What is CVX (Convex Finance)?
Convex Finance (CVX) is an innovative decentralized finance (DeFi) protocol developed as a layer on top of Curve Finance, the decentralized exchange with the largest total lock-up volume in the world. The fundamental purpose of the Convex project is to optimize the returns of Curve liquidity providers and CRV token stakers by providing them with additional DeFi returns. The Convex project’s model revolves around enabling Curve liquidity providers to earn a portion of trading fees on the Curve platform without directly staking liquidity within it. Conversely, Liquidity Providers (LPs) can stake their funds into the Convex platform to earn higher CRV returns and liquidity mining rewards. This mechanism provides CRV stakers with greater capital efficiency and enhances Convex’s role as a key competitor in the so-called “Curve Wars.”
The “Curve Wars” are a testament to the intense competition between DeFi protocols like Convex and Yearn Finance as they try to lock in as much Curve liquidity as possible. Curve platform liquidity is a coveted asset as protocols holding the majority of CRV tokens have greater influence over Curve’s interest rates. Given that the Curve platform is the DEX with the largest lock-up volume (TVL) in the world, it is a protocol that can successfully absorb liquidity, thereby significantly expanding its influence and growth potential.
The Convex platform focuses on simplicity and functionality. Its platform offers increased staking rewards for two main user types: CRV token holders, who can stake their tokens into cvxCRV, and Curve LP token holders, who can stake and boost their tokens. Convex’s ability to offer higher rewards makes it a compelling alternative to other platforms like Curve and Yearn, where users might otherwise stake their tokens.