Convex Finance Launches - Initial Reactions
The Curve decentralized exchange ecosystem keeps growing
This is part two so if you’re unfamiliar with Convex Finance please read my first article and implications on Curve here: Curve and DeFi Printer Go BRRR with Convex Finance
Off to the races!
I have been asking ‘Wen launch’ for weeks in the Convex Finance Discord, and when I saw this tweet, I ran to my laptop! If you’re a veCRV holder, you can claim your CVX tokens. Thank you Convex Finance, you’ve just made a lot of new friends!
The Convex Finance front end is very well designed, highly performant, and easy to navigate if you’re familiar with Curve pools and providing liquidity in DeFi. It’s brilliant they actually provide the Ethereum contract addresses for every token and pool. If Convex’s entire premise is to deliver the value of Curve without the technical challenges, token understanding, and math, they appear to be off on a ferocious start.
Gas, gas, gas (Gwei, gwei, gwei…)
Here’s what I have done so far with Convex.
Staked my CVX tokens to earn a share of protocol fees. The CVX token is brilliant and will see high demand over time. The Convex DApp offers max boost on Curve deposits without locking up huge amounts of CRV
which should increase tokens staked in Curve (especially at these prices)
which leads to higher fees to Convex token stakers
which leads to a higher CVX token price
Another benefit of earning cvxCRV is it generates yield when it’s staked on Convex (from Curve protocol fees-paid in 3pool + 10% of all LP CRV earnings + CVX tokens) - POSITIVE FEEDBACK LOOP!
Earning more CVX - LP in cvxCRV/CRV Sushi pool
Bought more CRV and locked it in Convex for cvxCRV
One annoyance with this process: locking CRV gives cvxCRV and automatically stakes it, rather than leaving it in your wallet. Convex should allow the user the option to LP rather than having to unstake to save some gas, especially at the early stage where cvxCRV liquidity is essential and yield farming is important.
EDIT:
Provided 50% CRV and 50% cvxCRV liquidity in Sushiswap for additional CVX rewards. This is currently yielding 300% APY.
This was an extremely expensive process. Thankfully ETH is ‘cheap’ today.
Contract approvals - $15x5 = $75
Swaps - $50x1 = $50
Stakes - $70x2 + $250 = $390
Deposited stablecoins for max boost
Borrowed USDC from Aave - currently costs 3.96% APY, but earns 3.52% APY in the form of staked Aave tokens
Staked USDC in the Curve 3pool - DO NOT STAKE YOUR LP TOKENS IN GAGUE
Staked Curve LP tokens in Convex Finance to earn max Curve boosts paid in CRV, and CVX tokens (~35% APY)
This was also an expensive process (~$300 all told) so I’m planning on setting it and forgetting it
What’s next?
I expect Convex to become a leading DeFi protocol with billions in liquidity due to its simplicity, the highest yield and lowest risk on stablecoins in DeFi, and users from retail all the way up to large institutions and DAO’s. However, for Convex stablecoin deposits to overtake yearn, there are some serious needs.
Retail investors cannot afford this protocol. Unless you are moving 5 figures around, or have an investment horizon of years, Convex is going to have a problem with Ethereum fees. The answer to this is moving to Polygon. Polygon already has a massive amount of liquidity, a Curve instance deployed, and has emerged as the top Ethereum side chain.
Easy integration with Zapper, Zerion, Dharma, and Argent will reduce the number of clicks for staking tokens, and onboard more users.
An auto-compounding option for earnings would be cool! This may require some work with the Curve protocol, but if more earned CRV was automatically deposited for cvxCRV that would save on gas.
For large institutions (they’re coming) and DAOs to get involved, there needs to be much deeper liquidity for the CVX token
Additional audits, from more well known sources (e.g. Peckshield, Quantstamp), are essential.
Governance - The team has not formally announced any plans and will rely on Curve for now. Diversity of opinion and brain share have proven to be extremely beneficial for DeFi protocols and I’d encourage decentralized governance.