Convex Continues Compounding CRV

AUG 27, 2021 • 9 Min Read

DISCLOSURE: DELPHI VENTURES HOLDS YFI. MEMBERS OF OUR TEAM ALSO HOLD YFI & CRV. THESE STATEMENTS ARE INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY, AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.

Key Takeaways

  • Convex’s TVL has grown to $6.6b in 3 months via a synergistic relationship with Curve, creating one of DeFi’s most powerful flywheels.

  • Convex controls ~30% of Curve governance and is currently farming ~73% of all CRV LP emissions.

  • Importantly, those who deposit their CRV into Convex are surrendering control of it forever. The liquid staking token they receive in return, cvxCRV, can be sold or staked but there’s no guarantee that it will be able to maintain its price peg to CRV, although there are incentives in place to support it.

  • Aggregators like Yearn, Badger and Harvest have deployed anywhere between 25-54% of their AUM into Convex to stay competitive on Curve-based strategies. Badger stands out as their implementation is very beneficial for the Convex flywheel.

  • In addition to the yield from Curve, CVX supply emissions are heavily subsidizing Convex’s top pools. Interestingly, the CVX emission schedule is not a function of time but is rather determined by the amount of CRV rewards farmed by Convex. If Convex continues to capture ~73% of all CRV LP emissions then, according to our projections, ~92% of the total CVX supply could be emitted by this time next year.

  • Convex has been able to capture meaningful value thus far from Curve, generating cumulative protocol revenue of over $11.3m in only 3 months. 5% of all yield earned is paid to CVX stakers which, when current figures are annualized, is roughly $18.4m a year. This equates to a fully diluted P/E of 38.5.

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