In the main Convex article, we have been learning about how bribes work. But the rewards must be shared amongst all since this is a permissionless system. So…
Mama, where does CVX come from?
CVX is printed at a rate set by the number of CRV tokens passing through the staked LP positions to the stakers by way of Convex. Since this algorithm is based upon the supply of the two tokens, let’s se where we are currently.
CRV Supply
3.3 Billion CRV tokens will ever exist
1.6 Billion minted August 2020
512 Million have released from lockups
404 Million locked into 367M veCRV
392 Million on the market
CVX Supply:
100 Million CVX supply cap
50 Million allocated for airdrop, protocol incentives, team, investors, treasury
50 Million for minting by Curve Liquidity Providers staking to Convex
The minting of the CVX token is a powerful force driving this protocol’s value right now, since CVX has durable value based upon Curve gauge voting weight. The alignment of incentives has reached reached a point where 93% of all the TVL on Curve is staked into Convex; over $20 Billion worth! Through the fee structure, Convex continues to intrinsically stack CRV onto the balance sheet while passing on & enhancing a LP staker’s returns.
Inflation Rate
The rate of CVX minting depends upon the rate at which CRV is captured through Convex to the stakers,it takes more and more CRV to mint each CVX, which could drive up the number of votes each CVX controls. The greater the percentage of daily CRV emissions passing through Convex to LP stakers, the more rapidly we scoot down the CVX minting curve towards the final cliff.
As per norms in crypto, fortune favors the earliest adopters. In this case, if you had veCRV, you may have been given an airdrop (so go check and claim it!).
The equation for the minting of CVX is shown here in the docs, but is as follows:
Max Supply (CVX): 100,000,000
Current Supply Found Here: 80,897,428 https://etherscan.io/token/0x4e3fbd56cd56c3e72c1403e103b45db9da5b9d2b
Cliff Size (CVX): 100,000
Total Cliffs: 1,000
Current Cliff = # of CVX in circulation / Cliff Size = 808.9 (round down) = 808
Remaining Cliffs = Total Cliffs - Current Cliff
CVX Earned = Your CRV Earned by LP staked * (Remaining Cliffs / Total Cliffs)
This basically means that you get 1:1 CVX for CRV at the beginning, tapering down to 1/1000th CVX per CRV at the final printing. We’re currently approaching the 809th epoch, or “cliff” as the Convex Docs describe it. This means that the passing of each cliff has significantly more effects than previously. Additionally, each CVX will control a greater number of veCRV votes.
Take a look back up at that CVX minting curve. You’d think the rate of CVX creation would be collapsing right about now. Let’s look at what is actually happening though and come to grok the situation. Is the rate of CVX minting slowing? Yeah, sure, a little. But it’s essentially holding steady going straight up. This is because the number of CRV Convex is harvesting is compounding rapidly while increasingly large amounts of the CRV emissions are passing through Convex to the stakers, allowing CVX to mint rather steadily.
What does all this mean in regards to the value of the CVX token? How does this impact bribes? Wen Moon? Well, let’s hop back over to the main article to find some answers to these questions, except that one about prices mooning, for that, you’ll have to make your own best guess!