Convex Finance
Convex Finance is a decentralized finance (DeFi) platform that provides staking rewards on the Curve Finance exchange. The protocol is multichain and operates on the Ethereum, Arbitrum, and Polygon blockchains and acts as a yield optimizer for CRV token holders and Curve liquidity providers.[1]
History
Convex Finance was first introduced in April 2021 by a group of anonymous developers with the aim of boosting rewards for CRV holders and liquidity providers using a simple and easy-to-navigate interface. The project’s native token, CVX, was introduced and subsequently launched for airdrops, incentives, and rewards on the Convex Finance platform. The platform went live in May 2021 and recorded $68 million in total value locked (TVL) in that first month. It reached its peak of $21 billion in January 2022. Convex Finance later announced that it had distributed $872.8 million in fees and rewards to its users in May 2022.[2]
Convex Goes Cross Chain
In November 2022, Convex Finance expanded its reach to additional chains, starting with the integration of Arbitrum. This cross-chain expansion enabled Liquidity Providers (LPs) to engage with Convex's boosting mechanics beyond Ethereum's main-net. This update also enabled users to provide liquidity on Curve, stake LP tokens on Convex, and claim rewards similarly to the Ethereum experience. The user interface was changed to accommodate both Ethereum and Arbitrum pools, enhancing accessibility and ease of interaction. Notably, the gas cost efficiency on Arbitrum eliminates the need for trailing 7-day payouts and automated "harvesters," streamlining the rewards process. The cross-chain expansion also brought opportunities for integrations with other projects and DAOs. [13]
Hijack
On June 23, 2022, one of the Twitter users reported some abnormal activity on the Convex Finance website. After some initial investigation, it was confirmed that the domain name system of the Convex website had been hijacked, taking users to a copy of the website containing malicious contracts. Convex used NameCheap as its domain registrar and the attacker was able to access the NameCheap account, even with 2-factor authentication enabled, a strong password, and security alerts. After this, Convex immediately reached out to Namecheap support, and a new, temporary domain was deployed using a new registrar. On June 24, the original Convex domain went back to normal operation. Convex Finance compensated losses stemming from the DNS hijacking from June 20–23, 2022, sourced from the treasury, and paid in CVX tokens equivalent to the USD values at the time of loss. Funds went directly to the addresses affected once approvals had been revoked for the malicious contracts. [5]
In 2023, Convex became multichain and now operates on the Ethereum, Arbitrum, and Polygon blockchains.[5][6]
Launch Airdrop
Convex Finance airdropped a portion of CVX tokens to all veCRV holders. Additionally, all addresses that voted to whitelist Convex in a subsequent Curve.fi governance vote, received additional CVX tokens.[3]
veCRV Holder Airdrop
Distribution was weighted by the amount of veCRV held at snapshot for the total of 1% of CVX supply. The snapshot was taken at block 12296676 on April 23rd, 2021. Platforms that held veCRV on behalf of multiple users had their distribution allocated directly to their users.[4]
Whitelist Vote Airdrop
The particular amount of tokens was evenly distributed to users whose veCRV was used to vote to whitelist the Convex Finance contract for a total of 1% of CVX supply. Platforms that held veCRV on behalf of multiple users had their distribution allocated directly to their users.[3]
Overview
Convex Finance was built to boost rewards for CRV stakers and liquidity providers in a simple and easy-to-use interface. Convex aims to simplify staking on Curve, as well as the CRV-locking system with the help of its native fee-earning token, CVX.[3]
Tokenomics
CVX Token
CVX token is the native cryptocurrency fueling Convex’s ecosystem. These tokens are minted pro rata for each CRV token claimed on the Convex platform by Curve’s liquidity providers. In addition, holders are offered a share of Convex platform fees with these tokens.[2]
CVX tokens can be staked on Convex Finance to earn cvxCRV. This provides a share of Curve’s LP CRV earnings in addition to a portion of the fees as well. In addition, holders of CVX have voting rights in the protocol's governance and decision-making processes. They can participate in proposing and voting on proposals related to the protocol's development, fee structures, and parameter adjustments. CVX holders also benefit from various incentives, such as reduced fees and additional rewards.[3]
cvxCRV (Tokenized veCRV)
- Tokenized deposits, minted 1:1 for each CRV locked in the platform.
- Stake to receive platform fees (CRV), CVX, and veCRV rewards(3CRV).[3]
Fees
There is a 16% total platform fee with 10% going to cvxCRV stakers, 5% going to CVX stakers, and 1% going to harvest caller. The 1% to harvest caller is to reimburse gas for calling contract functions to gather and distribute rewards to rewards contracts.[3]
Convex for Frax LPs
cvxFXS: Tokenized veFXS
Frax liquidity providers (LPs) have the opportunity to leverage Convex Finance's simplified boosting mechanics to enhance their LP positions. By staking their LP tokens on Convex, LPs can participate in a socialized boosting model similar to that of Curve.fi. While Frax Finance accommodates LPs from diverse platforms such as Uniswap, Sushiswap, and AAVE, Convex offers tailored support for Frax LPs. [7]
Staking Process for cvxFXS
LPs aiming to stake on Convex with their veFXS tokens need to follow these steps: [7]
- Obtain veFXS tokens from the original source (unstaking from Frax if necessary).
- Deposit and stake your veFXS tokens on Convex, creating a vault, approving, and depositing and staking veFXS tokens across three transactions.
Elevated Earnings with cvxFXS
To optimize their rewards, Frax LPs can consider the time-boosted earning potential of cvxFXS. Locking LP tokens for various durations offers LPs an amplified share of FXS rewards. The time boost becomes substantial with longer lock durations, culminating in maximum time-boosted returns over a span of up to 3 years. Following the expiry of the time-locks, LPs can seamlessly transition to benefiting from Convex's socialized boosting via veFXS, without necessitating additional time-locking. [8]
Governance with cvxFXS
Holders of vlCVX are granted a 7% portion of FXS emissions from Convex-staked pools, distributed as rewards. Furthermore, vlCVX holders possess the right to cast votes on Frax governance proposals related to veFXS and veFPIS. The weightage of these proposals is determined by the outcome of vlCVX votes, with each vote contributing to the overall vote distribution. [9]
Single-Sided Staking with cvxFXS
After a proposal that passed on February 8, 2023, single-sided staking for cvxFXS has been made available. This update involves redirecting the 10% platform fee from the cvxFXS+FXS liquidity pool to single-side staking, covering both veFXS fees and cvxFXS. To utilize this feature, users can stake their cvxFXS tokens using the "Advanced" toggle switch, mirroring the process found in Convex's staking page for cvxCRV in the "Convert CRV" section. This enhancement simplifies the staking process and underscores Convex's commitment to enhancing accessibility for users. [11][12]
cvxFPIS: Tokenized veFPIS
Frax liquidity providers also have the option to explore Convex Finance's offerings through tokenized veFPIS, known as cvxFPIS. This mechanism mirrors the cvxFXS model and provides LPs with enhanced opportunities for participation. [10]
Staking Process for cvxFPIS
LPs seeking to engage with cvxFPIS on Convex can follow a similar process to cvxFXS staking. By obtaining veFPIS tokens and depositing them on Convex, LPs can create a vault, approve, and deposit and stake veFPIS tokens across multiple transactions. [10]
Elevated Earnings with cvxFPIS
The potential for increased FXS rewards is similarly available for cvxFPIS stakers. By participating in Convex staking, users may receive rewards both as FPIS and as the platform's native token, CVX. [8]
Partnerships
Frax Finance
Frax Finance deployed a portion of its treasury to the FRAX pool on Convex Finance. They’ve committed to holding/staking their earned cvxCRV and CVX rewards for the long term, and work to align incentives for both protocols.[4]
BadgerDAO
The team at BadgerDAO deployed vaults purpose-built for Convex Finance. BadgerDAO’s Helper Vaults can be used to auto-compound users' staked cvxCRV and CVX earnings.[4]
OlympusDAO
When OlympusDAO's OIP-14 passed, excess treasury funds (FRAX tokens) were deployed into Convex Finance’s liquidity pools to start earning trading fees, CVX, and CRV. OlympusDAO plans to deploy more capital from their treasury to Convex liquidity pools in the future and maintain a CVX position.[4]
Other protocols that integrated Convex include Yearn Finance, Alchemix, Abracadabra.money, and more.[5]
