Convex Incentives: Analysis

I am writing this post to summarize the effects of the bribes we have made on Convex.
We bribed 915340.6 ANGLE for vlCVX holders to allocate their voting power to the 3EUR pool on Curve.
Convex changes its weights every two weeks and controls for approximately 45% of the voting power on Curve (45% of the veCRV).
Based on current rates, 8863706 CRV tokens are issued for this period of two weeks (between the 15th and the 29th).

The result of the vote is that we obtained thanks to votes on Convex that 1.82% of the CRV emissions would be directed towards the 3EUR pool. This means 161319 CRV tokens going to LPs of the 3EUR Pool.

With current CRV Price: this means that it corresponds to $543646. At the time of the bribe, ANGLE was worth around $0.4, so it means that the protocol spent $366136 for this reward: corresponding to a multiplier effect of 1.48x on the bribes.

This does not include CVX rewards given to people staking on Convex: it is currently written on their website that the APR is 218.42%, meaning they’ll distribute approximately $933187 to the pool.

We can thus estimate the total multiplier effect to be around: x4.03: for $1 we could have spent to incentivize Curve LPs, $4.03 ended coming to Curve LPs staking on Convex.

The downside of it was the negative effect on the ANGLE price which decreased quite a bit after the incentives have been given. People received it as an airdrop and they tended to directly dump it, with respect to farmers which are more prone to keeping their token.
The price of ANGLE decreased by like 15% on the day of the airdrop, which means that the overall liquidity mining program is also less effective as a whole.

Imagine without any dump from people who received the bribes, the 2,500,000 tokens left we are distributing this week could have been worth $1,050,000 and they’re now worth: $850,000. This is also going to roll over for future liquidity mining programs.

The question now is should we keep bribing on Convex in future rounds?

  1. On the one hand: there is some real multiplier effect (thanks to CVX rewards mostly) for Curve LPs with respect to just having the protocol incentivizing with Angle
  2. On the other hand, the dump from people receiving the ANGLE airdrop may ruin it all
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There is no such a point to even be in a curve 3EUR pool currently. Every EUR in this pool can be traded trough Uniswap V3. But may be we just don’t need a lot of liquidity. Current 20m of EUR in this pool gives an ability to swap 1m EUR with less than 1% slippage.

Accumulating CVX via olympus bonds can be a solution (Market or OTC buying CVX with agEUR). For example, people, who have Angle, sell it for agEUR, provide agEUR trough bonds and receive some ROI. Then received increased amount of Angle, bond providers just dump tokens to keep the loop going. It has the same dumping effect, but in this case we are actually accumulating own liquidity or CVX tokens, which will definitely benefit us more in the long term

Too early to tell, need to evaluate when more data points are available to assess. There is other intangible benefits such as overall project exposure to defi natives being at the top of convex.

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Yes true had not taken into account that one. TVL increased thanks to the yield proposed on Convex yesterday, it was not much but still!

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Could make sense to run it at a similar rate until the launch of new token-economics in early Jan to gain more DeFi native exposure, and which in turn, hopefully make them phase into the upcoming veAngle model. I guess good marketing/education needs to go hand-in-hand.

Because of the easy front end (UI/UX) as well as large user base in Convex, it probably is the audience that we want to be targeting and has the best ROI (when factoring in other intangible benefits). Instead of those that use Gelato or Curve pools etc (which is more sophisticated) and are more likely to be used by savvy farm-and-dump yield mercenaries with large AUMs. Obviously requires data analysis of the interacting wallets but that would be my guess.

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Given the good APR and momentum we have seen on the pool, I think it’d be a good idea to continue the bribes for next round. There is already a gauge for bribes in this week’s Snapshot vote: Snapshot

We could make a vote to take a portion of next week’s LM weights for Convex incentives. The rationale would be the following: APRs are still high on Convex and the pool does not seem to be growing more, by dividing the incentives by 2, we’d be decreasing the APR by 2 and I am not sure it would have much effect there.

My idea would be to take 7% of next week’s liquidity mining (from the 29th to the 5th of January as bribes for Convex voters).