The crypto market has moved from simply buying and selling coins and hoping they moon. There are now different ways to earn cash and grow your portfolio. One such avenue in crypto is found in the emergence of Decentralized Finance. So, investors can now take advantage of a variety of passive income streams thanks to this dynamic sector.
While DeFi has different earning opportunities, yield protocols are the most popular. They allow investors to profit by supplying liquidity on a platform. Convex Finance is one such platform. It gives Curve users extra channels to earn and maximize their profits. This article will define Convex Finance and describe how users can take advantage of it.
What’s Convex Finance All About?
Convex Finance is an Ethereum-based DeFi platform that offers enhanced staking rewards on the Curve Finance exchange. It also acts as a yield optimizer for holders of the CRV token and liquidity providers.
Today I want to talk about the advantages of a #liquidity platform that allows users to borrow against their own tokens.
— Einstein BTC (@btc_einstein) December 26, 2022
Convex offers additional advantages like no withdrawal costs and low-performance fees without requiring users to lock their CRV tokens. So, token holders and LPs earn increased profit. At the height of its features is its user-friendly interface. The ERC-20 utility token, CVX, which can be locked in return for a % of the platform’s revenue, powers the Convex ecosystem.
Curve users can directly provide liquidity on the platform to receive rewards. However, Convex Finance takes things a step further and offers users greater incentives. Convex has a simple game plan: offer users a better deal for providing liquidity to Curve Finance and bring in more users. Some Convex pools go as far as providing higher rewards than pools on Curve.
How Does Convex Finance Work?
Convex Finance was launched in 2021 by a team of developers that chose to maintain their anonymity, much like Bitcoin. It recorded an impressive $68 million in TVL in its first month. Subsequently, it reached its peak of $21 billion early this year. Convex has its own native token, CVX, which it uses for incentives, airdrops and rewards.
On an uncontroversial vote with lower turnout, it's common to see Convex control a supermajority of the vote.
Yet it's not a cause for alarm… pic.twitter.com/m6DA9pZKjY
— curvecap.lens (@CurveCap) December 21, 2022
So, Convex Finance’s objective is to steadily raise CRV deposits in order to acquire a larger stake in Curve. But it is not the only protocol with such ambition. Also, Yearn Finance shares the same objective. So, both platforms compete by providing customers with higher incentives in an effort to monopolize Curve Finance. Curve Wars refers to the rivalry between these two protocols.
Not many have noticed, but Curve Wars started again!
There is a (still going) vote for sdYFI/YFI gauge. @ConvexFinance obviously isn't too interested, so they didn't get a quorum for this one.
Previously it would have failed, but now it looks like it will succeed pic.twitter.com/ZGmRxuhtBt
— Curve Finance (@CurveFinance) December 16, 2022
Curve is a decentralized exchange that focuses on stablecoin trading rather than the standard market volatility. The exchange promises cheaper trading fees and less slippage, making it a popular option. So, Convex Finance offers two ways for investors to increase their earnings on Curve:
- Providing liquidity: Convex enables Curve LP tokens holders to stake and grow their holdings. Users can deposit their LP tokens on Convex for CRV incentive boosts, which are combined with those of other CRV stakers.
- Staking: CRV tokens holders can use Convex to stake them for cvxCRV rather than Curve for veCRV tokens. veCRV means time-locked CRV used for reward boosting, airdrops and governance. Users get extra benefits for using Convex, such as CVX tokens and a share of the platform’s revenue.
The CVX Token
The CVX token encourages and rewards users to stake. It serves as Convex Finance’s utility and governance token. Users literally own a chunk of the protocol when they hold CVX. Additionally, users receive the CVX token as a bonus for supplying liquidity on Convex. You can buy CVX on:
As of this writing, CVX trades at $3.59.
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