The decentralized finance (DeFi) landscape has seen a dramatic shift in power dynamics, with Curve Finance at the heart of it. As stablecoin and pegged-asset trading dominates DeFi activity, control over Curve’s liquidity incentives — often called the "Curve Wars" — has become a high-stakes game among protocols. At the center of this battle are three major tokens: CRV, CVX, and FXS.
This article dives deep into their economic models, competitive positioning, growth drivers, and investment potential — helping you determine which token offers the strongest long-term value in the evolving Curve ecosystem.
Understanding the Curve Ecosystem
Curve Finance is a specialized automated market maker (AMM) designed for low-slippage trading of stablecoins and pegged assets like stETH/ETH. Its algorithmic design minimizes impermanent loss and enables efficient capital use, making it the go-to DEX for large-volume swaps.
To incentivize liquidity, Curve issues CRV as a reward. However, simply holding CRV doesn’t unlock its full utility. Users must lock CRV to receive veCRV (vote-escrowed CRV), which grants:
- Governance rights
- Boosted yield on liquidity pools (up to 2.5x)
- 50% of trading fees
- Influence over CRV emissions distribution across pools
While powerful, veCRV comes with a major drawback: it's illiquid. You sacrifice access to your tokens for up to four years.
👉 Discover how top protocols maximize yield while navigating liquidity constraints
1. CRV: The Foundation of Curve’s Economy
Tokenomics & Value Capture
CRV has a total supply of 3.03 billion:
- 62% to liquidity providers
- 30% to shareholders (2–4 year vesting)
- 3% to team (2-year vesting)
- 5% community reserve
To capture value from Curve, users must lock CRV into veCRV. The longer the lock-up (up to 4 years), the more veCRV earned — with full value only realized through long-term commitment.
Revenue streams include:
- 0.04% trading fees (50% go to veCRV holders)
- Control over CRV emission weights across pools
However, CRV itself does not directly earn revenue — it’s the act of locking that generates returns. This creates a structural dependency on external platforms to provide liquidity and yield enhancement.
2. CVX: Unlocking Liquidity and Power in the Curve Wars
Convex Finance emerged to solve veCRV’s biggest flaw: illiquidity.
By depositing CRV into Convex, users receive cvxCRV, a liquid derivative that represents 1:1 backing by veCRV. This allows users to retain exposure to veCRV benefits while maintaining tradability.
Additionally, Convex issues its native token, CVX, distributed as follows:
- 50% to Curve LPs
- 25% for liquidity mining (CVX/ETH, cvxCRV/CRV)
- 10% team (1-year lock)
- 9.7% treasury
- 3.3% investors
- 2% airdropped to veCRV holders and governance participants
How CVX Captures Value
Convex takes a 17% fee on all CRV rewards generated by its platform:
- 10% → paid to cvxCRV stakers in CRV
- 5% → paid to CVX stakers in cvxCRV
- 1% → reserved for vote-locked CVX holders
- 1% → goes to harvest callers
Despite CVX capturing only a small portion of revenue, its real power lies in governance: vlCVX (vote-locked CVX) controls a massive share of veCRV — giving Convex de facto control over Curve’s emissions.
This makes CVX one of the most strategically valuable assets in DeFi today.
👉 See how leading protocols leverage CVX for sustainable yield generation
3. FXS: The Ambitious Challenger in the Stablecoin Arena
Frax Finance operates a partially collateralized stablecoin model, where FRAX is backed by both USDC and algorithmically by burning FXS, its governance token.
When FRAX trades above $1, users can mint new FRAX using USDC + FXS, then sell for profit — increasing supply and pushing price down. When below $1, redemption mechanics reduce supply and restore parity.
FXS Tokenomics
Total supply: 100 million FXS
- 60% → liquidity incentives & community treasury (halving emissions yearly)
- 20% → team (6-month lock, 12-month linear release)
- 12% → investors
- 5% → grants & partnerships
- 3% → advisors
FXS captures value through:
- Being burned during FRAX minting (deflationary pressure)
Earning protocol revenue via:
- Trading fees from FRAX/USDC pools
- Yield from lending idle USDC (e.g., Aave, Compound)
- Revenue from Frax’s own lending protocol (Fraxlend)
- Buybacks funded by protocol income, distributed to veFXS stakers
Like veCRV, veFXS is required to access full rewards and governance rights.
Frax also actively participates in the Curve Wars by accumulating CVX and CRV to secure liquidity for its metapools — particularly the FRAX-3pool on Ethereum.
Competitive Analysis: Porter’s Five Forces Applied
Curve Finance
- Supplier power (LPs): Low – LPs chase yield; Curve subsidizes them via CRV.
- Threat of new entrants: Low – Niche specialization deters competition.
- Rivalry: Minimal – No direct competitor matches Curve’s efficiency.
- Substitutes: Moderate – Uniswap V3 competes in stablecoin swaps but lacks depth in pegged assets.
- Buyer power: Mixed – Traders have alternatives; projects needing liquidity do not.
👉 Compare how different DEXs handle stablecoin trading efficiency
Convex Finance
- Effectively controls ~50% of veCRV via vlCVX.
- Acts as an aggregator with near-monopoly status.
- Faces minimal competition after Yearn stepped back.
- Downstream projects depend on Convex for boosted yields and emissions influence.
Frax Finance
Operates in a highly competitive space:
- Strong substitutes (USDT, USDC)
- High rivalry (LUSD, DAI, new chain-native stables)
- Supplier power (Curve/Convex) is high
- Buyer choice is abundant → high user bargaining power
Despite challenges, Frax differentiates through capital efficiency and innovation (e.g., Frax Ether, Fraxlend).
Growth Drivers and Investment Outlook
| Metric | CRV | CVX | FXS |
|---|---|---|---|
| Governance Power | High (via veCRV) | Very High (controls veCRV) | Medium (growing CVX holdings) |
| Revenue Capture | Indirect (requires locking) | Partial (fees shared with stakers) | Direct (protocol-owned liquidity) |
| Market Position | Foundational but passive | Dominant aggregator | Aggressive challenger |
| Long-Term Moat | Strong in niche | Strongest due to control | Dependent on execution |
Why CVX Stands Out
CVX sits at the intersection of liquidity, governance, and yield amplification. With no single entity controlling it, protocols bid for influence via bribes — creating recurring demand.
Bribery platforms like Redacted Cartel and Gauge Wars drive consistent income for vlCVX holders. As more protocols seek sustainable liquidity, CVX becomes a de facto tollbooth for accessing Curve’s ecosystem.
Moreover, holding CVX is cheaper than acquiring CRV directly — with shorter lock-up periods and liquid derivatives available.
Frequently Asked Questions (FAQ)
Q: Is CRV a good long-term investment?
A: CRV has foundational value but requires locking to generate returns. Its upside depends heavily on external platforms like Convex. While essential to the ecosystem, it lacks direct yield unless staked via third parties.
Q: Can FXS overtake DAI or UST?
A: FXS won’t replace DAI soon, but it’s well-positioned to capture market share post-UST collapse. Its hybrid model offers resilience, and expanding use cases like Frax Ether improve adoption potential.
Q: Why is CVX considered powerful?
A: Because vlCVX controls veCRV distribution, which dictates where CRV emissions flow. Protocols pay bribes to vlCVX voters — turning CVX into a revenue-generating asset with outsized influence.
Q: Does Frax really control Curve?
A: Not yet. While Frax holds significant CVX, no single protocol dominates. However, Frax’s strategy of reinvesting profits into CVX accumulation could shift power over time.
Q: Are bribes sustainable in the long run?
A: Yes — as long as protocols need liquidity, they’ll pay for influence. Bribes act as marketing spend for protocols aiming for organic growth. As DeFi matures, this spending becomes more strategic and efficient.
Q: Should I stake my tokens?
A: For maximum returns:
- Stake CRV → get veCRV or use Convex
- Lock CVX → earn bribes + protocol fees
- Stake FXS → get veFXS for buyback rewards
Only unstaked tokens miss out on value capture.
Final Verdict: Where Should You Allocate?
- CRV: Best held through Convex or Yearn for compounded yields. Standalone holding offers limited utility.
- CVX: The most strategically valuable asset in the Curve Wars. Offers exposure to bribes, fees, and governance — making it the safest bet.
- FXS: High-risk, high-reward play. If Frax gains dominance in liquidity provision or secures major partnerships, FXS could outperform.
In summary, CVX currently presents the strongest investment case due to its central role in governance, growing fee streams, and low competitive threat.
As DeFi continues evolving, control over liquidity will remain paramount — and CVX sits at the top of that food chain.