The Curve war is a competition among various protocols that continuously strive to ensure their preferred pools offer the highest CRV rewards ('bribes'), resulting in increased buying pressure for CRV. Typically, Curve Wars occur when liquidity is in short supply, prompting decentralized finance (DeFi) protocols to bribe vote-escrowed CRV (veCRV) holders to influence voting decisions in their favor. ^[1][2]

Overview

Curve Wars is the battle for yield through the acquisition of veCRV, aiming to influence the allocation of CRV rewards to pools providing liquidity. veCRV, a non-transferable variant of the CRV asset, symbolizes voting power and is generated only when the CRV token is locked or staked. veCRV token holders also receive rewards from the Curve ecosystem, but they are distributed over four years. In the Curve Finance ecosystem, CRV, Curve’s native token, is awarded to liquidity providers contributing to each pool. As liquidity becomes scarce in the Curve pool, intense competition unfolds among DeFi protocols to attract the majority of liquidity providers. This competition prompts different protocols to offer incentives in exchange for votes, aiming to gain control of Curve governance by influencing the voting decisions of veCRV token holders. ^[2][3][4][5]

In general, DeFi protocols primarily focus on two main aspects of the incentive design of their platforms: discouraging token sales and encouraging increased token liquidity. Those who provide liquidity for DeFi protocols are rewarded. Additionally, protocols can aggregate various opportunities for individuals to earn yield income by providing liquidity and may even pay them to enhance token liquidity. This aggregation leads to competition for liquidity across all platforms, with Curve Finance experiencing particularly pronounced competition known as "Curve Wars." Basically, DeFi projects that intelligently design their incentives gain significant power and wealth, while those with poorly designed incentives may see their tokens decrease in value. ^[6]

DeFi protocols involved in Curve Wars

The notable competitors seeking to entice Curve token holders into locking their CRV on their platforms include: ^[1][7]

• Stake DAO ($SDT) 

• Yearn Finance ($YFI)

• Convex Finance ($CVX)

However, the Curve Wars are primarily unfolding on the Convex protocol, as it offers one of the highest Return on Investments (ROIs) on CRV and controls the majority—more than 40%—of veCRV tokens. Consequently, it holds the most decision-making power in the Curve ecosystem, determining how Curve’s rewards are distributed. ^[1][4]

Convex achieves this by enabling users to stake CRV tokens and receive crvCVX tokens in return, in addition to earning extra CRV tokens and Curve trading fees. Many DeFi platforms choose to interact with the Curve ecosystem through Convex, acquiring crvCVX tokens instead of CRV, which requires a longer unlocking period for maximum benefits. Notably, Convex distinguished itself by providing its governance token, CVX, to token holders with tradable crvCVX—a feature not present with veCRV, which remains non-transferable. As Convex attracts Curve token holders, another protocol, Votium, capitalizes on this by encouraging users to deposit their CVX tokens as vlCVX to earn rewards and gain higher voting power on Convex. Additionally, various DAOs such as Terra, Frax, and Badger have amassed substantial Convex tokens (CVX) in an attempt to influence Curve's voting power. ^[2][4]

Benefits

The primary advantage of these decentralized application protocols is their consistent creation of liquidity, enabling them to address the needs of all DeFi traders involved in buying and selling digital assets. In this regard, the benefits of the Curve Wars are as follows: ^[2]

Voting power

Participating as a liquidity provider in the Curve Wars can offer substantial advantages, largely because of the considerable rewards available. Owning the CRV token automatically provides entry to the veCRV asset, and having veCRV allows stakers to gain influence over how funds are distributed among different liquidity pools. ^[2]

Earning rewards from liquidity pools

Platforms like Convex Finance, Yearn, Stake DAO, and others actively pursue liquidity, consistently providing rewards and incentives to Liquidity Providers (LPs) who stake their veCRV tokens on their platforms. This strategy allows these platforms to create the liquidity essential for their operations. In exchange, LPs and stakers receive cvxCRV tokens, which are both tradable and transferable, especially in the case of Convex Finance. ^[2]

Diverse sources of income

Taking part in a liquidity pool usually results in receiving the pool's inherent token. For example, when a veCRV asset is locked with Convex Finance, users can immediately obtain a liquid and tradeable cvxCRV asset. Subsequently, this can be withdrawn or reinvested to earn additional rewards. ^[2]