DeFi Tool Convex to Make Changes to Staking Service for Curve Token Rewards

Curve tokens (CRV) are issued as yield farming rewards to liquidity providers on Curve Finance, and can be converted into vote-escrowed CRV (veCRV).

AccessTimeIconJan 4, 2023 at 8:37 a.m. UTC
Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.

Convex Finance is making updates to its staking system on the Curve protocol that will allow users to earn more rewards and have more control over what rewards they receive.

Convex Finance is also proposing changes to the fees on the platform and redirecting some of the existing rewards to provide more incentives for staking.

These updates will be applied to the cvxCRV – which refers to the Convex and Curve token derivative staking system on Curve. The updates will allow users to add additional incentives to their cvxCRV staking, as well as adjust their rewards to include a mix of curve (CRV) and convex (CVX) tokens.

Convex allows users to access liquidity and earn fees from Ethereum-based stablecoin exchange Curve Finance, once the largest DeFi protocols with a total value locked (TVL) of $23 billion. As of Wednesday, Curve’s TVL had dropped to $3.2 billion, in line with a broader market fall. Convex locks over $3 billion and held over $21 billion during its 2021 lifetime peak.

Curve tokens (CRV) are issued as yield farming rewards to liquidity providers on Curve Finance, and can be converted into vote-escrowed CRV (veCRV). Holding veCRV allows users to participate in platform governance, earn higher rewards and fees and receive airdrops.

The tokens are time-locked, meaning users are incentivized to lock their CRV for a long time to receive more veCRV and platform rewards. However, this mechanism effectively locks up liquidity, creating opportunity costs for users.

To solve this problem, Convex pools all user assets together so that it can purchase curve tokens, convert them into veCRV and maximize rewards for its liquidity providers. This allows Convex users to receive Curve rewards without locking up curve tokens for lengthy periods.

Meanwhile, Convex also proposed fee structure changes that will see 2% of platform fees used to acquire and stake existing cvxCRV toward the new wrapper contract. This will increase the wrapper's overall rewards and remove cvxCRV from circulation – which could increase the value of tokens held by investors.



Read more about

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.


Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.


CoinDesk - Unknown

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.