According to Footprint Analytics, Curve and Convex surpassed the previous #1 DeFi protocol, Aave, in TVL in both November and December. Convex continued its strong momentum, also surpassing MakerDAO in late December to become the #2 program behind Curve.
Footprint Analysis – TVL of Top 5 Projects
The growth of Convex TVL is highly relevant to Curve, as Convex was originally launched to help LPs offering liquidity on Curve to easily earn transaction fees and earn higher returns without locking in CRV. Convex wanted to allow LPs to increase their returns without losing liquidity.
In this article, we compare Convex to Curve and Yearn, who also outperformed, and analyze how Convex climbed to the number two spot in DeFi from a data perspective. Why the desire? As the leader among revenue aggregators, Yearn is often compared to Convex.
Make curves accessible to everyone
Before looking at Convex, it is important to understand Curve, which is currently the top program in TVL's DEX category, focusing on swaps between stablecoins. Many investors like Curve's low slippage, low fees and infrequent losses. Traders and LPs alike get the best fees on Curve.
Curve provides incentives to LPs through the issuance of token CRV. Users can acquire non-circulating veCRV through an irreversible pledge of CRV. The amount acquired is related to the length of the pledge, locked for 4 years, at a 1:1 ratio of veCRV.
Users will sacrifice veCRV's liquidity because of the share of community governance fees and the ability to primarily increase the LP's return by 2.5x. However, the minimum 1 year lock-in period is a barrier, and Convex can address this gap.
Users who deposit LP tokens from Curve to Convex will receive the base Curve APR, the enhanced CRV APY and the Convex token CVX.
Users can also pledge CRVs on Convex and will receive CVX as a reward. The pledge here is also irreversible. The cvxCRV obtained from the equity is like a mapping of veCRV on Convex, but it can be traded in the marketplace. The price of CRV and cvxCRV remains almost constant and can be traded on Uniswap and SushiSwap at a ratio close to 1:1.
Footprint Analysis – Token Price CRV vs S cvxCRV
Users receive revenue growth while maintaining liquidity. For Convex, which collects a large number of CRVs, it will receive enough votes on Curve for incentive allocation across mining pools.
The footprint analysis shows that cvxCRV's market cap is now rising at a faster rate compared to CRV, rising to 43% of CRV. This means that Convex will have a significant impact on Curve's incentive distribution as nearly half of its subscribers pledge their CRV holdings to Convex.
Footprint Analysis – Market Value of CRV and CVXCRV
In addition to solving liquidity issues, Convex simplifies Curve's complex operational processes, giving users a convenient experience. A more in-depth analysis of Curve can be found in a joint presentation by Footprint Analytics and the Blockchain NYC community, "Intro to Defi & Analysis of Curve Finance".
Competing with Yearn for the top of the revenue aggregator
As the DeFi ecosystem has grown, more tokens have been added to Curve's mining pools. Curve currently has over 100 mining pools, including factory pools (unlicensed pools that allow anyone to deploy on Curve without having to review requests)
It is very important for projects to compete for veCRV votes to stand out in the mining pools. This has led to a battle of revenue aggregation platforms, led by Yearn.
For project owners, having enough veCRV allows them to vote in the community to weigh the distribution of CRV. Therefore, Yearn has also set up yeCRV pools to absorb CRV. Similar to Convex, users will receive a high APY and marketable veCRV upon topping up.
However, Yield's pioneer Yearn was surpassed by Convex in less than 2 months. While the mechanisms are usually the same, the use cases for their tokens are slightly different.
Footprint Analysis – Yearn vs Convex in TVL
YFI and CVX are governance tokens for Yearn and Convex, respectively, but locking CVX also allows users to vote on Convex's governance decisions on Curve. It is equivalent to influencing the incentive allocation of the Curve mining pool through CVX, moving CRV's decisions on Curve to CVX. The price of CVX is also climbing, rising to $39 as of Jan. 20.
Footprint Analysis – CVX Price
While YFI's supply of only 33,000 resulted in a much higher price than the CRV, CVX surpassed YFI in terms of market value in December.
Footprint Analysis – Earnings Token Market Cap
As of the end of January, Yearn appears to be losing out to Convex. However, we can also see that Yearn uses Convex for a large number of its pooling strategies. In order to increase revenue from its own factory pools, Yearn also delegates its veCRV to Convex.
Convex became DeFi's second largest program through
The deep connection to Curve also ties its risks to Curve. A deal that relies entirely on other projects is tantamount to handing over its entire future to someone else.
At this point, Yearn was growing slowly, but was still leveraging the Lego nature of the DeFi world to keep reaching out. In addition to offering more token mining pools, it is building Iron Bank with Cream on the lending side and partnering with Cover on the insurance side.
For Curve, Convex seems to have become a subsidiary of Curve. As Convex holds more veCRVs and more tickets, it seems to have reversed the position of host and guest.
What is footprint analysis?
Footprint Analytics is an all-in-one analytics platform for visualizing blockchain data and discovering insights. It cleans and integrates on-chain data, so users of any experience level can quickly start researching tokens, projects and protocols. With over a thousand dashboard templates and a drag-and-drop interface, anyone can build their own custom K-line charts in minutes. Use Footprint to discover blockchain data and make smarter investments.
Date and Author: Friday, February 4, 2022, [email protected]
Data source: Footprint Analytics Bump Dashboard
- Footprint website
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