Degens rang in the new year with an announcement too hot for 2022.
We’ll get to what it is… but first, why it matters.
Context
Most of DeFi are well aware of Convex by this point. Particularly for veTokens, we often see new projects likened to “the Convex for ___."
Convex has been stacking $CRV for a long time. The team has accumulated an enviable lead in the wrapped Curve wars.
However, toward the close of 2022, Convex momentum had stalled somewhat. The stake of veCRV owned by Convex was dropping.
Staking $CRV for $cvxCRV was losing its luster. The effective 13% APR saw strong competition given that Stake DAO’s $sdCRV and Yearn’s $yCRV were offering more attractive yield.
For more depths on recent context around the wrapped $CRV wars:
It totaled up to a situation where Convex was losing ground. The team still had a sufficient advantage they might well have been able to twiddle their thumbs for a few more years before they had to worry. Instead, they got to work.
$cvxCRV v2
The feature list of $cvxCRV is a welcome list of great new features
Important to note that this is not replacing the $cvxCRV token — this functions as a new staking wrapper.
In a way it functions to fix up some of the outdated elements of the immutable first version — does this mean the “Convex of Convex” is Convex itself?
The wrapper contract has a lot of implications, some of them quite big. A few of our faves:
Adjustable Rewards:
Staked cvxCRV currently earns a mix of $CRV, $CVX and $3CRV. The new version will let you withdraw a different blend.
This has some interesting game theory baked into it, because stakers can dilute these yields.
ERC-20 compatibility
Making this into a token means you can stake your $cvxCRV and still use it to ape.
Effect
That 2023 candle on the cvxCRV peg is something to behodl.
The announcement was enough to turn skeptics…
…into, shall we say, cautious optimists.
The new changes are proposed to be funded by a 2% of fee distributions, reallocated from elsewhere in the ecosystem.
Given Convex’s size (about 85% of Curve liquidity is currently restaked onto Convex), this could total up to significant incentives to stake $cvxCRV. Under the hood, the raw numbers would appear to boost the APR.
As part of the announcement, Convex also announced it will at some point in the future be migrating liquidity to a new pool which will contain a price oracle.
The team appears serious about winning the staked Curve Wars, including functionality to add additional incentives for $cvxCRV stakers, and adding:
Additional cvxCRV staking mechanics are also possible in the future.
The Curve Wars… are they back? Or did they never leave?
Disclaimers! Author has exposure to assets mentioned including $CRV, $cvxCRV, $sdCRV and $yCRV