How to Earn Up to 116% with Stablecoins on Convex Finance
Disclaimer: This is not financial advice. This is an educational resource that should never be interpreted as an endorsement to buy any digital assets mentioned. Please do your own research and be sure to check the updated APYs being earned because rates can go up or down with the price of CVX and CRV rewards and depending on how diluted Curve and Convex staking pools becomes.
Introducing Convex Finance
Since its launch, Curve Finance has ranked as a top 10 DeFi protocol by TVL and trading volume. Curve is a liquidity protocol deployed on Ethereum, Polygon, and Fantom. It is designed specifically for efficient stablecoin and pegged asset trading. One of the perks of being a Curve liquidity provider (LP) is that you remove your exposure to impermanent loss because you're holding a share of a pool that's composed of assets nearly equivalent in value (ie stablecoins or different versions of tokenized BTC). The Curve protocol is governed by CRV token holders. A part of their protocol design is to reward liquidity providers (LPs) with CRV tokens. Aside from governance, CRV holders can boost their rewards by vote locking CRV, and ultimately earning up to 2.5X more for their liquidity.
Recently, Convex Finance launched as a new protocol dedicated to optimizing the CRV boost for Curve Finance liquidity providers. Convex is complementary to Curve's mission because it ensures LPs earn greater CRV rewards, and in exchange for this optimization, Curve can grow deeper liquidity. Convex itself is a protocol governed by CVX token holders. With the issuance of CVX, it means Convex can reward early users for bootstrapping their protocol and incentivize them to become long-term holders. This is one of the best examples of yield farming (aka liquidity mining) that is symbiotic for all market participants--Curve LPs, the Curve community, the Convex community, and new CVX holders.
The net result of Convex Finance's protocol is anyone willing to provide liquidity to the top 37 Curve pools can earn up to 4 forms of stacked yield:
- Trading fees
- Up to 2.5x boosted CRV rewards
- CVX liquidity mining rewards
As of writing today, Convex Finance has approximately $1.81B in TVL.
Earn More with Curve by Staking with Convex Finance
The opportunity identified in this Alpha Leak is for new and existing Curve LPs to optimize for projected yields up to 116% without the risk of impermanent loss. A few examples of the aggregate yield in different Curve LPs staked in Convex Finance are the following pools earning a projected APY of:
- eurs: 116%
- usdn: 91%
- usdk: 81%
- usdp: 85%
- saave: 78%
Length of the Rewards Program
There is no time constraint on these Convex opportunities but there is a ceiling of 50M CVX to be issued which could be reached in the coming weeks. It would then require a governance vote to raise that ceiling and issue more CVX rewards.
There are no fees to deposit/stake Curve LPs. The quoted APYs in this post account for these deducted performance fees below:
- 10% performance fees distributed to cvxCRV stakers
- 5% operations fees distributed to CVX stakers
- 1% platform fees distributed to harvesters
This opportunity exposes participants to the following major risks:
- Smart contract risk in Curve and Convex protocols (Curve is currently covered by DeFi insurer Nexus Mutual but Convex is not covered)
- Systemic risk in nearly all of DeFi due to the interconnected nature of money legos
- Risk of a stablecoin in the pool de-pegging
How to Earn Up to 116% APY with Stablecoins on Convex Finance
Here's how to get started stacking yield with one of the most popular new DeFi protocols--Convex Finance.
- Go to the Convex Finance app under the Stake tab and compare/rank the estimated APYs in different staked Curve LPs. Remember, one must first become a Curve liquidity provider before staking the LP token and earning boosted CRV rewards along with CVX. If you visit the Curve Pools page, you can research which tokens make up these different pools if you're unfamiliar with them. Curve pools are generally composed of dollar-pegged stablecoins, tokenized BTC, synthetic forex (ie eurs), or synthetic ETH.
- After you identify a pool with optimal APY and token exposure, go to Zapper Pools to invest liquidity into the Curve pool. Search "Curve" to reveal all the options to invest liquidity into a Curve pool that can eventually be staked on Convex Finance.
- When you find your selected pool, click Invest and specify which token to deposit and how much. Remember, Zapper will swap your tokens to the appropriate pool tokens, in the exact ratio to optimize your share of the liquidity pool. If you start with any token other than ETH, it will require an Approval transaction, followed by a Confirm to deposit liquidity.
- After completing the deposit into the Curve LP, return to the Convex Finance app (Stake tab) and find the corresponding option to stake the LP token. It will require two transactions: an Approve transaction following by Deposit & Stake.
You're done! You'll now continue to accrue the underlying yield from whichever Curve LP while earning boosted CRV rewards as well as CVX mining rewards from Convex Finance. Return to this Claim tab in the Convex Finance app to Claim CRV and CVX rewards whenever you like in the future. Track the balance of your staked LP in Convex Finance in your Zapper Dashboard under Staked.