Convex Finance: Boosting CRV Rewards and Liquidity Mining in DeFi

Convex Finance: Everything You Need to Know

Convex Finance is a decentralized platform that enables rewards for CRV liquidity providers and stakers, all in a simple and easy to use interface. As per its whitepaper, the asset runs on the Ethereum blockchain, and users need an Ethereum wallet to interact with the Dapps on the Convex platform1. In this article, we will explore what Convex Finance is, how it works, who is the team behind it and what are the use cases for it.

What is Convex Finance?

Convex Finance is a DeFi protocol that allows Curve liquidity providers to earn a share of trading fees on Curve without staking liquidity there. Instead, LPs can stake with Convex and receive boosted CRV and liquidity mining rewards. This provides CRV stakers with better capital efficiency and positions Convex Finance as an important player in the Curve wars.

The Curve wars are an ongoing race for influence over Curve Finance, which is the largest DEX in the world by TVL. The more CRV tokens a protocol has, the more influence it has over interest rates on Curve, which is probably the most important protocol in DeFi. Consequently, Convex Finance targets only CRV holders and Curve liquidity providers and does so in two ways:

CRV holders receive cvxCRV for staking the CRV.

Curve LPs receive boosted rewards for staking their LP tokens with Convex.

How does Convex Finance work?

Convex Finance works by pooling the assets of individual stakers and benefiting from their aggregated liquidity. Even low-level investors can stake their Curve Finance LPs with Convex and receive boosted rewards that would otherwise not be attainable. They receive:

The interest rate on their provided liquidity.

A share of the Curve trading fees.

Boosted CRV rewards.

CVX tokens.

CVX is the native token of Convex Finance, which gives holders governance rights over the platform and a share of the platform fees. cvxCRV is a derivative token that represents staked CRV on Convex. It also gives holders governance rights over both Convex and Curve, as well as a share of the CRV rewards.

The boost mechanism of Convex Finance is based on the veCRV system of Curve. veCRV are time-locked CRV tokens with boosted voting power and rewards, which are both a function of the lock-up period of the underlying CRV. You can read more about veCRV here. The maximum boost factor is 2.5X, but it is nearly impossible for any one party to stake enough liquidity to attain the maximum boost. That’s why Convex Finance acts as a cartel that pools the assets of individual stakers and distributes the boosted rewards among them.

Who is the team behind Convex Finance?

Convex Finance was developed by a team of anonymous developers. However, unlike many shitcoins, Convex Finance is considered one of the most important and influential protocols in decentralized finance and thus a fairly low-risk investment. The team has also undergone several audits by reputable firms such as MixBytes2 to ensure the security and reliability of their smart contracts.

What are the use cases for Convex Finance?

Convex Finance has several use cases for different types of users in the DeFi space. Some of them are:

For CRV holders who want to maximize their returns and governance power over both Convex and Curve.

For Curve LPs who want to earn boosted CRV rewards and CVX tokens without locking their liquidity on Curve.

For CVX holders who want to participate in the governance of Convex and earn platform fees.

For DeFi enthusiasts who want to support a protocol that aims to control as big a stake of Curve as possible.

Convex Finance is a platform that boosts rewards for CRV stakers and liquidity providers alike, all in a simple and easy to use interface. It has a unique incentive structure that positions it as an important player in the Curve wars. It also has a strong community and a transparent governance process that makes it a trustworthy and innovative project in the DeFi space.