What Is Convex Finance? All You Need to Know About CVX

Decentralized finance (DeFi) has emerged as one of the most disruptive innovations in the blockchain industry, offering financial services that are accessible to anyone with an internet connection. DeFi protocols are built on open-source code and run on decentralized networks, allowing users to interact with them in a trustless and permissionless manner.

As the DeFi ecosystem continues to grow, a new class of “secondary” protocols has emerged. These protocols aim to maximize the rewards of the main DeFi protocols and offer additional incentives to users. One such protocol is Convex Finance (CVX), a yield optimizer built on top of Curve Finance.

Convex Finance provides boosted staking rewards for CRV token holders and Curve liquidity providers, incentivizing long-term staking and providing a sustainable income stream. By maximizing the yield of Curve Finance, Convex Finance is helping to drive the growth of DeFi and expand the use cases for blockchain technology.

What Is Convex Finance (CVX)?

Convex Finance was launched in May 2021 as a community-driven project focused on enhancing the Curve Finance protocol. The platform was created by a group of anonymous developers and quickly gained traction within the DeFi ecosystem due to its innovative yield optimization strategies. It is assumed the founder(s) came from a software development background, though this is yet to be officially verified.

Convex Finance was able to secure its whitelisting by submitting a proposal that requested participation in Curve governance. As a result of the high volume of CRV being deposited on Convex, the platform now custodies a significant portion of the tokens that allow holders to participate in Curve’s governance.

Convex Finance has become a cornerstone of the DeFi ecosystem, providing critical infrastructure for many other DeFi applications. Its focus on enhancing the yield optimization strategies of Curve Finance has helped to drive the growth of DeFi and expand the use cases for blockchain technology. As of April 2023, it has over $3.7 billion in total value locked (TVL) and is one of the top DeFi platforms in terms of TVL.

How Does Convex Finance Work? Liquidity Providing and Staking

One key aspect of the DeFi ecosystem is yield optimization protocols, which aim to maximize returns for users by incentivizing them to stake their assets and participate in governance. Convex Finance (CVX) is one such protocol that is quickly gaining traction in the DeFi space.

As previously mentioned, Convex Finance is inextricably linked to Curve, as it is a platform created specifically to maximize Curve’s income and improve its user experience. By allowing users to stake CRV tokens and provide liquidity to the Curve Finance protocol, Convex is able to enhance rewards for its users and drive increased liquidity on the Curve platform.

There are therefore two main ways to boost Curve rewards:

1. Staking: The essential requirement to proceed is to own CRV tokens, which is the Curve coin. Upon entering Convex, there is a section dedicated to staking. What users should do is:

• Convert CRV tokens into cvxCRV (Convex CRV, a synthetic with a value linked and almost identical to CRV). The conversion from CRV to cvxCRV is irreversible: users cannot get the CRV back from Convex. However, other platforms are available that allow for swapping.
• Stake cvxCRV to obtain different rewards.

These are divided into:

• Classic rewards: Rewards that users would also get on Curve (such as fees and airdrops).
• Additional Convex rewards: 10% of the share of the Curve pool that Convex belongs to, plus the CVX token.

1. Liquidity Providing: By providing liquidity, users can earn trading fees on the platform, as well as yield farming rewards from Convex. In addition, Convex also offers boosted rewards for liquidity providers who stake their liquidity provider (LP) tokens on the Convex platform. This incentivizes users to provide more liquidity, which can lead to a deeper and more liquid market on Curve. Overall, liquidity provision on Convex Finance can be a profitable and rewarding experience for users who are willing to contribute to the ecosystem.

In addition, Convex Finance offers a simple way to monitor and claim rewards through their rewards page. Of particular interest is the CVX token, which can be exchanged or staked to generate “yield on yield.” To stake CVX, users can go to the “Lock CVX” page and deposit their tokens using the familiar interface. The staking period is 16 weeks (counted from Thursday) plus an additional 7 days. While the annual percentage rate (APR) is not particularly high, it still represents an additional income.

What Is the CVX Token?

CVX is the native utility token of the Convex Finance platform. Its maximum supply is 100 million units, of which 76,320,938 (76%) are already in circulation (April 2023). It has several use cases within the ecosystem, including providing holders with discounted fees on transaction costs, granting voting rights in governance decisions, and serving as a means of incentivizing liquidity providers. In addition, CVX is used as the main staking asset for boosting rewards on Curve Finance pools, allowing users to earn additional income from their holdings.

The token was launched in May 2021, and since then, it has gained significant popularity among the DeFi community due to its unique value proposition and potential for generating passive income. CVX is an ERC-20 token and is traded on several major decentralized exchanges, including Uniswap and SushiSwap.

The supply of CVX tokens was distributed as follows:

• 50% Curve LP Rewards
• 25% Liquidity Mining
• 10% Team
• 9.7% Treasury
• 3.3% Investors
• 2% Airdrop

Source: ConvexFinance

Convex Finance Ecosystem

Convex Finance operates within the wider DeFi ecosystem, primarily focused on yield farming and liquidity provision. As such, it is compatible with a range of wallets, including Metamask and Ledger.

In addition to its core functionality, Convex has also spawned a number of other projects and initiatives. One such project is the Curve DAO, of which Convex is a significant participant. The Curve DAO aims to decentralize control of the Curve protocol and give more power to its users. The token CVX has also been integrated with other DeFi projects, such as Aave, Uniswap, and SushiSwap.

Furthermore, Convex has launched a grants program to support the development of other DeFi projects. This program aims to fund projects that will benefit the wider DeFi community and help to expand the ecosystem. Convex also supports community-driven initiatives through its governance system, which allows CVX holders to vote on proposals and shape the future direction of the protocol.

Overall, the Convex Finance ecosystem is designed to facilitate seamless interaction with other DeFi projects and promote collaboration within the wider DeFi community. Its various projects and initiatives are aimed at promoting the growth and development of DeFi as a whole.

Is Convex Finance a Good Investment?

Investing in yield-boosting platforms like Convex Finance can potentially be lucrative, but it also carries risks. As with any investment, it is important to do your own research and assess your risk tolerance before making any decisions. However, these types of platforms have gained popularity in the DeFi space due to their ability to provide higher yields than traditional finance. As long as they are built on a solid foundation and have a moderate appetite for risk, yield-boosting platforms like Convex Finance could play an important role in the future of decentralized finance. It is important to note that yield-boosting platforms like Convex Finance are not without risks, as with any investment. Investors should always do their own research and assess their risk tolerance before investing in any platform or token.

Convex Finance has shown promising growth since its launch, and its focus on increasing rewards for liquidity providers has attracted many users. As the DeFi space continues to evolve, platforms like Convex Finance will likely play an important role in providing investors with attractive opportunities to earn yield on their assets.

How to Own CVX?

To own CVX, you can use the services of a centralized crypto exchange. Start by creating a Gate.io account, and get it verified and funded. Then you are ready to go through the steps to buy CVX.

News on Convex Finance

As announced on March 9, 2023, Convex Finance has expanded its ecosystem by launching on Polygon. This expansion allows Convex to offer a new range of services to its users, including lower fees, faster transaction times, and access to the expanding Polygon ecosystem.

Furthermore, the move to Polygon is expected to help Convex further foster its mission of creating a more decentralized and accessible financial system for all. In addition to the launch on Polygon, Convex also introduced CVX-FXS staking, providing yet another opportunity for users to earn rewards on their investments. These developments mark another step forward in Convex’s journey to provide a user-friendly and secure platform for yield farming and liquidity provision.

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