Convex Finance (CVX) is a liquidity protocol (LP) built to make money from another liquidity protocol, Curve Finance (CRV).
To explain users stake Curve (CRV) on Convex’s platform to earn Curve trading fees. Users can even stake and earn CRV on CVX tokens and Curve trading fees. Holders can stake CVX rewards back to the platform to earn more platform tokens.
CRV stakers can deposit any amount of CRV tokens into Convex. They can receive cvxCRV tokens for providing CRV. All users can earn Curve platform trading fees. Users earn the fees as a share of boosted CRV.
How Convex Finance profits from Liquidity Mining
Liquidity providers deposit Curve tokens into the Convex app. In the app, the CRV tokens automatically earn CRV when they apply the group boost.
They pool earnings from CRV stakers to create the boost. Users can earn CRV over time and claim rewards when they want. Plus, liquidity providers can withdraw Curve from Convex whenever they want.
They claim Convex had earned $408.20million in total revenue, or 316.3 million CRV from a $4.071 billion Total Locked Value on 25 January 2023. Convex was offering a 3.07% annual percentage rate (APR) on 25 January 2023. Users have to lock Convex for 16 weeks and four days to get that rate.
Users who stake CRV on Convex could receive a maximum vAPR of 19.74% to 15.52% on 25 January 2023.
What Value does Convex Finance (CVX) offer?
Convex Finance (CVX) was CoinMarketCap’s 85th ranked cryptocurrency on 25 January 2023.
CoinMarketCap gave Convex a $5.31 Coin Price, a $392.763 million Market Capitalization, a Fully Diluted Market Cap of $531.474 million, a $4.104 billion Total Value Locked, and an $858.171 million 24-Hour Market Value on 22 January 2023.
Convex had a $5.842 million Centralized Exchange (CEX) Volume and a $3.013million Decentralized Exchange (DEX) Volume on 25 January 2023. They based those numbers on a 73.901 million CVX Circulating Supply, a 100 million CVX Maximum Supply, and a 97 million CVX Total Supply.
Hence, Convex has value as both a cryptocurrency and a DeFi protocol.
Convex vs Curve Finance (CRX)
Curve Finance (CRX) is an automatic market maker (AMM) and decentralized finance (DeFi) ecosystem. This ecosystem comprises the Curve StableSwap and Curve Crypto Pools.
The Curve StableSwap is an AMM for stablecoins that lets users swap stableocoins. StableSwap creates an automated liquidity market for stablecoins. They claim Curve can build multi-stablecoin accounts that can offer up to 300% APR.
The purpose of StableSwap is to give stablecoins liquidity. Liquidity is the ability to convert assets into cash. Stablecoin liquidity is important because stablecoins are cryptocurrencies that make payment in fiat currencies. For example, the Tether (USDT) stablecoin makes payment in US dollars when you spend it.
Curve Crypto Pools or Curve Liquidity pools create liquidity for unrelated assets. For example, liquidity for swaps of Binance (BNB) to Tether (USDT).
Convex (CVX) provides another way to generate liquidity from Curve and cash in on Curve. Thus, I view Convex as an alternative to Curve and a way to enhance Curve (CRX). I think Curve’s success drives Convex’s value.
What Value Does Curve (CRX) Offer?
Curve is popular it had $4.482 billion in Total Deposits and a Daily Volume of $358.230 million on 25 January 2023.
Moreover, CoinMarketCap named the CurveDAO Token (CVX) its 61st ranked cryptocurrency on 25 January 2022. CoinMarketCap gave Curve a $1.08 Coin Price, a $754.597 million Market Cap, a $3.522 billion Fully Diluted Market Cap, a $4.590 billion Total Value Locked, and a $108.192 million 24-Hour Market Volume of 25 January 2023.
Curve had a $90.745 million Centralized Exchange Volume (CEX) and a $17.482 million Decentralized Exchange (DEX) volume on 25 January 2023. They base those numbers on a Circulating Supply of 701.696 million CRV, a Maximum Supply of 3.303 billion CRV, and a 1.890 billion CRV Total Supply.
If are seeking an automatic market maker or DeFi protocol for speculation, both CRX and CVX are worth examining. I think each of these tokens could make money from liquidity and staking.