Lately, with the low float/high FDV controversies running around, there’s been some newfound interest for coins that are of higher float and almost fully vested and circulated. Particularly, the spotlight has fallen on DeFi 1.0 once again.

Intro to DeFi 1.0
DeFi 1.0 consists of dApps built by those considered to be the forefathers of the DeFi space such as Uniswap & Curve (DEX), Aave & Compound (money markets) and Synthetix (derivatives). These dApps served as the building blocks of every ecosystem, providing services such as swaps and lending & borrowing.

Today, many of these dApps and communities are very much still alive and heavily utilised. Some examples are as follows:

These tokens have extremely high MCAP/FDV ratio; are almost fully vested. Most of these protocols also feature good DeFi activity and business models in place, cementing themselves as fee generating machines. Another reason to note is that these protocols often have communities that are engaged in governance activities such as proposing proposals for improvements and voting on them as well. These pointers give these protocols a stronger fundamental value proposition.

Case study: Convex Finance
Today we take a closer look into Conex Finance, which once upon a time, was all the rage, mentioned and loved all over CT especially during the Curve Wars era in 2021. Convex Finance originally started out with the goal of optimising yield for Curve.fi users by aggregating Curve.fi’s governance token, $CRV. 

Currently, Convex Finance has expanded and integrated similar protocols to Curve.fi such as Frax Finance, Prisma Finance and FX protocol, opening up more yield and opportunities for $CVX holders.

How does Curve Finance work?
To keep this simple, I will be referencing Curve in this thread. But note that this generally applies to the other protocols that Convex has integrated with.

Curve Finance is a DEX and AMM which incentivises LPs with CRV rewards. Curve users have the option to lock $CRV to receive $veCRV based on the lock duration and the amount locked. Locking is not reversible and $veCRV tokens are non-transferable. By holding $veCRV, LPs can boost their $CRV rewards up to 2.5x by collecting a portion of the fees from swaps and loans that occur on Curve. LPs can also deposit their LP tokens into Convex Finance to earn trading fees and claim boosted $CRV without locking $CRV. 

Who should use Convex Finance?
$CRV holders can irreversibly convert $CRV to $cvxCRV which is then staked on Convex. $cvxCRV earns users token rewards in the form of governance tokens ($CRV, $CVX) or stablecoins ($3CRV, $crvUSD).

LP here, stake there, convert this, but what’s the big deal? To understand this, let’s dive into $CVX. Users can stake $CVX to earn a portion of the platform’s revenue, distributed as $cvxCRV tokens. Users can also opt to lock $CVX for a minimum of 16 weeks, earning a share of platform fees. More importantly, $vlCVX gives voting weight for Curve, Prisma & f(x) emissions weight votes. $vlCVX holders can redirect these external incentives to certain liquidity pools via the Votium bribes platform.

The Curve-Convex integration once brought Convex Finance to fame, dubbing it as DeFi’s Kingmaker. Up till today, more than $800 million USD worth of $CRV has been farmed by Convex.

Additionally, the number of Weekly Active Users (WAUs) who deposit Curve LPs into Convex is largely consistent.

Accounting for the slight deviations caused by the weekly $vlCVX unlocks at the end of every epoch, it can be seen that around 50-60% of $CVX is being locked up constantly.

With recent buzz around VC coins that are low float and high FDV, $CVX sits on the opposite camp. As of writing, $CVX sits at a market cap of $173.3m, while having a FDV of $192.1m; $CVX has a MCAP/FDV ratio of 0.90. As it currently stands, Convex still commands a good amount of DeFi activity, has healthy tokenomics which reduces sell pressure, and is an extremely high float coin. 

After this analysis, what do you readers think? Will $CVX lead the DeFi 1.0 comeback? Or will they be overshadowed by shiny new protocols?

Thank you for reading!

References

Token Terminal: https://tokenterminal.com/terminal/projects/convex-finance

DeFiLlama: https://defillama.com/governance

Dune Dashboard: https://dune.com/0xsamoyed/convex-finance