many users. Convex Finance, which officially launched on May 17 this year, is dedicated to remedying Curve’s shortcomings in user experience.
What is Convex Finance?
In a nutshell, Convex Finance is a “one-stop platform for CRV pledging and liquidity mining” dedicated to simplifying the process of using Curve.
As another revenue aggregator on the ethereum chain, Convex Finance aims to facilitate the development of the CRV ecosystem by simplifying the process of locking and pledging Curve and CRV through an easy-to-use interface with CVX tokens, and increasing the rewards for CRV holders and liquidity providers.
Those who have been a Curve LP may know that depositing/maintaining veCRV balances to maximize returns is not an easy task. From the design of three tokens in one protocol (the Curve protocol token CRV, the CRV token veCRV locked specifically for voting, and the Curve liquidity pool token 3Crv in three stable coins DAI/USDC/USDT) to the complex revenue calculations (the longer the lock-up time, the greater the voting weight, currently it takes four years of lock-up to get 1:1 access to veCRV), Curve has a significantly higher barrier to entry than most mainstream DeFi products.
Convex Finance allows liquidity providers to participate in Curve through their own portal, i.e. users can pledge CRVs and claim CRV rewards on Convex, and unlike direct Curve where positions need to be locked and weighted differently depending on the length of time, users do not need to lock CRVs to receive The revenue rewards.
The official explanation has not been disclosed in detail, but I understand that it should be equivalent to the “maturity mismatch” design common in traditional banking business – all the CRVs that users invest in Curve through Convex, converge into a total pool of funds, and Convex through a self-defined Convex divides this pool into a combination of long-term locked, short-term locked, and non-locked pools with a self-defined margin of safety, thus achieving a balance between “locked duration” and “reward”.
In this way, although the user’s CRV is not locked and can be withdrawn at any time, the user’s withdrawal period is directly linked to the return, i.e., the earlier the withdrawal, the lower the return, and the later the withdrawal, the higher the return. Theoretically, by subsidizing the returns of early withdrawals against late withdrawals, Convex is expected to achieve a high “leveraged” yield that exceeds Curve’s own return range.
Rapid momentum and growth
Unlike Yearn Finance, which is a “pan-asset management protocol” serving the entire DeFi ecosystem, Convex Finance is essentially a “vertical asset management protocol” dedicated to Curve, but it is performing no worse than Yearn Finance.
Curve Market Cap Data
As of June 10, 2021, the number of veCRVs pledged in Convex Finance (CVX), a one-stop shop for CRV pledging and liquidity mining, has now reached 31 million, far exceeding the 17.9 million veCRVs pledged in Yearn Finance.
The most obvious comparison is that in the less than a month since its launch, Convex’s lock-up volume has soared from zero to $3.47 billion today (June 10 data on the website). Yearn Finance, a “veteran of capital management”, has a lock volume of only $4.42 billion in the same period, so the two are already at the same level, and Convex is catching up fast, which brings obvious pressure to Yearn Finance.
It is interesting to note that on May 17, the day Convex went live, Yearn Finance’s corresponding lock volume fell sharply, similar to Sushiswap’s initial “vampire” attack on Uniswap – after all, Curve already has more than 50% of its daily trading volume on the market. More than 50% of Curve’s daily trading volume is now conducted on Convex Finance.
Mapping of CRV – cvxCRV
cvxCRV is a mapping of CRVs in Convex, made by casting each CRV locked in Convex on a 1:1 basis.
By betting cvxCRV in Convex, users receive the usual rewards from veCRV (from Curve + any airdrop 3crv governance fee allocation), plus a 10% share of Convex LPs boosted CRV earnings, and CVX tokens.
It is important to note that the conversion of CRV to cvxCRV is irreversible, i.e. if the liquidity of cvxCRV is subsequently withdrawn from Convex, it cannot be converted directly back to CRV. However, it is possible to convert cvxCRV to CRV via trading pairs on the secondary market (which means that it may not be possible to exchange the same amount of CRV back at the original 1:1 casting ratio).
Users holding cvxCRV in Convex receive a share of the Curve platform fees (in the form of CRV), CVX and veCRV rewards (3Crv).
Native Token CVX
CVX is Convex’s native token, with a maximum supply of 100 million, used to capture Convex’s platform fee revenue (16% of total platform fees, 10% to cvxCRV pledgers, 5% to CVX holders, and 1% to be used for the operation of pooling revenue rewards-) -(Gas fees for invoking contracts to collect and distribute rewards.
And the specific distribution arrangement for CVX is as follows.
50% (50 million) are Curve LP rewards, which are distributed directly on a pro-rata basis.
25% (25 million) is for liquidity mining rewards, supporting CVX/ETH and cvxCRV/CRV trading pools, distributed over a 4-year period.
10% (10 million coins) for Convex founding team incentive, locked in for one year after product launch ;
9.7% (9.7 million) as a treasury reserve, locked in for one year for future community incentives or other community activities
3.3% (3.3 million) distributed to investors, all locked up for one year (no cvxCRV minting for this portion of CVX)
1% (1 million) of CVX is airdropped to veCRV token holders.
1% (1 million) of CVX is awarded to users who participate in the Curve.fi governance vote (i.e. support the whitelisting of Convex in Curve.fi).
This portion of cvxCRV rewarded by Curve LP is minted at a determined ratio of claimed CRV, which decreases as the total supply increases.
Also to channel CVX and cxvCRV early liquidity, if the cvxCRV/CRV and CVX/ETH pairs at SushiSwap provide liquidity, the corresponding LP token can be deposited on Convex and receive the corresponding CVX reward.
As of June 10, the latest revenue data on the website, cvxCRV/CRV and CVX/ETH had APY returns of 86.18% and 130.39%, respectively, and TVLs of $36.4 million and $16.8 million, respectively.
A few observations
During the explosive growth of DeFi in the past year, the underlying protocols such as Uniswap and Cruve, which have stood the test of time and market, and have huge volume and audience, have become the core infrastructure indispensable in the subsequent evolution of DeFi, and almost all DeFi projects are mainly built on top of these infrastructure-like crypto assets. At the same time, in addition to playing the role of the underlying components, DeFi projects around these protocol-layered DeFi faucets have begun to spawn tools and application-layered DeFi projects, with richer and more advanced features being enhanced.
What is clear is that more and more DeFi “tool-based applications” are built around individual underlying Super DeFi Protocols, and by supporting them with richer and more advanced derivative features, they are growing on these underlying Super DeFi Protocols, and eventually feeding the underlying Super DeFi Protocols to achieve greater empowerment, gradually giving rise to a The unique and self-contained “mini-ecology” will emerge. Just like Uniswap+dextools/Unitrade for asset free trading, Curve+Convex for stablecoin exchange, etc., it is interesting to note that these mini-ecologies are now being combined with each other in a further way.
Let’s take Curve and Uniswap as an example. As we all know, Curve is the industry leader in the stablecoin exchange circuit, especially for large stablecoins, with much lower transaction fees, slippage, and erratic losses than AMM DEXs such as Uniswap or Sushiswap.
However, with the launch of the much talked about Uniswap V3’s new mechanism for “granular control of aggregated liquidity”, it is clear that its design to provide concentrated liquidity is similar to Curve’s “stableswap invariant” kernel, meaning that Uniswap V3 is likely to be outside the realm of general asset trading as well, with the intention of It is likely that Uniswap V3 is also outside the realm of generic asset trading and intends to get its hands on the large pie of stable asset exchange where Curve is currently dominant.
Similarly, on January 18 of this year, Curve announced the launch of a cross-asset exchange trading service in partnership with Synthetix, a synthetic asset protocol, and on June 10, the latest news saw the launch of Curve Finance V2, the latest version of which leverages a new algorithm to provide trading capabilities for common assets such as ETH/WBTC pairs. The new pool relies on an internal prophecy machine implemented by Exponential Moving Averages (EMA) combined with modules such as Union Curve to perform exchanges between common assets.
This means that the relative “peace and quiet” between the different DeFi leaders such as Uniswap and Curve may be upset, with both sides coming out of the woodwork and taking the first tentative steps in “invading” each other’s domain.
The leaders of the DeFi world have become a vibrant, borderless new world.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/five-minutes-to-read-convex-a-one-stop-platform-for-crv-pledging-and-liquidity-mining/
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