Key Takeaways

  • The stablecoin yield optimizer Convex Finance has become the second-biggest protocol by total value locked.
  • Convex has roughly $21.3 billion locked value, trailing only Curve Finance.
  • The protocol has taken a central role in a battle for DeFI liquidity that’s been dubbed the “Curve wars.”

Share this article

Convex Finance is now the second-largest DeFi protocol with over $21 billion in total value locked.

Convex Finance Jumps to Second-Ranked TVL 

Convex Finance now holds the second-highest amount of liquidity in DeFi.

The stablecoin yield optimizer hit $20 billion in total value locked for the first time over the weekend and now holds around $21.3 billion. The most liquid DeFi protocol, Curve Finance, holds just over $24 billion. After the latest jump, Convex holds more value than the likes of Aave and MakerDAO—two early DeFi projects that launched on Ethereum and are often referred to as “blue chips” of the ecosystem.

Convex works in tandem with Curve in that it lets liquidity providers maximize the yields they can earn on Curve’s stablecoin pools. Curve’s native token, CRV, gives token holders a claim on a portion of the trading fees, staking rewards, and voting power in the protocol’s governance. CRV holders are required to lock up their tokens for up to four years as part of a mechanism called vote escrow.

While Curve has been around since DeFi first started to gain traction on Ethereum, Convex is part of a newer group of projects that fall under the so-called “DeFi 2.0” banner. It launched in May 2021 and created value by letting CRV holders earn high liquidity mining rewards without extensive locking periods. That means CRV holders and Curve liquidity providers can deposit their tokens via Convex to earn Curve’s trading fees, CRV token rewards, and CVX tokens. This incentive system explains the protocol’s explosive growth over the last eight months.

Convex is not the only DeFi project to have sought liquidity from CRV holders. Other established projects like Yearn.Finance and StakeDAO have competed with Convex by offering incentives to attract CRV holders to lock their tokens, while Dopex Finance has given market participants a way to profit from via options vaults. This environment has been dubbed the “Curve wars,” where projects compete to ensure that their Curve Pools receive more CRV rewards.

Convex’s CVX token has benefited from the recent activity and growth in the protocol’s total value locked. According to data from CoinGecko, it’s currently trading at $48.05, up 115.9% in the last 30 days.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.

Share this article