Is the Convex Flywheel Sustainable?

FEB 07, 2022 • 17 Min Read

DISCLOSURE: DELPHI VENTURES HAS INVESTED IN LUNA (TERRA). MEMBERS OF OUR TEAM ALSO OWN CVX, CRV, YFI, RBN, FXS, AND UNI. 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

  • Through their symbiotic relationship, Convex has helped propel Curve to the largest DeFi protocol by total value locked, amassing over $18B in deposits.

  • Annualized bribes per vlCVX have grown from $1.76 in the first epoch to over $22.72 at their peak in Dec., representing a 46% APR on vlCVX; over $76M has been collected in bribes since inception.

  • During Jan., an average of 92% of CRV had been farmed via Convex. If we project out a 90% Convex farm rate into the future, CVX emissions will be largely depleted within 12 months (47.5M/50M set for LPs).

  • The launch of Uniswap v3 impacted Curve’s market share over stablecoin swaps, bringing the market share for Ethereum stablecoin volume to roughly 50/50 between the two. However, the main purpose of Curve’s liquidity is to reinforce the stability of stablecoin pegs rather than facilitate volume. And as such, there is room for both products to flourish.

  • Convex’s future is tied to its ability to grow beyond Curve. And this has already begun with the creation of cvxFXS — a liquid staking derivative for Frax which already controls 14.8% of all veFXS.

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