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DeFi Tool Convex to Make Changes to Staking Service for Curve Token Rewards
Curve tokens (CRV) are issued as yield farming rewards to liquidity providers on Curve Finance, and can be converted into vote-escrowed CRV (veCRV).
Updated Jan 4, 2023, 8:37 a.m. Published Jan 4, 2023, 8:37 a.m.
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Convex Finance is making updates to its staking system on the Curve protocol that will allow users to earn more rewards and have more control over what rewards they receive.
Convex Finance is also proposing changes to the fees on the platform and redirecting some of the existing rewards to provide more incentives for staking.
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These updates will be applied to the cvxCRV – which refers to the Convex and Curve token derivative staking system on Curve. The updates will allow users to add additional incentives to their cvxCRV staking, as well as adjust 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 protocols with a total value locked (TVL) of $23 billion. As of Wednesday, Curve’s TVL had dropped to $3.2 billion, in line with a broader market fall. Convex locks over $3 billion and held over $21 billion during its 2021 lifetime peak.
Curve tokens (CRV) are issued as yield farming rewards to liquidity providers on Curve Finance, and can be converted into vote-escrowed CRV (veCRV). Holding veCRV allows users to participate in platform governance, earn higher rewards and fees and receive airdrops.
The tokens are time-locked, meaning users are incentivized to lock their CRV for a long time to receive more veCRV and platform rewards. However, this mechanism effectively locks up liquidity, creating opportunity costs for users.
To solve this problem, Convex pools all user assets together so that it can purchase curve tokens, convert them into veCRV and maximize rewards for its liquidity providers. This allows Convex users to receive Curve rewards without locking up curve tokens for lengthy periods.
Meanwhile, Convex also proposed fee structure changes that will see 2% of platform fees used to acquire and stake existing cvxCRV toward the new wrapper contract. This will increase the wrapper's overall rewards and remove cvxCRV from circulation – which could increase the value of tokens held by investors.
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