A Look at Convex's Business Model and a Looming Catalyst

Introduction

Yield farming, or at least some form of token-based bootstrapping, has become a core component of every project’s go-to-market strategy. Protocols actively think about how to best employ game theory to attract users. At the same time, DeFi summer taught us that incentives and game theory aren’t enough to sustain a project. At the end of the day, you need to build something there’s genuine and organic demand for.

Curve successfully integrated its novel veToken model with its token incentives, making it one of the leading decentralized exchanges (DEXs) in the space. Other protocols followed suit by finding unique ways to compose on top of Curve.

Convex has become a cornerstone protocol in DeFi, serving as the go-to platform for yield optimization that boosts liquidity providers’ yields in Curve and Frax. Its unique business model enables depositors to receive boosted yields in exchange for a portion of the yield earned.

A business model that allows depositors to receive boosted yields in return for a part of yields earned has propelled Convex to be one of the top five protocols in total value locked (TVL). Additionally, with the Curve stablecoin (crvUSD) coming up, it could potentially be a catalyst to propel Convex further.

In this update, we will delve into Convex’s metrics, its current dominance on Curve, its business model’s performance, and how crvUSD could potentially serve as a catalyst for further growth.

Convex Dominates Curve

To receive boosted yields on Curve, liquidity providers (LPs) must hold veCRV, which requires CRV to be locked for up to 4 years. This requirement makes it unattractive for many LPs. With Convex, LPs can receive