[Company Watch] Convex Financial — Curve’s Buddy Booster
We have earlier covered Curve Finance and in particular, an article dedicated to how to invest your CRV. One of the methods is to lock it into the Yearn’s Backscratcher vault and leave it there to earn passive income. Whilst yield is good, the Yearn vault (or the team behind it) has made not much progress on the matter how the airdrops like EPS from Ellipsis can be distributed to users. This represents a significant portion of income to CRV holders — and being silent on it is not a good way. So there has been a challenger of Yearn today, Convex Financial, which basically duplicates Yearn’s CRV-related products and is getting some popularity.
Convex Finance is whitelisted by Curve on 30 April (proposal here), despite the team was still anonymous. Whitelisting a smart contract on Curve does not mean endorsement of the project, rather it only means Curve, after DAO votes, allows the contract to participate in Curve, e.g. stake CRV to boost. Over discord, Curve community managers Charlie and Kendrick mentioned that Curve will be supporting Convex (with no further details as to which extent); and that they have reviewed the codes of Convex to conclude it is simple, therefore a rugpull is not possible. Kendrick and Charlie also appear as community managers in Convex discord and telegram channel.
Conext is audited by MixBytes(), a Russian smart contract audit company founded by Sergey Prilutskiy.
Convex’s Way of Boosting
Convex works very similarly to Yearn, with variation on how rewards are utilised.
For liquidity providers, one needs to deposit stablecoins into Curve vaults and then stake the LP tokens into Convex. Convex auto-harvests with boosts (there’s no strategy like Yearn’s other non-Curve vaults) and distributes the rewards to liquidity providers. The rewards are either in CRV or other reward tokens, and they are distributed directly, unlike Yearn’s vaults which sell harvested CRV into vault LP tokens to compound. On top of this, liquidity providers get CVX, Convex’s platform tokens, as additional rewards.
For CRV holdrs, one can stake CRV with Convex into cvxCRV, which is like Yearn’s yveCRV, an irreversible, perpentually locked token. After that, one can either provide liquidity for the cvxCRV-CRV pool on Sushiswap and claim CVX rewards from Convex, or simply stake cvxCRV with Convex for rewards. Staking rewards include 10% share of the CRV harvested by the vaults; share of veCRV admin fees; airdrops; additional CVX rewards.
Although CRV is locked perpetually into the contract, cvxCRV are tradable in the cvxCRV-CRV pair, or it might be listed on some cryptoexchanges some day.
Differentiation from Yearn
Comparing with Yearn, Convex’s key differentiation is that it does not convert harvested CRV into LP tokens or yveCRV, but rather, it distributes to the users directly. In addition, it charges a cheaper fee of 16%. Last but not least, it is having CVX incentives now, increasing the yields for vaults by 10% to 20% on average.
As of the date of this article, the boosting effects of selected Curve vaults and the comparative boosting effects are listed below. As Convex is yet small, so it generally has a better boost:
There’s a total supply of 100m CVX, 75% of which will be used for long-term incentives to encourage adoption of the platform. 13.3% are for team and investors, vested over a year. The rest goes to treasury, for future purposes and 2% of which were used for early airdrops.
(Serenity Team, 23 May 2021, Twitter: https://twitter.com/SerenityFund)