What is Convex Finance?
Convex Finance is a yield optimizer for Curve Finance.
Background
An anonymous group of founders released Convex Finance on Ethereum in April 2021.
How Does It Work
Liquidity providers on Curve can deposit their Curve LP tokens on Convex to earn trading fees alongside boosted CRV and CVX token rewards. Users can also stake CRV tokens on Convex to earn trading fees from Curve share of the platform fees from Convex, alongside CVX token rewards. CRV stakers also receive a liquid staking derivative called cvxCRV tokens, allowing them to profit from staking CRV without the need to lock up CRV tokens. While Convex Finance primarily focuses on Curve, it aims to optimize yield and rewards for any platform with locked native tokens. As such, the project has also expanded to offer similar services for Frax Finance.
CVX is the fee-sharing and governance token of Convex Finance. Vote-locked CVX tokens receive the voting rights of CRV tokens and get to allocate gauge weight votes on Curve. CVX can also be staked to earn a share of CRV from liquidity providers, paid as cvxCRV tokens. Vote-locked CVX tokens are eligible for additional fees from liquidity providers as well.
Key Takeaways
- Convex Finance is a yield optimizer for any protocol with locked native tokens but initially supported Curve.
- An anonymous team with in-depth knowledge of how Curve works founded Convex Finance in April 2021.
- Convex Finance allows users to optimize their yield from protocols while also keeping tokens liquid.
