The growth of DeFi has introduced many possibilities for yield farming, lending, borrowing, staking, and other forms of decentralized finance.
As with any financial system, DeFi has its challenges…
The Strengths and Challenges of Convex Finance
Convex Finance has made a name for itself by optimizing the capture of boosted $CRV rewards. This optimization allows LPs to earn more $CRV, providing a strong incentive to engage with the platform. However, to capture these boosted rewards, LPs must stake tokens, adding an extra step to the investment process.
The dynamic nature of asset balances, TVL, and $CRV emissions makes it difficult for LPs to commit to a single Curve pool for the long term. As these variables change, the profitability of different pools can fluctuate significantly. This volatility makes it challenging to navigate Curve's ecosystem effectively, especially given the high gas costs associated with staking and withdrawing LP tokens.
To mitigate these challenges, Conic adds another layer atop Curve - introducing the omnipool concept. A single deposit pool to allocate liquidity across multiple curve pools holding that underlying asset, this pool offers vlCNC lockers the ability to vote on how to allocate liquidity within the pool. This democratic approach taken gives LPs a say in the pool's direction, increasing the potential for better yield and offering a more dynamic response to changes in asset balances, TVL, and $CRV emissions, coupled with an incentives system for rebalancing the omnipool.
Now that we’ve touched on some history, let’s dive in to why Torus represents a leap beyond Conic and additional value-add to Curves thriving ecosystem.
Torus' ETH Omnipool: An Innovative Approach to incentive alignment on liquidity allocation and governance Yield and Fee Distribution.
Torus has taken Conic’s concept a step further with the introduction of the $ETH + ETH LSDs omnipool.
vlTOR holders can receive rewards via "bribes" for their votes from protocols that want a higher percentage of liquidity allocated to their pool. These bribes provide an additional yield source for vlTOR holders, on top of the traditional yield from $CRV and $CVX.
Additionally, vlTOR holders can also collect real yield from a percentage of platform fees collected in $CRV + $CVX, and a variety of incentive tokens. This model ensures a diversified income stream,incentives alignment on governance and increasing the potential for higher yield while also lowering the risk associated with reliance on a single token or protocol.
By leveraging Layer Zero technology, we can drive even deeper yield and composability by allowing for the chain-agnostic bridging of $ETH omnipool receipts for users to capture Curve yield on mainnet whilst being used as collateral on, for example, an Arbitrum lending market (article on pricing curve LP as collateral to follow).
Conclusion
DeFi is a rapidly evolving space, and with innovations on top of Curve like Convex reward boosting, Conic's omnipools and now Torus' $ETH/LSD omnipools, the challenges of volatile asset balances, changing TVL, shifting $CRV emissions, and high gas fees can be addressed.
By giving LPs more flexibility and easier opportunities to earn yield through single deposits, these tools make DeFi more accessible and more profitable, further promoting growth and evolution while adding value to the existing ecosystem.
TL;DR:
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veCRV directs emissions.
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Convex boosts rewards on top Curve
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vlTOR directs liquidity and rewards users for participating in governance.
Until next time,
Torus