From Curve War to Convex War；Convex: How will the Third Largest DeFi Project, rise?

1. In Curve's token economics, if users choose voting rights and vote-escrowed CRV (veCRV), they need to give up the liquidity of their assets (because veCRV is non-assignable).

2. When users hand over their CRV to Convex, they will only lose a small amount of stake income of veCRV (10%), get additional CVX rewards, and obtain flexible exit ways.

3. For stablecoin projects, especially new projects, obtaining good liquidity on Curve can well support their own stablecoin value, reduce the exchange slip point, and bring a certain number of users.

4. Now vlCVX has also produced its own bribery vote platform (or vertical management agreement), which is Votium. Major agreements can bribe vlCVX holders with their own tokens on this platform to encourage holders to vote in their stablecoin pool.


In the article “What is Curve War: Gain Insight Into Curve - The Stablecoin Exchange Leader”, we introduced Curve, the DeFi stablecoin exchange project with the highest TVL (total lock-up value), and mentioned the Curve War caused by competing for the ownership of Curve lock-up revenue.

From the beginning of Yearn to Stake DAO and then to Convex, Curve War has changed from a simple stake competition to a governance competition of mechanism innovation. Subprojects such as Convex have also become an important ecological component to make up for Curve's shortcomings from Dao, which is simply organized spontaneously and competes for lock-up earnings at the beginning.


Since its birth in May last year, the proportion of veCRV occupied by Convex has been rising. At present, it has reached 42.9%, far exceeding the 5.48% of Yearn, which ranks second. In terms of total lock-up value, Convex has become the third largest TVL project on Ethereum, and even surpassed MakerDAO for a time, second only to Curve. Curve War has also developed with it.

Brief Introduction to Stake Mechanism of Convex

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The winner of Curve War has obviously been decided, that is, Convex, which firmly occupies the first place in the proportion of veCRV. In Curve's token economics, if users choose voting rights and vote-escrowed CRV （veCRV）, they need to give up the liquidity of their assets (because vecrv is non-assignable). For CRV itself, this design helps to endow itself with value for a long time and maintain currency price stability, but it is not very humanized for many users, especially retail investors. This is not only the pain point that Convex strives to solve, but also the biggest reason for Convex's success.

For users who hold CRVs, they can irreversibly convert CRV into cvxCRV in the ratio of 1:1 in Convex, which is a Tokenized veCRV. Convex stakes the captured CRV to Curve to obtain income and voting rights. Compared with directly staking CRV in Convex, when users stake cvxCRV in Convex, they can obtain 90% of the corresponding CRV income, and Convex will charge the remaining 10%, but will provide users with other additional income including CVX. Compared with veCRV, cvxCRV is assignable. Although the exchange from CRV to cvxCRV is irreversible, users can trade it back to CRV in the cvxCRV-CRV pool of Convex or the corresponding pool of other exchanges, which provides users with a more reliable exit mechanism and makes up for the design problem of Curve.


CVX is the native token of the platform of Convex. The token issuance increases with the rise of CRV captured by the project, and the maximum supply is 100 million. Of which 50% will be distributed directly to liquidity providers; 25% will be used as liquidity mining incentive, which is currently used for CVX / Eth and cvxCRV/CRV pools; 10% will be provided to the Convex project team and will be locked up for 1 year; The remaining 15% will also be gradually distributed as various incentives. For users who hold CVX, they can stake or lock up CVX on Convex to obtain a certain amount of income and voting governance rights on Convex. This governance right is reflected in the form of the corresponding token vlCVX. After locking up CVX16 weeks, they can obtain a vlCVX.


When users hand over their CRV to Convex, they will only lose a small amount of stake income of veCRV (10%), get additional CVX rewards, and obtain flexible exit ways. From a macro perspective, the two parts of the value of CRV are split on Convex. cvxCRV represents the usufruct of veCRV, and vlCVX indirectly reflects the voting governance right of veCRV by governing Convex.

From Curve War to Convex War

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Due to its great advantages in the field of stablecoin exchange, Curve has become an important infrastructure in DeFi, and its own and its Convex have also become a geomantic treasure land contested by major project parties. With the entry of other project parties, Curve War has also undergone further development.

For stablecoin projects, especially new projects, obtaining good liquidity on Curve can well support their own stablecoin value, reduce the exchange slip point, and bring a certain number of users. If you want to attract more liquidity on the Curve, you also need to try to improve the yield of the corresponding liquidity pool on the Curve. Due to the leading position of Convex in the voting governance of Curve, a large number of project parties turn to holding CVX and indirectly obtain the governance right on Curve by obtaining the voting governance right on Convex. Therefore, this stage is also called Convex War.


At present, more than 20% of CVX in circulation has been owned by major DAOs and protocols. In terms of the number of CVX holdings, FraX, Badger, Olympus and Terra, which we are familiar with, occupy a place. The stablecoin project 's pursuit of liquidity on the Curve has also become the support of the value of CRV and CVX. In addition to directly owning CVX or CRV to obtain voting rights, the project party will also use another lower cost and more “traditional” way, that is “bribing vote".

Now vlCVX has also produced its own bribery vote platform (or vertical management agreement), which is Votium. Major protocols can bribe vlCVX holders with their own tokens on this platform to encourage holders to vote in their stablecoin pool. Users can openly "accept the purchase" here and earn an additional token income.

Conclusion

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DeFi is such a creative emerging field. It not only provides a bridge for blockchain implementation and application, but also brings countless new formats and models to traditional finance.

Curve War will not disappear in the short term. We are also glad to see the birth of projects such as Convex, which will inject long-term impetus into the DeFi development.



Author: Gate.io Observer: Edward H. Translator: Joy Z.
Disclaimer:
* This article represents only the views of the observers and does not constitute any investment suggestions.
*Gate.io reserves all rights to this article. Reposting the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.

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