Convex Finance (CVX): Providing Boosted CRV & FXS Yields

Curve Finance is a DEX, or decentralized exchange, well-known for permitting digital asset exchanges with no permissions needed. As exceptional as that is, Curve’s design can be confusing and cumbersome to navigate. In fact, this characteristic may prevent some who are new to DeFi from using it. Convex Finance works as a yield optimizer that benefits Curve’s liquidity providers and token holders. With Convex, DeFi newcomers can generate passive income with greater ease.

What Is Convex Finance?

Convex Finance is a well-designed platform that enables users to optimize the benefits of holding their CRV tokens, native to the Curve Finance platform. Rewards and fees can be paid out to CRV token holders to produce income without the requirement of locking their tokens.

Liquidity providers generate CRV tokens by locking them on Curve Finance, using a complicated platform. The Convex Finance platform is designed to help long-term CRV token holders reap the greatest return from their holdings without locking them. With this easier process, boosted rewards are available via the platform through staking and by providing liquidity. Those who earn rewards through Convex Finance do so in the form of its native cryptocurrency, CVX. Convex Finance’s benefits are available to anyone, and returns are optimized with a minimal performance fee and no withdrawal fee.

History of Convex Finance

Convex Finance was specifically designed to accommodate Curve Finance’s functions. Curve was established in January 2020 as a stablecoin liquidity aggregator. It has a complicated transaction process that can be cumbersome for those who are relatively unfamiliar with the process. In simple words, Curve Finance requires a large amount of liquidity provided by liquidity providers in order to attain a successful exchange volume. In return, liquidity providers are given yield farming rewards in the form of CRV tokens. The more CRV tokens one locks, the more they can boost their CRV rewards from the liquidity pool.

A year later, Convex Finance launched with the goal of allowing Curve liquidity providers to profit without locking their tokens, or having a robust knowledge of a complicated platform. Within only two weeks of its launch, its total value locked exceeded $1 billion.

What Does Convex Finance Aim to Achieve?

The developers of Convex Finance had two primary goals when it was established: To promote liquidity generation for Curve Finance, and to boost CRV rewards for liquidity providers and stakers. The well-designed platform has already proven its value to Curve liquidity providers and to Curve Finance, and it continues to be refined to offer greater value.

Increase Returns for Liquidity Providers and CRV/FXS Stakers

Requiring tokens to be locked for up to four years can be prohibitive for some investors. Convex Finance offers boosted rewards to these individuals without locking their coins. The rewards are provided in the form of CVX tokens, the native cryptocurrency of the Convex Finance platform. With no deposit or withdrawal fees, profits are maximized. CRV tokens can also be staked on Convex Finance. CRV stakers can earn a share of Curve trading fees and platform fees, and they can earn cvxCRV rewards.

Increase Liquidity of Curve Finance

The easy-to-use design of the Convex Finance platform, as well as boosted Curve staking rewards and other benefits, means increased participation with Curve Finance. Curve liquidity providers now have an option to contribute to the platform without locking tokens for years. As a result, Convex Finance has boosted the liquidity generation capabilities of Curve Finance.

How Does Convex Finance Work?

Convex Finance works on the Ethereum blockchain and supports Curve Finance and Frax Finance. To begin using Convex, Curve liquidity providers deposit their CRV tokens into the Convex Finance app. Funds are contributed to a liquidity pool, enabling token holders to start earning boosted rewards immediately. 

CRV rewards can be earned over a period of time, and claimed whenever the investor chooses. The CRV tokens can be withdrawn at the investor’s discretion without a waiting period. Curve doesn’t charge trading fees for deposits and withdrawals, or for additional incentive tokens.

Convex Finance offers boosted Curve staking rewards in the same fashion. After a staker deposits CRV tokens into the Convex Finance app, they'll receive cvxCRV tokens. Stakers will then be able to earn CVX rewards, and profit from a share of the earned Convex platform fees. Moreover, stakers can receive trading fees via the Curve 3pool platform.

Although Convex Finance was originally developed to support Curve liquidity providers and stakers, its developers have identified opportunities to apply the platform’s technologies and features to other protocols. Now Convex Finance supports another token-locking solution, Frax Finance. Its native cryptocurrency is the FXS token.

Features of Convex Finance

The sophisticated Convex Finance platform has numerous features that support its ability to receive boosted curve staking rewards, and various ways to avoid paying Curve trading and platform fees. Let’s look at some of its specific features.

Staking Curve Finance LP Tokens

As we know, locking up CRV tokens for as long as four years to earn rewards can be daunting and even a dealbreaker. Convex Finance supports staking CRV tokens without long-term locking. Investors’ tokens are pooled with other investors’ tokens in a liquidity pool, making boosted Curve staking rewards available. 

Staking cvxCRV

CRV tokens can be converted to cvxCRV tokens within the Convex Finance platform. Why would an investor want to do this, you might ask? Because by staking cvxCRV tokens, investors can profit in several ways. For example, they can receive a share of the total CRV token earnings from the platform, earn through airdrops, receive Curve trading fees and receive CVX rewards. 

Staking Frax Finance LP Tokens

Through the Convex Finance app, investors can stake Frax Finance LP tokens. While there’s no minimum staking period, stakers can qualify for boosted rewards by making a commitment of up to three years. Even without locking the tokens, investors can earn some boosted FXS rewards. CVX lockers receive 7% of the FXS earned in the form of cvxFXS. The cvxFXS stakers receive 10% of the FXS earned in the form of FXS.

Staking CVX

The Convex Finance platform also enables investors to stake their CVX tokens. In this case, stakers receive a 5% portion of all the platform’s fees in the form of cvxCRV. CVX tokens can be staked and unstaked at the investor’s discretion without incurring Curve trading fees.

Vote Locking CVX

Locking CVX tokens gives investors the opportunity to participate in gauge weight or governance voting. The tokens may be locked for a specific period of time — approximately 16 weeks. Investors can check the app to view the status and unlock date of the tokens. The tokens qualify for boosted rewards via Curve Finance.

Convex Treasury

The team at Convex Finance control over 9.7% of the CVX token supply. The tokens in the Convex Treasury benefit the platform in several ways. They can incentivize people, tokens or actions that the team has identified as having a positive impact. In the future, this aspect of the platform’s operation may shift toward community governance.

CVX Tokenomics

The maximum supply of CVX tokens is 100 million. The circulating supply is approximately 67 million, while its market cap is $372 million.

Half of the tokens’ maximum supply are allocated for CRV rewards. A quarter are tied to liquidity mining, and are distributed accordingly over four years. As stated above, the Convex Treasury holds over 9.7% of the CVX tokens. Another 10% are vested for a year by the Convex Finance team. 

One percent of the tokens are allocated for veCRV holders. These are immediately claimable through airdrop. Another 1% is for veCRV holders who whitelist Convex, and these are claimable via airdrop as well. The final 3.3% of the tokens are available to investors. The cvxCRV tokens are tokenized veCRV, and they have a 1:1 ratio with locked CRV tokens. CVX stakers are able to access their earnings via the SushiSwap application.

CVX Price Prediction

When CVX launched, its price was $6.1921 per unit. Within a few weeks, it jumped to $20.15 per unit, but in July 2021 the value dropped to $1.8823 per unit. In September of that year, Convex Finance released news that its revenue had passed the $100 million mark and that CVX vote locking would begin soon. This resulted in the price increasing to $13.73 by mid-September 2021. The CVX token price continued to rise to $40.37 in mid-November 2021 before once again dropping. After Convex Finance announced that it was now supporting Frax Finance, the token price reached a new peak of $62.69 in January 2022.

The token price has fluctuated considerably with the cryptocurrency market as a whole, but investor sentiment has remained bullish overall. While its current price is $5.51, TechNewsLeader and DigitalCoinPrice predict that the CVX price will hit double digits by 2023. TechNewsLeader believes the CVX price will reach $230.89 by 2030, while less optimistic DigitalCoinPrice believes that CVX’s price will reach only $77.84 by 2030.

Since many analysts maintain a bullish view of CVX for the next several years, it’s important to note that numerous factors impact token value. In addition, values tend to fluctuate dramatically from time to time. With this in mind, investors might want to hold their tokens through a dip to avoid taking a loss.

Where to Buy CVX

You can purchase CVX through many popular exchange platforms. CVX tokens are also available on Bybit as perpetual contracts. Through Bybit, you can deposit fiat in exchange for a variety of tokens. You can also analyze historical pricing and trends with ease through the well-designed Bybit platform. Simply register for an account to get started.

Tokens can be stored through the Convex Finance app, or wallets such as MetaMask, Ledger, Trezor, Trust and others. Also consider that CVX can be staked and unstaked through the Convex Finance app without fees, and investors can qualify for boosted CRV rewards.

Is CVX a Good Investment?

Convex Finance serves an important function by supporting Curve and Frax investments and offering boosted rewards to liquidity providers and stakers. It has exceptional potential because of its ability to support other similar services in the future. These may be the two primary reasons why the value of CVX tokens has had an overall upward trajectory since its launch, and why its growing value may continue going forward.

It’s important to note that the functionality of CVX is directly linked to CRV and FRX. Rather than requiring stakers to commit to long-term staking to make money through Curve and Frax, Convex Finance allows them to profit — and even to earn boosted rewards through CRV and FXS without a long-term commitment of their tokens. This means that investors can use CVX for both short-term and long-term investments without incurring expensive fees, which makes CVX a reasonable investment for both short-term and long-term holds.

However, the CVX token value does experience considerable fluctuations, which is common in the cryptocurrency market. With this in mind, there may be times when investors see value dips. This could necessitate holding the tokens until the value once again increases to avoid taking a loss.

The Future of Convex Finance

Convex Finance has been well-received by investors since its inception. It enables access to the benefits of Curve Finance and Frax without notable drawbacks. For example, it doen’t require a years-long staking commitment or have expensive fees associated with it. The Convex Finance platform is structured such that it can serve other similar entities through its services. By doing so, it can help them to increase their liquidity by supporting investor activity. The platform was originally designed to support Curve Finance, and it’s already expanded to also support Frax. Going forward, Convex Finance may continue to expand in this way.

In addition to growth, Convex Finance may offer greater governance to its token holders. Currently, the Convex Treasury is controlled by the Convex team. The intent is to eventually increase the general governance of treasury control to voting token holders.

Convex Finance is a relatively new entity with ample room for continued growth and improvement. Aware of the platform’s flexibility, the Convex team is actively moving toward identifying new opportunities.

Closing Thoughts

From eliminating Curve trading fees to optimizing CRV rewards for its users, Convex Finance offers significant advantages for its token holders. Activity on the platform is significant, and it has been growing steadily since the platform’s inception. With boosted rewards and other benefits available now for Frax, plus the potential for additional growth, Convex Finance is a platform to watch.