Written by: DeFi Made Here

Compiled by: TechFlow

 

 

Curve Finance’s veToken model allows users to lock up $CRV for up to 4 years and earn management fees (paid in stablecoins) and allows them to vote for the CRV allocation of selected pools.

 

Protocols seeking liquidity can choose to bribe veCRV holders to direct CRV allocations to their pools. This is another source of income for veCRV holders in addition to management fees.

 

But locking up CRV for 4 years is not a very attractive option for holders.

 

What is the solution?

 

Choose to Wrap your liquidity:

  • cvxCRV from Convex Finance

  • sdCRV from Stake DAO

  • yCRV from Yearn

 

Liquidity wrapping allows CRV holders to collect fees and/or bribes without the need to lock up for 4 years and provides an opportunity to exit a position.

 

What is the difference between them?

 

 

cvxCRV

By staking cvxCRV, you can earn 3crv in fees, plus a 10% share of Convex LP’s increased CRV yield and CVX tokens.

 

 

And the bribe income (voting rights that can be sold) is distributed to the CVX locked up as a result of voting.

 

Therefore, the normal income (fees + bribes) of veCRV is divided between cvxCRV and CVX.

 

 

 

sdCRV

sdCRV distributes 3CRV fees and keeps voting rights with stakers.

 

Voting power can be delegated to StakeDAO, which combines market and OTC bribes to obtain the best returns.

 

 

Alternatively, users can access bribes on Stake DAO directly from Paladin or Votium Protocol.

 

 

Since StakeDAO does not split bribes and admin fees between sdCRV and the native token, the staking APR is significantly higher.

 

The staker gets 3CRV, CRV, and rewards converted into SDT due to bribes.

 

 

However, in order to obtain the highest annual interest rate, users must lock up the native token SDT.

 

In the case of a veSDT boost, sdCRV stakers will receive a 0.62x boost in voting power, and can be boosted up to 1.56x depending on veSDT balance and total number of veSDT stakers.

 

 

 

yCRV

Among all packaging, staking yCRV can obtain the highest yield.

 

However, the yield will decrease as there are remaining rewards from the legacy yvBOOST donor contracts.

 

Additionally, 1/4 of all yCRV belongs to the treasury, which increases the returns of all yCRV stakers.

 

 

st-yCRV provides a “set it and forget it” user experience, and the revenue comes from two sources:

• Management Fees: The management fees earned will automatically be converted into more yCRV

• Bribe: 1 st-yCRV = 1 veCRV of voting rights will be sold on the bribe market to further increase returns.

 

Unlike sdCRV, holders of st-yCRV give up their voting rights, so the protocol cannot use it to vote for Curve.

 

vl-yCRV has voting rights and is in the final stages of development, but it will remove fees and bribes in favor of st-yCRV.

 

What are the trade-offs of wrapping these liquidity packages?

  • Agreement Fee

  • Voting rights

  • Protective hook

 

Agreement Fees are charged for services provided under the agreement (deducted from the APR shown):

• cvxCRV 0%

• sdCRV 16%

• yCRV 10%

 

Voting rights:

  • cvxCRV does not provide voting rights and does not share bribe income

  • yCRV does not provide voting rights, but shares bribe income

  • sdCRV provides voting power and bribe income, but reduces voting power and bribe income in favor of veSDT stakers.

 

To maintain the peg, all protocols direct CRV to their respective LPs.

 

When the peg price is below 0.99, Stakedao will use the bribe income to buy sdCRV and distribute it to stakers (otherwise they pay with SDT tokens purchased from the market).

 

 

What is the best way to play CRV liquidity wrapping?

 

First, I must say that I do not own any CRV or its wrappers and I have always been bearish on CRV tokens and lifetime cash flows.

 

 

Even though about 50% of CRVs are locked up forever, it still lacks the purchasing power to exceed CRV emissions.

 

If all CRV were locked up, the yield would be severely diluted.

 

 

As the CRV price drops along with the TVL in Curve Finance, the bribe value also drops.

 

 

However, I see potential for Curve with the introduction of crvUSD. It can drive more volume and TVL back to the platform.

 

But we will only see how it pans out once it is actually deployed.

 

In my opinion, yCRV is winning the Curve liquidity wrapping war because it offers the highest yield and the easiest user experience.

 

If some users own veSDT, they may find the sdCRV solution more attractive, as its vote will increase all users’ liquidity locks simultaneously:

  • sdCRV

  • sdBAL

  • sdFXS

  • sdYFI

  • sdANGLE

 

The absolute loser in this case is cvxCRV. It has the lowest yield, no voting rights or bribe income, weak pegging, etc.

 

I expect cvxCRV to depreciate further until it reaches equilibrium with the yCRV yield.

 

Another problem with Convex is that it's unlikely that anyone will mint new cvxCRVs in the foreseeable future - there are 50 million "cheap" cvxCRVs on the market.

 

 

Meaning that Convex’s total ownership (%) in veCRV supply is likely to decrease further.

 

Original link