# DeFi - Curve War 曲線戰爭

**Published by:** [CompoundWater 複水](https://paragraph.com/@compoundwater/)
**Published on:** 2022-07-04
**URL:** https://paragraph.com/@compoundwater/defi-curve-war

## Content

DeFi’s Competition for Liquidity (Or Called Convex War?)作者：CompoundWater 複水 ; Contents Also Contribute to MatrixDAOContentsWhat is Curve War?Why Rely on Curve?Low Price Slippage and Efficient TradeIncentive Design: The veCRV ModelHow’s Curve War?Crown Winner: Convex FinanceTurn to Convex War! （The army I hired, still my army）ConclusionReferenceFeedbackWhat is Curve War?The competition for liquidity is known as “The Curve Wars.” As protocols are trying to grab liquidity for their own, they either have to buy up $CRV to vote, or “bribe” their users to vote for them.Why Rely on Curve?Low Price Slippage and Efficient TradeCurve with its niche in low slippage trading stablecoins thanks to its deep liquidity pools and “StableSwap Efficient Mechanism Design” (in Curve whitepaper).Source: Curve whitepaperFor for large transactions, Curve can dramatically reduce the price slippage and enable much more efficient trades. This made Curve have significantly more Total Value Locked than their competitors.Source: defiLlamaFor example, selling 1000 $ETH to $USDT at the time of writing pays out US$2,673,104 on CurveSource: Curve.fiBut only US$2,455,120 on SushiSwap.Source: SushiSwapIncentive Design: The veCRV ModelAlso, Crypto is a giant game of incentive design, who design their incentives intelligently win massive power and wealth.When provide liquidity to a pool on Curve, can earn a share of all the trading fees on that pool. But also earn some CRV tokens, as a bonus incentive to you for providing liquidity to that pool.For example, the Curve “3Pool” is one of the most liquid pools in all of DeFi, currently holding a bit over $3.3b in stablecoins. If add to this pool, you will make about 0.24% APR in trading fees and also make 0.3% to 0.74% APR in CRV rewards. The more CRV you lock, the more APR you enjoy.But check out “Wormhole v2 UST-3Pool” below it. That’s also a pool with the total APR in CRV reward is 3.98% to 9.61%.⇒ You may think at this point, there’s no reason to hold CRV tokens right? what’s different or benefit to do it?Source: Curve.fiThe veCRV Model: more reward and more vote power.Whenever do a trade on Curve, people have to pay a trade fee. For Curve 3pool fee is 0.03%. 50% goes to the people who provided liquidity. And the other 50% goes to holders of veCRV.“veCRV” stands for “Vote Escrowed Curve”. Within the Curve, you have the option to lock your CRV tokens for one to four years to receive a certain amount of veCRV in return.So it is kind of dual incentive to lock up CRV. It increases how much you’re earning from staking your LP tokens, and it gives passive income from all the pools on Curve.How about “Vote” part? Well the last benefit you get from veCRV is the ability to vote on which pools Curve allocates its CRV rewards to. The more votes a pool gets, the more CRV LP stakers will receive.⇒ To get more CRV rewards, people either deposit more liquid in the pool or acquire more veCRV for vote power to vote on which Curve pools get more rewards.Source: FlynnGao Curve veCRV Incentive ModelHow’s Curve War?In fact, this war did not attract enough attention at first. Major players such as Yearn Finance and Stake DAO sold CRV in the market after obtaining the incentive of CRV, which lowered the price of CRV, which greatly reduced the price of CRV. Reduces the attractiveness of incentives. But that all changed when Convex came along. This was the first battleground of the “Curve Wars,” and unfortunately it’s almost over. The winner, Convex, is where we turn our attention next.Crown Winner: Convex FinanceIt is hard for investor to get the maximum yield rate or vote power in Curve by lock a lot of veCRV and 4 years. Convex solved this problem for the average investor by aggregating everyone’s veCRV and deposits.But How?It encourage people to deposit CRV into ConvexConvex gives cvxCRV in exchange and stakes your CRV for veCRV (the veCRV being owned by Convex)Stake your cvxCRV to earn (30.79% APY as right now) CVX and also earn share of all the veCRV rewards plus 10% Convex LP’s earningBtw, You can sell your cvxCRV for CRV or other tokens anytime, without 4-year lockup.Source: ConvexSo, That liquid veCRV, cvxCRV, allowed Convex to acquire more veCRV voting power than anyone else. That voting power has allowed Convex to control what pools CRV awards are allocated to.Source: ConvexTurn to Convex War! （The army I hired, still my army）If Convex won the Curve war by controlling all the veCRV, then whoever controls the veCVX could win the Convex Wars.Source: MediumThe current war are mainly based on large-scale algorithmic stablecoin projects, and some defi project (like Frax, Badger, Olympus, Redacted(BTRFLY), UST etc.) are also constantly joining the war. The picture below shows that the participating parties are constantly adding their own weapons: CVX.Source: DaoConvexTotal Dao Owned CVX around 14,196,425 at 202205, and overview Dao Owned CVX market share as belowFRAX ~16.8%, Terra: 16.2%, Badger ~12.2%, Redacted 10.9%, Olympus ~6%Source: DaoConvexConclusionThe eternal theme in Defi is the evolution of capital efficiency. The members of the Curve ecosystem, including itself, are all leading players in the field of improving capital efficiency. Curve or Convex War is just the beginning. The Liquidity Wars may shape the future of DeFi, and define many of the coming investment opportunities.ReferenceHow to DeFi (Advanced). CoinGecko. May 2021. URL: https://store.coingecko.com/products/how-to-defi-advancedMichael Egorov. StableSwap - efficient mechanism for Stablecoin liquidity. Nov 10, 2019. URL: https://curve.fi/files/stableswap-paper.pdfNat Eliason. Field Guide to the Curve Wars: DeFi’s Fight for Liquidity. Every. Feb 4, 2021. URL: https://every.to/almanack/curve-warsFlynnGao. Curve帝国编年简史：资本永不眠. Jan 15, 2022. URL: https://mirror.xyz/cryptolunatic.eth/uKjxSopOVcMFyvttJWDcCKkfu-Jp_iaEXxDNql2vf6w0x137. Curve War升級CVX之戰，精彩的權力之爭仍在繼續. 律動BlockBeats. Jan 6, 2021. URL: https://www.panewslab.com/zh_hk/articledetails/1641431870601476.htmlFeedback@0x_Todd轉載請註明出處與作者 聯繫郵件：nctu.frank@gmail.com 更多關於我: CompoundWater複水 IG/TG/YT/FB/Linkedin/Twitter: 頻道搜尋 @compoundwater 歡迎自由斗內支持(ERC20): 0xc2Ac7F93D54dfbf9Bf7E4AeD21F817F2ce598D28

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