Curve's CRV Token Emerges as Central Force in DeFi's 'Great CRV War'

Curve Finance's CRV token has gained prominence as both Yearn Finance and Convex Finance utilize it in revenue models. CRV holders benefit from governance rights, trading fees, and enhanced rewards. The resulting "Great CRV War" has seen Convex surpass Yearn in terms of veCRV holdings. Convex's incentivization structure, including boosted rewards and CVX token issuance, has led to an influx of assets into the protocol. Yearn continues to use Convex's products for yield generation, while Convex drives further veCRV lock-ups, creating a flywheel effect. The competitive landscape and potential for increased rewards are attracting attention within the DeFi space.

Curve Finance's CRV Token Emerges as a Central Pillar in DeFi Landscape

Curve Finance, a decentralized exchange specializing in stablecoin trading, has witnessed a surge in prominence amidst the growing influence of Yearn Finance and Convex Finance. Both projects have integrated Curve's governance token, CRV, into their revenue models, fueling a competitive landscape dubbed "The Great CRV War."

CRV's Enhanced Role

Users who lock in CRV are granted not only governance rights but also trading fees from the automated market maker and amplified rewards. This elevated status has attracted significant demand for CRV, culminating in a 29% surge in its value over the past seven days. Currently, 61% of the circulating CRV supply is staked, indicating the growing appetite for the incentives associated with token lock-in.

The Convergence of Yearn and Convex

Convex Finance, a newcomer to the DeFi arena, has swiftly surpassed Yearn Finance in terms of total veCRV (voting escrowed CRV) held, despite its recent launch. However, it's important to note that Yearn utilizes Convex's offerings to enhance the returns of its vaults.

Yearn's Backscratcher Vault

Yearn employs its Backscratcher vault to lock CRV, leveraging veCRV's amplified rewards to boost the yields of vaults employing Curve strategies. According to Yearn's report, the Backscratcher provides a competitive edge, as strategies can be copied but the boosts derived from veCRV cannot.

Convex's Vaulted Incentives

Convex enables users to stake Curve LP (liquidity provider) tokens to qualify for substantial rewards resulting from the massive inflow of enhanced incentives from locked CRV. Moreover, depositors of Curve LP tokens into Convex receive the protocol's CVX token as an additional bonus.

Convex's Flywheel Effect

Convex's veCRV, which grants these amplified rewards, originates from a separate module with its own incentive scheme, encompassing both standard Curve incentives and CVX tokens. This ingenious design has propelled Convex into the top 14 projects in terms of total value locked ($2.3 billion), a remarkable feat achieved within a mere 17 days of its inception.

Industry Perspectives on CRV's Surge

Experts in the venture capital sector, such as Michael Dempsey of Compound, question why more projects do not implement a locking mechanism similar to CRV's. This highlights the potential underutilization of such incentives in the DeFi space.

Sushiswap's Potential Entry

Sushiswap, another decentralized exchange, appears to be following suit. A proposal authored by Yearn founder Andre Cronje and developer Banteg proposes the inclusion of a token-locking feature.

Convex's Dominance and Yearn's Acquisition

Convex's remarkable success has garnered substantial attention within the DeFi ecosystem. Last week, Yearn purchased 1.4 million CVX tokens, signaling its recognition of Convex's significance. Investors are closely monitoring the unfolding competition, seeking opportunities to capitalize on the "Great CRV War."

Conclusion

The integration of CRV by Yearn Finance and Convex Finance has solidified its position as a primary revenue driver in the DeFi space. The ongoing "Great CRV War" is expected to further enhance the value of CRV and drive innovation within the DeFi ecosystem.