Convex Finance has been dubbed a "DeFi 2.0 protocol," and is part of the ever-growing subset of second-generation decentralized finance (DeFi) protocols that offer yield farming services to users. Deeply ingrained in the DeFi space, Convex empowers Curve Finance users to further benefit from earning and optimizing yields.
What is Convex Finance (CVX)?
Convex Finance is a revolutionary DeFi platform that offers enhanced staking rewards and works on top of the Curve Finance network, a decentralized exchange (DEX) liquidity pool designed for the swapping of stablecoins. By focusing on stablecoins, the Curve exchange platform is able to bypass volatility typically associated with the cryptocurrency industry, as well as offer lower trading fees and less slippage.
Curve Finance functions using its native CRV tokens which are earned when users deposit crypto assets into its liquidity pools. Both protocols, Curve and Convex, are built on the Ethereum blockchain. Convex acts as a yield optimizer for both Curve CRV token holders and Curve liquidity providers on the network.
Convex offers a simple user experience alongside extra advantages such as low-performance fees and zero withdrawal fees, which allows liquidity providers and CRV stakers to earn higher returns. Convex Finance CVX tokens are the platform's native token and are ERC-20-based utility tokens with additional governance incentives.
The Convex Finance protocol offers two ways in which users can optimize their yields: staking and providing liquidity.
- Staking: users can stake CRV tokens on Convex (instead of staking on Curve directly) to receive additional rewards (CVX and a portion of the protocol's earnings). CVX can also be staked on the Convex platform, and in return, users earn a share of Curve liquidity providers' CRV earnings.
- Liquidity providers: as a reward for providing liquidity on the Curve platform, liquidity providers earn Curve LP tokens. These tokens can be staked on the Convex platform in return for CRV tokens and additional rewards. The more CRV tokens that are staked, the higher the reward distribution.
CVX token holders can earn governance rights by locking their tokens on the platform for a specific amount of time.
Who created the Convex Finance platform?
Convex Finance was launched in May 2021 by a pseudonymous founder, C2tp. Little is known about this person or group but it is assumed that they came from a software development background. Despite anonymous founders generally being a red flag for risky investments, Convex has defied this norm and is considered to be one of the most influential and important protocols in the DeFi industry.
In its first month, Convex Finance recorded $68 million in total value locked (TVL), reaching its peak in January 2022 of $21 billion. TVL refers to the sum of all the crypto assets deposited in a DeFi protocol at any given.
Soon after launching, the Convex platform was whitelisted on the Curve platform. Due to a large number of CRV tokens being deposited on Convex, Curve granted Convex permission to participate in Curve's governance.
How does Convex Finance work?
The Convex Finance protocol provides users access to liquidity and earning trading fees through Curve's established stablecoin pools. In order to do so, users need to deposit Curve tokens into Curve's liquidity pools and then stake them on Convex. Acting as an intermediary, Convex then auto-harvests these tokens and reimburses liquidity providers with the gained rewards.
CRV tokens and curve liquidity providers
These rewards can be distributed as either CRV or other tokens such as LDO or SNX. Liquidity providers can also increase their returns by further compounding their earned CVX tokens through the staking mechanism. Both CRV stakers and Curve’s liquidity providers are entitled to Convex liquidity mining rewards.
Convex Finance CVX tokens were designed to simplify staking on Curve's platform with an added fee-earning nature. When a user deposits CRV into Convex, the platform converts these tokens into veCRV (vote escrowed CRV) and credits the depositor with cvxCRV on a 1:1 ratio. Users can then exchange the cvxCRV tokens for CRV using the Curve liquidity pool and earn higher yields by locking up more CRV.
When users have deposited a certain amount of CRV tokens into the Convex protocol they receive wrapped cvxCRV tokens. These tokens can be staked for CVX tokens and are entitled to CRV rewards earned through the protocol. These rewards include receiving a part of the CVX token airdrop and a 10% share of the CRV harvested by the vaults.
By providing users the opportunity to earn staking rewards and trading fees without having to lock in CRV, Convex offers a secondary source of income for tokens users already own through Curve. This is the core reason for Convex's success and growth.
What are CVX tokens?
Convex Finance CVX tokens are ERC-20-based tokens with both utility and governance functionality. The token is used to receive a share of Convex platform fees and reward CRV stakers.
The token has a maximum supply of 100 million, with 50% of the tokens assigned to rewarding Curve liquidity providers. 25% of the remaining tokens are allocated to liquidity mining distributions over the next four years while 9.7% are held in the platform's treasury.
How can I buy the Convex Finance CVX token?
Tap grants its users the freedom to trade securely while retaining their cryptocurrencies in its integrated wallet or the choice of withdrawing them for use on DeFi platforms. Tap offers a secure space to not only trade digital assets but to store them long term too.
Unlock the power of Tap's mobile app by creating an account and completing your account verification steps. You'll then enjoy access to a wide array of vetted crypto markets and fiat currencies, from where you can buy or sell Convex Finance CVX tokens in a click. All that stands between you and get started with Tap is getting the app today.
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