Convex Finance, explained clearly

What Convex Finance does

Convex is a DeFi protocol built on top of Curve Finance, the largest decentralized exchange for stablecoins and pegged assets. Curve rewards liquidity providers in CRV, and the size of those rewards can be boosted up to 2.5× — but only if you lock CRV as veCRV for up to four years.

Convex pools CRV from thousands of users into one giant veCRV position. Liquidity providers who deposit through Convex share that boost, without locking anything themselves.

Who it is for

Convex is useful for three groups of people:

• Curve LPs who want higher yields without managing veCRV.
• CRV holders who want liquid exposure to veCRV rewards through cvxCRV.
• DAOs and protocols that want voting power over Curve emissions through vlCVX.

Why it matters

Convex became one of the most important protocols in DeFi because it controls a large share of Curve's governance votes. That made it the centre of the so-called Curve Wars, where protocols compete to direct CRV emissions to their own pools.