My thoughts on Curve and the Curve Wars.
Tldr; Why buy oil when you can be OPEC?
Recently, a tokenomics structure has seen massive popularity: “ve” or Vote-Escrow. Much like how some companies offer discounts for members, many Defi protocols have started offering higher yields for those who “buy a membership” by buying and locking their native tokens.
At the forefront is the stablecoin optimized DEX: @CurveFinance. An analogy I like to use is to imagine that $CRV is like a newly discovered underwater oil reserve in international waters. Every country wants some of this oil and they have a variety of options to do so. They can go in and drill for this oil individually, however doing so would require lots of costs, and profits would be suboptimal. Instead, they can go through for example OPEC, and utilize their drills to mine for this $CRV more efficiently.
In this case, OPEC is @ConvexFinance. More technically, when you deposit on Convex, they take it and deposit on Curve. Then with the earned CRV, Convex will boost your yields without you directly having to do so yourself. In return you’ll get both Curve and Convex tokens.
Now, it’s easy to understand why countries would want oil, but why do I want $CRV? To be frankly honest, I personally don’t. At its core, $CRV is useful for increasing the emissions of other protocols’ tokens. After a certain price, the costs of buying $CRV to justify the increased yields simply don’t make sense anymore. It seems the market has seemed to reflect this view as well, as at the end of the day, $CRV is “just another farm token,” which are known to trend to 0.
Currently, less than 25% of the entire CRV supply is in circulation. Meaning, in the next four years, over 3 times the amount of CRV in circulation currently will be minted. Personally, there is no scenario in the long run where I see CRV prices beating the overall crypto market. Further, I’d be very surprised if CRV price isn’t below $2 in a couple years. These insane emissions put Jerome Powell and his money printer to shame. Just like how I would never call stuffing cash under my mattress in a hyperinflationary economy as a good investment, I do not own any CRV. Contrarily, if CRV is cash, Convex is somewhat like a super high yield bond, entitling me to periodic and consistent coupon payments in that of CRV and CVX rewards.
However, the single thing that pushed me over the edge to enter into the Curve wars was this graph. CVX emissions are set to drastically decrease well before CRV emissions end. Therefore, as demand for CVX increases, price should proportionally follow suit.
Seeing as CVX is the main leader in the Curve wars and don’t seem to be going anywhere soon, I feel relatively safe with CVX, and see it as a better scenario than CRV as long as Convex remains the leader in the Curve wars.
Now, although I purchased a small bag of CVX, why buy a token when you can farm it? That’s exactly what I’m doing with @0xconcentrator. Just like how locking up CRV increases yields, locking up CVX on Convex also boosts native yields. If Convex is the L2 built on top of the Curve L1, why not have a L3 to optimize Convex rewards? Here’s where Concentrator comes in.
Using this excellent graphic, Concentrator “concentrates” rewards by vesting rewards to cvxCRV and auto-compounding extra yield back for more cvxCRV. I redeem my yields in CVX and that’s how I personally increase my CVX exposure. (@phtevenstrong has a great youtube overview)
As always, this is NFA & plz plz plz dyor 😊. Personally with $1000, I’d purchase no CRV, $200 of CVX, and invest the other $800 in stables or tricrpyto/steth on Concentrator. As for price, now seems like a great time. Price is at a local low and the overall performance of the platform depends on the overall crypto market with very high correlation. Convex recently expanded to optimize frax yields and their direction towards not just CRV optimization is super promising.
A couple other Curve war participants to look into are @redactedcartel and @TokenReactor. Ultimately, why buy oil (CRV) when you can be OPEC (CVX)?
Another similar (but “optimized”) project that I’m more involved in is @solidlyexchange and @SolidexFantom / @0xDAO_fi on Fantom. For those that think they’re too late, @MaiaDAOMetis has a pretty much identical fork of Solidly on Metis network, with @starstreamfin being the Convex relation. I personally think this Ve(3,3) model will be forked across more and more chains in the near future. Hate it or love it, I think we should appreciate the super low slippage swaps for 0.01% fees.
Thanks for your time — Juanbug.