Convex Finance is updating its staking system on the Curve protocol, allowing users to earn more rewards and have more control over what rewards they receive.
Convex Finance is also proposing changes to fees on the platform and redirecting some of the existing rewards to provide more incentive for staking.
These updates will be applied to the cvxCRV – which refers to the Convex and Curve token derivative staking system on Curve. The updates allow users to add additional incentives to their cvxCRV staking and customize their rewards to include a mix of curve (CRV) and convex (CVX) tokens.
Convex allows users to access liquidity and earn fees from Ethereum-based stablecoin exchange Curve Finance, once the largest DeFi protocol with a total locked value (TVL) of $23 billion. On Wednesday, Curve’s TVL fell to $3.2 billion in line with a broader market decline. Convex locks over $3 billion and held over $21 billion during its 2021 peak.
Curve tokens (CRV) are issued as yield farming rewards to liquidity providers on Curve Finance and can be converted into proxy voting CRV (veCRV). Holding veCRV allows users to participate in platform governance, earn higher rewards and fees, and receive airdrops.
The tokens are time-locked, which means users are encouraged to lock their CRV for a long time to get more veCRV and platform rewards. However, this mechanism effectively ties up liquidity and incurs an opportunity cost for users.
To solve this problem, Convex pools all user assets so it can buy Curve tokens, convert them to veCRV and maximize rewards for its liquidity providers. This allows Convex users to earn Curve rewards without locking Curve tokens for long periods of time.
Meanwhile, Convex also proposed changes to the fee structure, using 2% of the platform fees to acquire and deploy existing cvxCRV for the new wrapper contract. This will increase the wrapper’s overall rewards and phase out cvxCRV – which could increase the value of tokens held by investors.
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