As a fool-like “peripheral service” dedicated to Curve, Convex, which was born less than a month ago, performed quite amazingly.
Written by: a poplar tree
No matter how violently the crypto market fluctuates, as far as the stable currency track is concerned, it has always been “unilateralism” all the way up. According to The Block data, as of June 10, the total market value of stablecoins on the entire network was as high as 105.5 billion U.S. dollars. Compared with the market size of only 11 billion U.S. dollars in the same period in 2020, it has surged nearly 10 times in one year.
At the same time, Curve, the leading project of the stable currency exchange track, has a total lock-up volume of up to 10 billion U.S. dollars, especially since “5.19”, even if the secondary market fluctuates significantly, Curve’s lock-up volume fluctuates. But it is smaller than other DeFi leading agreements, and quickly regained lost ground after the market stabilized.
However, Curve is not perfect. For a long time, Curve’s aesthetic retro UI and its “anti-human” pledge operation logic have discouraged many users. Convex Finance, which was officially launched on May 17 this year, is dedicated to making up for Curve’s shortcomings in user experience.
What is Convex Finance?
In one sentence, Convex Finance is a ” CRV pledge and liquidity mining one-stop platform ” dedicated to simplifying the use of Curve.
As another revenue aggregator on the Ethereum chain, Convex Finance aims to use CVX tokens to simplify the process of locking and staking of Curve and CRV through a simple and easy-to-use interface, and to improve CRV holders and liquidity providers. Remuneration to promote the development of the CRV ecosystem .
If you have ever done Curve LP, you may know that storing/maintaining veCRV balance to maximize revenue is not an easy task. From the design of one protocol and three tokens (Curve protocol token CRV , CRV token veCRV locked specifically for voting and the Curve liquidity pool token 3Crv of DAI/USDC/USDT three stable coins), to the complex profit calculation ( The longer the lock-up time, the greater the voting weight . At present, veCRV can only be obtained 1:1 after four years of lock-up.) The threshold for getting started with Curve is significantly higher than that of most mainstream DeFi products.
Convex Finance allows liquidity providers to participate in Curve through its own portal, that is, users can pledge CRV and claim CRV rewards on Convex, which is different from operations that require lock-up on Curve directly and different weights according to the length of time. Restrictions, users do not need to lock the CRV to get revenue rewards .
At present, the official has not disclosed too many detailed interpretations, but the author understands that it should be equivalent to the common “term mismatch” design in traditional bank lending business-all users use the CRV for Curve betting operations through Convex to converge into a total fund pool. Convex divides the total fund pool into a combination of long-term, short-term, and non-locked mutual gradient mismatched fund pools through a self-defined margin of safety , thereby realizing between the “lock-in period” and the “income reward” Balanced .
In this way, although the user’s CRV does not need to be locked and can be withdrawn at any time, the user’s withdrawal period is directly linked to the income, that is, the earlier the withdrawal, the lower the profit, and the later the withdrawal, the higher the profit. In theory, through the income subsidy of early withdrawals to late withdrawals, Convex is expected to achieve a high “leverage” rate of return that exceeds the return range of Curve itself. The current rate of return of USDT pool in Convex is 11%, which is much higher than Curve’s 4.2%. rate of return.
The momentum is on the verge of fast growth
Unlike Year Finance’s “pan-asset management agreement” that serves the entire DeFi ecosystem, Convex Finance is essentially just a “vertical asset management agreement” specifically for Curve, but it does not lose the performance of Year Finance.
Curve Market Cap data
As of June 10, 2021, the number of veCRV pledged in Convex Finance (CVX), a one-stop platform for CRV pledge and liquidity mining, has reached 31 million , far exceeding the 17.9 million pledged veCRV in Year Finance.
The most intuitive comparison is that in less than a month since Convex went online, the amount of locked positions has soared from zero to $3.47 billion today (data from the official website on June 10). Year Finance, as the “veteran asset management gun”, has locked up only US$4.42 billion during the same period. The two are already at the same order of magnitude, and Convex is clearly catching up. The pressure on Year Finance is obvious.
Interestingly, on the day Convex went online on May 17, Yearn Finance’s corresponding lock-up volume dropped sharply, similar to Sushiswap’s initial “vampire” attack on Uniswap-after all, Curve has more than 50% of its daily transaction volume. On Convex Finance.
Economic model
CRV mapping—cvxCRV
cvxCRV is the mapping of CRV in Convex, which is made by 1:1 casting of each CRV locked in Convex.
By betting on cvxCRV in Convex, users can get the usual rewards from veCRV (from Curve + 3crv governance fee distribution for any airdrop), plus Convex LPs to increase the 10% share of CRV revenue, and CVX tokens.
It is important to note that the conversion of CRV to cvxCRV is irreversible, that is, if the liquidity of cvxCRV is subsequently withdrawn from Convex, it cannot be directly converted back to CRV. However, cvxCRV can be converted into CRV through trading pairs on the secondary market (this means that it may not be possible to exchange the same amount of CRV back according to the original 1:1 casting ratio ).
Users who hold cvxCRV in Convex can get a share of 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 income (16% of the total platform fee will be paid, 10% to cvxCRV pledgers, 5% to CVX holders, 1% Will be used for the operation of collecting revenue rewards-used to call the contract to collect and distribute the gas fee for the reward.
The specific distribution arrangements for CVX are as follows:
- 50% (50 million pieces) are Curve LP rewards, which will be distributed directly in proportion;
- 25% (25 million pieces) is used for liquid mining rewards, supporting CVX/ETH and cvxCRV/CRV trading pools, and the distribution period is 4 years;
- 10% (10 million pieces) is the incentive of the founding team of Convex, which will be locked for one year after the product goes online;
- 9.7% (9.7 million pieces) will be reserved for the state treasury, which will be locked for one year for future community incentives or other community activities;
- 3.3% (3.3 million pieces) will be distributed to investors, all locked up for one year (this part of CVX does not have cvxCRV minting);
- 1% (1 million pieces) of CVX is airdropped to veCRV token holders;
- 1% (1 million pieces) of CVX will be rewarded to users who participate in the Curve.fi governance vote (that is, support the inclusion of Convex on the Curve.fi whitelist);
The part of the cvxCRV awarded by Curve LP is minted at a certain rate of CRV claimed, and as the total supply increases, this rate will decrease.
At the same time, in order to guide the early liquidity of CVX and cxvCRV, if you provide liquidity in SushiSwap’s cvxCRV/CRV and CVX/ETH trading pairs, you can deposit the corresponding LP token on Convex and get the corresponding CVX reward.
As of the latest earnings data on the official website on June 10, the APY earnings of cvxCRV/CRV and CVX/ETH were 86.18% and 130.39%, respectively, and the TVL was US$36.4 million and US$16.8 million, respectively.
A little observation
In the explosive growth of DeFi in the past year, Uniswap, Cruve and other underlying protocols that have stood the test of time and market, and have a huge volume and audience, have become an indispensable core infrastructure in the subsequent evolution of DeFi. Almost all DeFi projects They are mainly based on these infrastructure types of encrypted assets. At the same time, in addition to playing the role of the underlying components, with the DeFi leaders of these protocol layers as the center, the DeFi projects surrounding their tool classes and application layers have also begun to derive, and richer advanced functions have been continuously strengthened .
It can be clearly seen that more and more DeFi “tool-based applications” revolve around a single underlying “Super DeFi Protocol”, and by assisting it to improve richer advanced derivative functions, relying on these underlying “Super DeFi Protocols”. The agreement develops and grows, and the “super DeFi agreement” that ultimately feeds back the underlying “super DeFi agreement” achieves greater empowerment, and gradually produces unique and self-contained “small ecology”. Just as Uniswap+dextoolsUnitrade is for the free trading of assets, Curve+Convex is for stable currency exchange, etc. What is interesting is that a further “integration” is now taking place between these small ecosystems.
Take Curve and Uniswap as examples. As we all know, in stable currency exchanges, especially large stable currency exchange tracks, Curve fees, transaction slippage and impermanence losses are far lower than those of AMM DEX such as Uniswap or Sushiswap, and they are well-deserved industry leaders.
However, after the well-received Uniswap V3’s new mechanism for ” granularity control of aggregated liquidity ” was launched, its design for providing centralized liquidity is obviously similar to Curve’s ” stableswap invariant ” kernel, that is, Uniswap V3 is very similar. GM may also be outside the scope of asset transactions, we intend to meddle in the current Curve occupy the absolute advantage of stable exchange assets of the big cake.
Similarly, on January 18 this year, Curve announced the launch of cross-asset exchange and trading services in cooperation with Synthetix, a synthetic asset agreement. On June 10, the latest news, Curve Finance V2 has been officially launched. This latest version uses new algorithms to provide common assets (such as The trading function of ETH/WBTC trading pair) , the new fund pool relies on the internal oracle realized by the exponential moving average (EMA) combined with the combined curve and other modules to exchange common assets .
This means that the original relatively “safe and safe” balance between the original Uniswap, Curve and other DeFi leaders may be broken. Both parties are out of the circle, and both have taken a tentative first step in “invading” the other’s domain.
The leaders of the DeFi world have also become a vibrant new world without borders.
