This is a weekly tutorial on the most compelling opportunities to consider yield farming, written by our friend DeFi Dad, an advisor to the Defiant and the Chief DeFi Officer of Zapper. The goal is to expose more Defiant readers to new DeFi applications and their associated liquidity mining programs.
Background on Protocol: Convex Finance is a new protocol dedicated to earning with CRV by Curve Finance with a better boost. Convex makes it possible for Curve liquidity providers to earn trading fees and claim boosted CRV without actually locking CRV themselves. In Curve Finance, one of the main incentives for CRV holders is the ability to boost your rewards as an LP. Vote locking CRV allows one to acquire more voting power to participate in the DAO and earn a boost of up to 2.5x on the liquidity you are providing on Curve.
Below you can see (third column from the left) all the ways you earn fees and CRV by locking CRV in veCRV with Curve to earn this “boost” in rewards.
Convex Finance solves a huge problem by allowing Curve LPs to skip several expensive steps depositing and locking CRV. Instead, Convex pools CRV for Curve liquidity providers so that LPs can gain boosted earnings with minimal effort:
- Earn claimable CRV with a high boost without locking any CRV
- Earn CVX rewards (the governance token of Convex)
- Zero deposit and withdraw fees
- Zero fees on extra incentive tokens (SNX, etc)
If you like earning trading fees and rewards as an LP in like-asset pools with Curve nearly zero impermanent loss, Convex Finance may interest you!
Opportunity: There are 2 very different opportunities with Convex depending on whether you are a Curve liquidity provider vs those who hold CRV and wish to be a CRV/cvxCRV LP to earn yield farming rewards in the form of CVX.
- If you’re in one of the 35 Curve LPs listed here, you can stake your Curve LP tokens and earn as high as 113% projected APY with the EURs Curve LP.
- If you’re keen to be an LP for cvxCRV/CRV in SushiSwap, Convex is paying 200% APY in CVX rewards to those staking the LP.
Time to Complete: 5-10 mins if paying the recommended FAST gas price on gasnow.org
Gas + Protocol Fees: Based on the FAST gas price on gasnow.org currently between 50-100 Gwei with ETH at $3300, I would estimate paying the following gas fees.
- Earning with Curve LPs staked in Convex = $50-$75
- Adding liquidity to cvxCRV/CRV SLP = $70-$100
- Staking cvxCRV/CRV SLP = $50-$75
Risks: As always, this is not financial advice and you should do your own research. Consider all these risks if you choose to participate in the liquidity mining program.
- Smart contract risk in Convex, Curve, and SushiSwap. Convex is a new protocol and despite an audit published on their website, I’d approach any new DeFi with caution.
- Oracle failure
- Liquidity crisis
- Systemic risk in DeFi composability
- Estimated APRs can go up or down with the price of CVX and pool liquidity
- Most importantly, Convex is very new. This is a high risk opportunity with so little track record from a newly launched DeFi team. Never trust a new DeFi app is safe just because we write tutorials about it.
- First, assuming one is an LP in a Curve pool and is not staked in the Curve DAO already, go to the Convex website to see what APYs can be earned based on which Curve LP you hold. If you’re interested in entering one of these Curve LPs, go to Zapper Pools and you can add liquidity with any token to get started.
- Once I’m in a Curve LP and ready to start earning boosted CRV rewards and trading fees as well as CVX, click on the tab to Approve. Once the Approval transaction is confirmed, click Deposit & Stake.
- Once those 2 transactions are completed, I’m done and officially one of the first earning with Convex Finance and Curve!
If one holds CRV and wishes to earn ~200% APY as a cvxCRV/CRV LP, check out below.
- Assuming one already holds CRV or wishes to acquire some, I can first go to this link to convert CRV to cvxCRV. By staking cvxCRV, you’re earning the usual rewards from veCRV (3crv governance fee distribution from Curve + any airdrop as well as a share of 10% of the Convex LPs’ boosted CRV earnings, and CVX tokens on top of that. CONVERTING CRV TO cvxCRV IS IRREVERSIBLE but with growing liquidity on SushiSwap, one is likely to be able to trade cvxCRV for CRV in the future.
- If one has cvxCRV and CRV now, they can go to this SushiSwap pool of cvxCRV/CRV to deposit both tokens and add liquidity.
- Alternatively, as liquidity grows and slippage is less of an issue, one can add liquidity with any token by just going to Zapper Pools and using this specific link.
- Lastly, go back to the Convex Finance dashboard under Use CVX to stake the SLP token and start earning 200% APY in CVX rewards.
About Author: DeFi Dad is a DeFi super-user, educator, and investor. You can subscribe to his YouTube channel at defidad.com and get started on your DeFi journey with Zapper Learn with DeFi basics and tutorials.
Disclosure: DeFi Dad holds CRV. This is not an endorsement or recommendation to buy CRV. Please do your own research.