Badger Curve Pool Adds Liquidity on Vote Locked CVX
Oct 29, 2021
Badger’s CVX ecosystem is getting a huge upgrade with the launch of our newest Sett vault: CVX - bveCVX Curve LP.
The Vault executes no underlying strategy other than to emit BADGER as an incentive for providing liquidity on Curve for Badger’s Vote Locked CVX. It charges no performance fee and there is a .1% withdrawal fee for security reasons.
This article explains the Vault’s origin and how it advances Badger’s mission of bringing Bitcoin to DeFi.
Unleash the Convex
Earlier this month, Badger launched its Vote Locked CVX (bveCVX) Vault.
This vault aims to be the best place in DeFI to deposit your Convex, earning users five layers of yield in exchange for locking their CVX with Badger.
The only hiccup for depositors in this Vault is that they are required to lock their CVX for periods of 16 weeks so that Badger is eligible to vote in Convex governance.
Many DeFi users are happy to do this, but there are others who prefer to retain liquidity to seize other opportunities that may come along.
Because Badger needs CVX to get better BTC yields in DeFi, we are going one step further to provide liquidity for locking Vault participants who would like the option to withdraw CVX before the 16 weeks are up.
How do we do this? By using a Curve Factory Pool. These are permissionless pools that allow ultra low slippage between pegged tokens.
Depositors to these pools earn trading fees when users swap between assets. But when users take their Curve LP tokens and deposit them to our newest Badger Vault, they will start earning their share of 2,100 - 2,231 BADGER per week (see emissions schedule below).
Our full User Guide is here, but the basics are as follows:
Step 1: Go to Curve and deposit either CVX, bveCVX (or both) into the liquidity pool to get your LP token. If you are only depositing a single asset, beware of the potential for slippage.
Step 2: Deposit your LP token into the Badger CVX-bveCVX Sett.
Step 3: Claim your mouth watering Badger rewards through app.badger.com.
Note 1: If you are already a depositor in the Locked Convex (bveCVX) Sett Vault, the rewards from the Curve LP vault replace the rewards you are receiving in the Locked Vault.
Note 2: This Sett Vault is not part of the Badger Boost system. All rewards are distributed pro rata.
Other protocols in the Curve ecosystem have struggled to maintain peg between unlocked and vote locked tokens, for example Yearn’s yveBOOST and Convex’s cvxCRV, both of which seek to track the CRV price.
Badger is applying lessons learned from these cases to maintain a tight peg between bveCVX and CVX. Convex's cvxCRV token has had the most success in maintaining peg through a combination of buy pressure on the locked token and deep liquidity for swapping between locked and unlocked (cvxCRV currently trades at a discount of just 2%).
Once the CVX / bveCVX pool has over $2 million USD in assets, Badger will switch our strategies to buying bveCVX with CVX out of this pool and emit it to users, creating a consistent buy pressure on the locked token.
In the following weeks, Badger will also consider switching our bcvxCRV vault, which currently sells CVX for cvxCRV to also buy and emit more bveCVX.
This means that while the DAO will emit only bveCVX, we will never mint it from our strategies. All new bveCVX will be purchased from the Curve pool. This should help us keep peg, while allowing anyone who would prefer not to have locked tokens to swap.
It also provides the opportunity for our vault to arbitrage bveCVX lp when it is below peg to get a better deal on bveCVX for our vault depositors.
Fuel for the Flywheel
Why are we Badgers so eager to get our paws on Convex tokens?
The answer is simple (well, sort of).
Badger’s mission is to foster a healthy yield environment for tokenized Bitcoin in DeFi.
Trading well over $350m of assets per day, Curve Finance is the most important place where tokenized Bitcoin is traded in DeFi.
What’s more, CRV rewards (as part of Curve’s 300 year emissions schedule) are one of the most reliable places to obtain yield on BTC pegged assets.
So how do we get more CRV rewards flowing to Bitcoin? By obtaining more voting power in Curve governance.
Currently the most efficient way to do this is through Convex (CVX), as each token controls approximately eight Curve governance votes.
As Badger locks more Convex, its voting power grows in Curve, which allows us to support even better yields on our Interest Bearing Bitcoin (ibBTC) product, in addition to other flavors of tokenized Bitcoin.
Better yields on Bitcoin are a win for our vault depositors and holders of ibBTC, which allows us to lock even more CVX, creating a virtuous cycle we call the Badger Flywheel.
And we’re not stopping here.
BIP 71 also authorizes generous incentives for CVX holders who are already staked in Convex to migrate over to Badger once their tokens unlock in December.
Better yields for Bitcoin 🤝 more liquidity for locked Convex holders.