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Profitability app Convex Finance surpassed $ 20 billion in total locked value (TVL) this Sunday, just days after TVL became the second largest decentralized finance (DeFi) protocol.
DeFi projects rely on smart contracts instead of intermediaries for financial services such as lending, trading and borrowing.
DeFi Llama data shows the platform only locked down $ 68 million after launching in May 2021, surpassing older projects in the following months. It took the project a month to raise $ 1 billion and five months to reach $ 10 billion. The increased demand for the product has resulted in a $ 10 billion increase in liquidity over the past two months.
Convex allows users to access liquidity and receive commissions from the Ethereum-based Curve Finance stablecoin exchange, the largest DeFi protocol with TVL at $ 23 billion.
Curve Tokens (CRV) are issued as crop rewards to liquidity providers on Curve Finance and can be converted to CRV with Deposited Votes (veCRV). Having veCRV allows users to participate in platform governance, earn higher rewards and fees, and receive airdrops.
Tokens are pegged in time, which means that users have an incentive to block their CRVs for a long time in order to receive more veCRV and more platform rewards. However, this mechanism effectively blocks liquidity, creating opportunity costs for users.
To solve this problem, Convex is bundling all user assets together so that it can buy Curve tokens, convert them to veCRV, and maximize rewards for its liquidity providers. This allows Convex users to receive Curve Rewards without blocking Curve tokens for extended periods of time.
Convex’s own tokens (CVX) are trading at $ 47 at the time of writing, down 6.6% in the last 24 hours. According to CoinGecko, the network has a market capitalization of over $ 2.2 billion.
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