Overview
Convex Finance lets Curve liquidity providers and CRV stakers earn boosted rewards without locking CRV themselves. Launched in May 2021, it concentrates Curve governance power through the CVX token. Convex became one of the largest holders of veCRV and a hub of DeFi yield.
How It Works
Curve LPs deposit their LP tokens into Convex, which stakes them on their behalf and returns a boosted share of trading fees and CRV emissions. CRV holders can deposit CRV into Convex to earn cvxCRV and receive the benefits of voting power without a lock. Convex's accumulated veCRV lets CVX holders influence Curve gauge weights.
Token & Funding
CVX is the governance token of Convex, and cvxCRV represents deposited CRV with voting influence. The protocol earns fees from the Curve rewards it captures. There was no VC sale; CVX was distributed to early users and through liquidity incentives.
Risks & Considerations
Convex concentrates risk through its dependence on Curve and its smart contracts, and it was affected by the 2022 Curve Vyper reentrancy incident. Users' positions depend on the ongoing security of both protocols. The concentration of veCRV voting power in one platform has also raised governance concerns.