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What Is Convex Finance?

Nov 1, 2022
4 min read

This blog post will cover:

  • About Convex Finance (CVX)
  • Where did Convex Finance (CVX) come from?
  • What are the advantages of Convex Finance (CVX)?
  • What are the disadvantages of Convex Finance (CVX)?
  • How to buy Convex Finance (CVX)?

About Convex Finance (CVX)

Convex Finance is a DeFi protocol built on top of a decentralized exchange called Curve Finance. The DEX focuses on stablecoins and has large liquidity pools, which is why it rewards users that provide liquidity. Convex is essentially a means to boost these rewards.

Convex works with these two types of users:

  1. Curve liquidity providers;
  2. Stakers of CRV token which is native for Curve Finance.

On its own, Curve gives rewards to its liquidity providers (LP) and stakers paid in CRV. The tokens are convertible to vote-escrowed CRV (veCRV). These tokens bring more rewards for providing liquidity (up to 2.5x) as well as trading fees, but they are locked for up to 4 years. Also, the amount of passive income the users get for providing liquidity depends on how much veCRV they have.

This is where Convex comes in handy: it allows getting boosted rewards without locking CRV tokens. The platform works with its users who are CRV liquidity providers (gathers their LP tokens) to convert CRV into veCRV and boost the rewards for them as a group because this way the amount of veCRV becomes more significant.

For those who do not have LP tokens, Convex offers the option of staking. They can buy CRV tokens, then stake them on Convex. This gives stakers cvxCRV which allow them to receive rewards paid in CVX (the utility token of Convex) and veCRV, a part of trading fees from Curve Finance, and join airdrops.

Users have the opportunity to stake their CVX tokens, too. In return, they earn a reward which is represented by trading fees from the Convex platform.

Where did Convex Finance (CVX) come from?

We do not have much information about the project’s history. It is known that it was implemented by anonymous developers in 2021.

Their goal is to absorb some of the liquidity of Curve Finance into their protocol because it is one of the leading DEXs by the measure of the amount of locked-in liquidity assets.

What are the advantages of Convex Finance (CVX)?

  1. The platform gives the users the opportunity to receive rewards, platform earnings from a large exchange, as well as airdrops.
  2. Convex does not charge withdrawal fees. Also, the performance fees are rather small.

What are the disadvantages of Convex Finance (CVX)?

  1. When users convert their CRV tokens to cvxCRV, they will not be able to get their CRV back: the process is one-way.
  2. The project was on the news in June 2022 because of the hackers’ attacks on its main server. Its DNS was hijacked, and some users approved malicious contracts by mistake. However, the funds that are in smart contracts were not affected. Even though there are potential risks, the project assures the customers that their assets’ safety is a high priority.

How to buy Convex Finance (CVX)?

If you plan to purchase a CVX token, SimpleSwap is the right choice. It will allow you to make an exchange in a fast and convenient manner. Just follow these instructions to get CVX:

  1. For example, you want to swap BTC for CVX. Select the currency you want to exchange (BTC) in the first drop-down list. Then enter the amount you want to swap.
  2. Select CVX in the second drop-down list. You’ll see the estimated amount that you’ll get after the exchange.
  3. Click the Exchange button.
  4. Enter the Recipient's Address, where CVX will be sent. Please, be careful and make sure you use the correct address.
  5. Create the exchange.
  6. You will see the Bitcoin deposit address. You should transfer the necessary amount of BTC to this address to start the exchange.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.

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