What is Curve War?
How it works
The Curve War centers on Curve Finance's CRV token and its gauge system. CRV holders can lock their tokens into vote-escrowed CRV (veCRV) to gain voting power over which liquidity pools receive CRV emissions. Protocols like Convex Finance aggregate CRV from users, converting it into cvxCRV, which represents a share of veCRV voting power. This allows protocols to direct CRV rewards to their own pools, incentivizing liquidity.
Major DeFi protocols, including Yearn Finance, Stake DAO, and others, accumulate CRV and cvxCRV to influence gauge weights. They deploy strategies like bribing voters with their own tokens via platforms like Votium or Hidden Hand. The goal is to attract liquidity to their pools by offering higher yields from CRV emissions, creating a feedback loop where more locked CRV yields more control over emissions.
The war extends to cross-chain bridges and stablecoin protocols. For example, Frax Finance uses its FXS token to bribe veCRV holders to boost its FraxBP pool. The competition drives demand for CRV, increasing its value and locking mechanisms. This dynamic has led to the creation of specialized aggregators and yield optimizers that compete for veCRV voting power.
Why it matters
The Curve War matters because it determines the distribution of liquidity incentives across DeFi, influencing which stablecoin pairs and pools thrive. It showcases the power of governance tokens in directing protocol resources and has spawned entire ecosystems like Convex Finance. Understanding this war is key to grasping how DeFi protocols compete for liquidity and how token holders can leverage voting power for profit.
Real-world examples
Real examples include Convex Finance, which aggregates CRV to dominate veCRV voting, and Yearn Finance, which uses its yCRV token to participate. The war also involves protocols like Frax Finance and MakerDAO, which bribe veCRV holders to boost their stablecoin pools. These interactions occur on Ethereum mainnet and have led to the creation of bribe markets on platforms like Votium.
FAQ
What is the goal of the Curve War?
The goal is to control CRV emissions by acquiring veCRV voting power, directing rewards to specific liquidity pools to attract capital and generate fees.
How do protocols participate in the Curve War?
Protocols lock CRV or use aggregators like Convex to gain veCRV voting power, then bribe voters with their tokens to influence gauge weights.
What is the role of Convex Finance in the Curve War?
Convex Finance aggregates CRV from users, converting it into cvxCRV, which represents veCRV voting power, allowing protocols to efficiently participate in the war.
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