Authored by Wu Huo Qiu Jiao Zhu
Published by Baihua Blockchain
Recent data shows that on-chain NFT sales have surpassed $19 billion. Musicians, NBA stars, and various sectors worldwide are diving into NFTs. Beyond the NFT market, fierce competition is spreading across other areas in the crypto space.
A months-long liquidity war centered around Curve has been raging largely unnoticed. Today, we pull back the curtain on this conflict. The key players include:
- Curve
- Convex
- Frax
- Mochi (short-lived)
- DOPEX
- BTRFLY
This article focuses on Curve and Convex, with the remaining players to be discussed later.
1. What Is Curve?
Initially, Curve emerged as a stablecoin swap platform. Its simple interface and modest user base belied its groundbreaking algorithm, which enabled significantly lower slippage compared to Uniswap. Early adopters viewed Curve as a supplement to Uniswap—a playground for large-scale stablecoin swaps.
As Curve evolved, it introduced liquidity mining rewards, attracting yield aggregators like Yearn Finance. However, rampant "farm-and-dump" strategies drove CRV prices down.
Curve’s attempts to diversify—such as introducing homogenous token pools (e.g., stETH via Lido) and partnering with Synthetix for near-zero-slippage BTC/ETH swaps—failed to boost adoption. Curve remained primarily a trading hub for whales and a liquidity feeder for yield pools.
Then came algorithmic stablecoins:
- Frax (FXS)
- MIM (Spell)
- UST (Luna)
- alUSD (Alchemix)
- LUSD (Liquity)
These projects sparked the Curve Wars, competing fiercely for Curve’s reward emissions.
How Curve’s Emission Model Works
1. What Is veCRV?
- veCRV is obtained by locking CRV.
- 1 CRV locked for 1 year = 0.25 veCRV.
- Max lock: 4 years = 1 veCRV.
2. Why Does veCRV Matter?
- Fee sharing from Curve.
- Airdrops from Curve forks (e.g., EPS).
- Boosted LP rewards (up to 2.5x).
But the most critical function: Governance.
- Weekly votes determine CRV emission weights per pool.
- Higher APY → More LP liquidity → Better depth & lower slippage.
Conclusion: veCRV is the lifeblood of algorithmic stablecoins, dictating their peg stability and adoption.
2. Convex: The Curve Power Consolidator
DeFi’s specialty? Nested protocols (think "Russian dolls").
Convex is a vertical management layer for Curve. Instead of manually locking CRV, voting, and claiming rewards, users deposit CRV into Convex, which:
- Auto-locks CRV for 4 years.
- Converts veCRV into cvxCRV (higher yield).
- Offers liquidity via cvxCRV/CRV pools.
But there’s a catch: You forfeit governance rights.
Who Controls Convex’s veCRV?
- CVX holders lock tokens for 16 weeks, receiving vlCVX.
- vlCVX directs veCRV votes for Curve pool rewards.
Result: Owning CVX = Indirect veCRV control.
Why? Buying CVX is cheaper than acquiring CRV/veCRV directly. Thus, CVX prices have surged.
Enter Votium
- A vlCVX governance marketplace.
- Projects bribe vlCVX holders to vote in their favor.
Key Takeaways
- veCRV = The "Helen of Troy" in DeFi—everyone wants it.
- Convex centralizes veCRV voting power via CVX/vlCVX.
- Next: Frax, Mochi, DOPEX, and BTRFLY’s roles in the Curve Wars.
FAQ
Q: Why is veCRV governance critical?
A: It dictates Curve pool APYs, which directly impact stablecoin peg stability.
Q: What’s Convex’s advantage?
A: It simplifies veCRV management while maximizing yields.
Q: Who benefits most from CVX?
A: Protocols needing veCRV votes (e.g., Frax, MIM issuers).
Disclaimer: This article represents the author’s views, not financial advice. Always comply with local regulations.
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