Author: 71sim12
Resource adapted from official Convex sources: convexfinance.com, Convex Docs & Blog
Convex is a complementary protocol built on top of the Curve AMM, allowing Liquidity Providers (LPs) and Curve investors to maximize their yield.
When Curve holders deposit their CRV tokens into the Convex protocol, their deposited tokens will be held by Convex in perpetuity.
If an investor decides to deposit, he will receive boosted yield on their CRV tokens and cvxCRV at a 1:1 ratio (pegged to CRV token).
CVX takes these deposited CRV tokens and locks them within Curve. In effect, the investor is locking CRV tokens for increased yield, whilst giving up governance rights to Convex.
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CVX has its own version of a governance token, dubbed vlCVX (or vote-locked CVX), which is another non-transferrable token that is minted upon locking CVX into the Convex protocol. Vote-locked CVX is used to vote on the governance decision as well as directing locked veCRV votes. At the time of this writing, vlCVX controls roughly 5.5 veCRV votes.
Due to the nature of the CRV-CVX relationship, protocols buy CVX with the goal of voting for their pools on Curve. Furthermore, they bribe other CVX holders for voting (similarly to veCRV). This dynamic is known as the CRB CVX Flywheel. Several protocols are involved every two weeks when bribing happens.
Find more about the bribing rounds and participants here: https://llama.airforce/#/convex/flyer
Convex allows Curve.fi liquidity providers to earn trading fees and claim boosted CRV without locking CRV themselves. Liquidity providers can receive boosted CRV and liquidity mining rewards with minimal effort.
In order to increase capital efficiency and higher balance between LPs and stakers, Convex lets users receive trading fees as well as a share of boosted CRV received by liquidity providers.
Convex has no withdrawal fees and minimal performance fees which is used to pay for gas and distributed to CVX stakers. CRV stakers and liquidity providers also receive liquidity mining rewards in the form of CVX.
Convex allows liquidity providers to earn trading fees and claim boosted CRV without locking CRV themselves. Liquidity providers can receive boosted CRV and liquidity mining rewards with minimal effort: Earn claimable CRV with a high boost without locking any CRV, Earn CVX rewards, Zero deposit and withdraw fees, Zero fees on extra incentive tokens (SNX, etc)
Convex allows liquidity providers to earn trading fees and claim boosted CRV without locking CRV themselves. Liquidity providers can receive boosted CRV and liquidity mining rewards with minimal effort: Earn claimable CRV with a high boost without locking any CRV, Earn CVX rewards, Zero deposit and withdraw fees, Zero fees on extra incentive tokens (SNX, etc)