Smart contracts, not intermediaries, serve as the backbone for decentralized finance platforms offering services like lending, borrowing, and trading.
Launching in May 2021, Convex Finance initially secured a modest $68 million, according to DeFi Llama, yet quickly overtook older competitors in the months that followed. The platform reached a pivotal milestone of $1 billion in locked value in just four weeks, and within five months, it soared past $10 billion. The last 60 days witnessed an additional surge of $10 billion in locked liquidity, fueled by growing user interest and demand.
Enabling users to tap into liquidity and earn fees from Curve Finance—the largest Ethereum-based stablecoin exchange with a staggering TVL of $23 billion—Convex acts as a gateway to one of DeFi’s giants.
Understanding Curve Tokens and veCRV
Curve Finance distributes CRV tokens as incentives for liquidity providers via yield farming, which can then be converted into vote-escrowed CRV (veCRV). Holding veCRV grants governance privileges, enhanced rewards, and eligibility for exclusive airdrops.
Since veCRV tokens are time-locked, users tend to lock their CRV tokens for extended durations to maximize their veCRV holdings and associated benefits. However, this locking mechanism restricts liquidity, imposing opportunity costs on token holders.
Convex’s Innovative Solution
Addressing this challenge, Convex aggregates user funds, allowing the platform to bulk purchase CRV tokens, convert them into veCRV, and optimize reward distribution for its liquidity providers. Consequently, users enjoy Curve’s rewards without the hassle of immobilizing their tokens for prolonged periods.
Market Snapshot
| CVX | $47 | -6.6% | $2.2 billion |
Data from CoinGecko confirms Convex’s native token (CVX) was trading around $47, experiencing a 6.6% dip over the preceding day, with the network’s market valuation exceeding $2.2 billion.