Welcome to the World of Crypto Trading!
So, you’ve got a cryptocurrency token, and you want to swap it for another. What do you do?
In the “normal” world, you’d go to a bank or a currency exchange booth. In crypto, however, you don’t need a middleman. You go to what’s called a Decentralized Exchange—or DEX for short.
Uniswap is one of the biggest DEXs out there.
You visit the Uniswap site, pick the token you want to swap, and—boom—you trade instantly.
Where does the money come from?
In traditional finance, a bank provides the funds.
In Uniswap, the funds come from regular people who deposit liquidity into “pools.”
A liquidity pool is like a big bowl that holds two different tokens—say, ETH and USDC.
People deposit equal amounts of these tokens into the pool.
When you swap ETH for USDC, you’re pulling USDC out of the pool and adding ETH in.
Liquidity providers earn fees for every trade that happens in their pool—like rent paid to the person stocking the vending machine.
If you’ve ever dabbled in web development, you might know JavaScript—a programming language used to make websites interactive.
A smart contract is like a JavaScript program that runs on the blockchain. Instead of regular JavaScript, it uses Solidity, a language that lets developers create these self-executing contracts.
When you use Uniswap, the front end (website) talks to the smart contract, telling it what trade you want to make.
The smart contract checks the liquidity pool and processes your trade instantly.
The whole thing runs without a central authority—just math, code, and blockchain magic.
Now that you’re familiar with the basics, let’s see how new projects come to life—sometimes by copying existing ideas, other times by inventing something completely new.
In 2020, Uniswap was king. Then along came SushiSwap—a “fork” of Uniswap’s code with higher rewards to lure Uniswap’s liquidity providers.
This “Vampire Attack” drained Uniswap’s liquidity, showing how open-source code can spawn intense competition.
Meanwhile, Curve Finance was doing something different:
Specialization in stablecoins (like USDT, USDC, DAI), optimizing trades with very low slippage.
Lock-ups that encourage long-term liquidity provision.
veCRV (vote-escrowed CRV) boosts rewards for those who lock up CRV for longer durations.
Rather than compete directly, Convex Finance built on top of Curve:
Aggregates CRV staking power so users can earn boosted rewards without locking CRV themselves.
Controls a massive chunk of Curve’s governance through veCRV votes.
Captures significant yield from Curve, acting as a yield optimizer for CRV stakers.
Market Cap vs. Assets
Convex ($CVX) has a market cap of around $186M (and a fully diluted valuation of $228M).
Meanwhile, it effectively holds or directs over $200M in various tokens (CRV, FXS, PRISMA, etc.).
Translation? It has more assets on its balance sheet than its total market capitalization—potentially signaling undervaluation.
Vote-Locked CVX (vlCVX)
Each vlCVX (price: $2.28) directs about $0.85 worth of rewards in a year, implying roughly a 2.69-year payback period.
The chart suggests an intrinsic value of $5.11—meaning vlCVX trades at about a 55% discount.
Why the Discount? Markets are chaotic. Sentiment can overshadow fundamentals, especially in fast-moving crypto markets. But for investors who see the bigger picture—locking tokens, capturing governance power, and earning a slice of DeFi’s fees—this might be a prime time to pay attention.
Uniswap showed how DEXs can replace traditional middlemen with smart contracts.
SushiSwap demonstrated that anyone can fork an open-source DEX and tweak incentives to steal market share.
Curve specialized in stablecoins, creating a new model for low-volatility liquidity pools.
Convex took it a step further by building on top of Curve, seizing governance power and optimizing yields.
Convex ($CVX) currently appears undervalued based on the assets it holds and the revenue (emissions) it directs.
Crypto is an ever-evolving ecosystem. Each new project can be a direct copy with slight modifications (a fork), or it can innovate at the protocol level, or even build a new layer on top of existing platforms—like Convex did with Curve. These layers interact in complex ways, sometimes creating market inefficiencies where careful investors might see opportunity.
That’s the big picture of how decentralized exchanges came into existence, evolved, forked, specialized, and got stacked upon. And right now, if the data in the images is any guide, Convex stands out as a discounted play—if you believe in the long-term sustainability of the Curve ecosystem it supports.
(As always, this is for educational purposes. DeFi investments carry risk, so do your own research before diving in.)
“The ConvexFinance MC is $186M ($228M FDV).$CVX Balance Sheet: $188M in CRV, $11.2M in FXS, $1.5M in PRISMA. Total = $201.5M$CVX holds more in assets than their current MC.$vlCVX is also trading at a massive 55% discount to the protocol’s intrinsic value.”
This snapshot shows why people call Convex undervalued:
Convex’s market cap (around $186M) is lower than the combined value of assets it effectively holds or controls (around $201.5M).
A quick parallel to the stock market: If you found a public company whose assets alone (e.g., real estate, patents, cash reserves) were worth more than the entire market cap of the company, you’d likely see that as a classic “undervalued” play—assuming those assets are really valuable and relatively liquid.
This graphic focuses on vlCVX (vote-locked CVX) and shows:
vlCVX Price ($2.28)
In one year, one vlCVX directs $0.85 worth of emissions → implying a 2.69-year payback on your capital if nothing changes dramatically.
vlCVX trades at a 55% discount to its estimated “intrinsic” value of $5.11, indicating some form of market mispricing or a lagging awareness among investors.
CRV: 418 million tokens locked
FXS (Frax Share): ~7.4 million tokens locked
FXN: 95,877 tokens locked (though the dollar value is small compared to CRV)
PRISMA: Over 51 million tokens locked
And, of course, vlCVX itself: ~39.9 million tokens
Each row shows:
Amount Locked: How many tokens are stuck in Convex on a rolling max lock (i.e., they can’t be freely withdrawn overnight).
Tokens / vlCVX: How many tokens (e.g., CRV or FXS) correspond to a single vlCVX.
$/vlCVX: The value per vlCVX if we split that pool’s worth across each vlCVX. For instance, $4.71 of CRV per vlCVX.
Token Price: The current market price of each locked token (CRV at $0.45, FXS at $1.51, etc.).
This table basically says: “Look at all the economic resources that are parked in Convex, forever feeding into vlCVX’s value.”
Convex voters can direct emissions (reward tokens) on protocols that rely on gauge voting (like Curve, Frax, Prisma, etc.).
The table shows how many biweekly emissions (fees/rewards) each protocol generates under Convex’s control.
For example, veCRV gauge rewards are around $1.226 million per 14-day period, which translates to about $0.8017 per vlCVX over the course of a year.
Add it all up, and it suggests vlCVX holders share in a steady stream of revenue from multiple sources.
Convex Finance doesn’t just hold CRV, FXS, PRISMA, and FXN—it controls the flow of rewards, fees, and governance decisions in multiple DeFi ecosystems. In a world where each protocol’s governance token directs how emissions and incentives are distributed, owning a large stake is akin to owning the “steering wheel” of the DeFi economy.
Largest stablecoin-focused DEX on Ethereum.
CRV governance decides which liquidity pools earn the most rewards (CRV emissions).
Because Convex holds a massive chunk of CRV, it influences where those emissions go, effectively shaping stablecoin market incentives and earning “bribe” fees from other projects seeking CRV emissions.
Governance & Fee Accrual.
Governance: FXS is the protocol’s governance token, meaning holders (and especially locked veFXS) can vote on parameters like fee rates, reserve allocations, and partnerships.
Fee Revenues: FXS holders receive a share of the protocol’s surplus income, including yield generated by the stablecoin collateral, fees from Frax’s lending markets (Fraxlend), and other Automated Market Operations (AMOs). Essentially, if Frax makes money, it funnels back to FXS holders.
Original (V1) Seigniorage Model.
In Frax’s earliest “fractional-algorithmic” design, minting FRAX required a combination of USDC (or another stablecoin) plus some portion of FXS.
Over time, any demand for newly minted FRAX effectively drove up FXS price (via seigniorage), since FXS was partially burned or locked in the process.
This system was flexible, but it relied on algorithmic elements that came under scrutiny when algorithmic stablecoins (like Terra) showed structural risk.
Current (V2+) Model.
Frax phased out the fractional-algorithmic peg. FRAX is now fully collateralized and rebranded to FRXUSD (see below).
FXS still gets protocol earnings and retains governance power, but no longer must be burned or minted to produce FRXUSD.
The upshot: All of Frax’s fee revenue—from stablecoin minting, yield strategies, and AMOs—ultimately accrues to FXS (particularly veFXS), aligning FXS’s value with the success of the ecosystem.
Fully Backed from Day One.
After the 2023 transition, every FRXUSD in circulation is 100% backed by high-quality assets—ranging from on-chain stablecoins to real-world assets like U.S. Treasuries.
Frax partners with regulated “enshrined custodians” (e.g., BlackRock’s BUIDL fund, Superstate’s funds) to hold dollar‑denominated collateral, ensuring FRXUSD can be redeemed for $1 in real-world assets at any time.
How Does It Earn Yield?
Frax’s core innovation is that it doesn’t just sit on idle collateral; it actively rotates these reserves among three main strategies to maximize safety and return:
Short-Term Bonds (Cash Equivalents)
Frax invests a portion of its collateral in U.S. Treasury bills or overnight repo markets, taking advantage of the risk-free rate—which can be substantial in a high-interest-rate environment.
Frax leverages BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL) as a key collateral asset for its stablecoins. BUIDL is a diversified basket of high-quality, low-risk assets—including cash, short-term U.S. Treasury bills, and repurchase agreements—that is tokenized by Securitize for full on-chain transparency. By allocating funds into the BUIDL Fund, Frax secures its frxUSD stablecoin with institutional-grade yield and liquidity. This approach minimizes counterparty risk and enables seamless fiat on/off ramping, effectively bridging traditional finance with decentralized systems.
These bond yields are funneled back into Frax’s treasury, boosting protocol revenue.
Cash-and-Carry Arbitrage (Crypto Basis Trades)
When futures markets for BTC/ETH trade at a premium, Frax can deploy a market-neutral strategy: hold the underlying asset spot while shorting an equivalent futures position, locking in a “basis” yield.
This approach can offer double-digit APY during strong contango phases without exposing Frax to price volatility.
If the basis premium shrinks, Frax rotates the collateral back into bonds or stable pools.
DeFi Lending and Liquidity
Frax also uses AMOs (Automated Market Operations) to lend FRXUSD on platforms like Aave, Compound, or provide liquidity in stablecoin pools (e.g., FraxBP on Curve).
This earns trading fees or lending interest, which again flows to the protocol’s bottom line. Frax can dynamically adjust how much of its collateral is on-chain vs. in Treasuries, depending on market conditions.
FXS captures the upside of all Frax operations: if FRXUSD usage grows and its collateral yield remains robust, FXS holders see increased protocol profits.
FRXUSD itself is a fully collateralized, interest-generating stablecoin—a major evolution from the original fractional-algorithmic approach.
The “rotating yield” mechanism—cycling between short-term bonds, market-neutral crypto trades, and DeFi lending—helps Frax optimize returns across changing market conditions, while keeping the stablecoin fully backed.
In short, FXS holders get paid from everything the protocol earns, and FRXUSD stays stable at $1 while continuously earning yield on its backing collateral. This dual‑token ecosystem has allowed Frax to balance stability (for the stablecoin) and upside potential (for FXS), making it a prominent driver of on-chain liquidity and a cornerstone of Convex’s broader revenue mix.
Protocol/Product: Prisma is a newer platform that aims to lock up various collateral assets (including Liquid Staking Derivatives, LSDs) and mint stablecoins.
What Are LSDs?
Liquid Staking Derivatives are tokenized versions of staked assets (e.g., stETH for staked ETH).
They accrue staking rewards (often ~4% on Ethereum) while still being liquid in DeFi (tradeable, usable as collateral, etc.).
They behave like “internet bonds”: you earn the underlying staking rewards without losing liquidity.
How Prisma Makes Money:
Users deposit LSDs (like stETH) or other assets into Prisma for borrowing or stablecoin minting.
Prisma can collect fees on borrowing, minting, or protocol services.
As LSDs accumulate staking rewards, Prisma’s stablecoins can retain value, and some of those protocol fees or minted tokens feed back to governance holders.
Convex’s Role:
By holding PRISMA, Convex is betting that LSD-based collateralization and stablecoin issuance will grow significantly.
If Prisma becomes a key LSD aggregator, its fees and token value rise, ultimately benefiting Convex’s PRISMA holdings.
Protocol/Product: A decentralized perpetual trading platform (f(x) Protocol 2.0) offering high-leverage, liquidation-protected positions on blue-chip crypto assets.
Splits yield-bearing assets into two tokens:
fxUSD: A fully collateralized stablecoin (backed by LSDs like stETH).
xPOSITION: A leveraged token (up to 10× on ETH, for instance) that uses a rebalancing mechanism to avoid sudden liquidations.
How It Makes Money:
Leverage Trading Fees: When traders open or maintain leveraged positions, the protocol collects fees.
Stablecoin Minting: fxUSD can be minted and used within DeFi; the protocol may collect minting fees or interest spreads.
Zero Liquidation Funding Model: While the user sees “no funding fees,” the protocol uses a rebalancing mechanism and can still earn from interest or spread on leveraged positions behind the scenes.
FXN’s Role:
Governance & Revenue Sharing: 75% of protocol revenues go to veFXN holders, so a chunk of all those fees flow to FXN holders.
Incentive Alignment: FXN ensures the stablecoin (fxUSD) and the leveraged positions (xPOSITION) remain stable, encouraging user adoption and continued volume.
Convex’s Role:
By controlling some FXN, Convex can direct how the protocol evolves—and earn a share of the protocol’s leverage/trading fees.
In the images you provided, we see data like:
“Currently, in one year, one vlCVX ($2.28) directs $0.85 worth of emissions, implying a 2.69-year payback.”
“vlCVX trades at a 55% discount to intrinsic value.”
“Convex’s Balance Sheet” is already worth more than its market cap, thanks to large holdings in CRV, FXS, PRISMA, and FXN.
Fee Flow to vlCVX: Convex uses these tokens (CRV, FXS, etc.) to earn fees and bribes, which then flow back to holders of vote-locked CVX (vlCVX). Essentially, owning vlCVX entitles you to a portion of the aggregate revenue streams from multiple top DeFi protocols.
Voting Power: Since each token has its own governance system (Curve gauges, Frax expansions, Prisma stablecoin parameters, f(x) Protocol fees), Convex’s large positions give it real say in how these protocols evolve—and thus how revenue is distributed.
“Market Cap vs. Assets Under Control”: Traditional analysis would say, “If a firm controls assets exceeding its own valuation, something’s mispriced.” In DeFi terms, it suggests CVX may be trading at a substantial discount relative to the value it directs and captures.
Multiple Income Streams:
Convex isn’t reliant on just one platform. If Curve’s fees dip, Frax yields might compensate. If Frax yields dip, maybe Prisma’s LSD stablecoin is booming, or f(x) Protocol’s leverage fees are climbing.
No Single-Point Risk:
By spreading out governance control across different protocols, Convex mitigates risk—if one protocol runs into trouble, the others can still generate revenue.
Compounding Influence:
As these protocols grow, so do their emissions, fees, and user bases. Convex’s stash of governance tokens scales in value, further boosting the yield for vlCVX holders.
In short, each asset under Convex’s umbrella has its own fee model (trading fees, stablecoin yields, bribes, leveraged trading fees, LSD staking rewards, etc.). Owning or directing those tokens gives Convex a direct slice of that revenue. That’s the fundamental reason why many observers say “CVX is undervalued”—because the token’s price doesn’t yet fully reflect the combined cash flows from CRV, FXS, PRISMA, and FXN.
Convex is the aggregator that consolidates governance and fee flows from major DeFi protocols under one roof.
Curve (CRV) drives stablecoin liquidity, with its gauge rewards effectively “rented” out to the highest bidder. Convex orchestrates this.
Frax Share (FXS) captures yield from real-world and crypto market-neutral strategies. Convex’s stake in FXS means it benefits from these stable returns.
Prisma leverages LSDs, a key innovation for maximizing capital efficiency, and Convex holds PRISMA to gain from that future growth.
FXN powers a next-gen leveraged trading protocol, sharing 75% of its revenues with FXN stakers—Convex, as a holder, gets a slice.
When you look at the numbers in the screenshots:
Convex’s reported assets ($201M+) already exceed its market cap ($186M).
vlCVX is “paying for itself” in just a couple of years through directed emissions.
Convex’s influence covers multiple fee-generating ecosystems (Curve, Frax, Prisma, f(x) Protocol).
All of that suggests there’s tangible economic value (cash flow) behind Convex. That’s why the tweet and the images highlight a “55% discount to intrinsic value.” Much like finding a profitable investment fund that trades below its net asset value, the logic is: if you believe these protocols (Curve, Frax, Prisma, f(x)) will continue to generate robust fees, then CVX and vlCVX may be significantly undervalued at present.
The “money” comes from protocol fees (trading, stablecoin minting, leveraged positions), emission rewards (CRV, FXS, etc.), and innovative yield strategies (staking, basis trades, RWA). By holding a large slice of these governance tokens, Convex captures and redirects the bulk of those cash flows to vlCVX holders. The images show that if you factor in the current flows and the locked assets on Convex’s balance sheet, there’s a compelling argument that CVX (and especially vlCVX) is priced well below its “fair value” based on actual, real-world DeFi income.
