ARC: Add support for CVX (Convex Finance Token)

Governance New Asset
2

Title: CVX Security and Risk Assessment
Author: Llama Community members @MatthewGraham, @JeanBrasse and @Dydymoon.
Created: 01/03/2022

CVX Security and Risk Assessment

##CVX

Convex Finance’s main goal is automation and boosting rewards from curve gauges. Users can deposit their Curve Liquidity Provider (LP) tokens into a Convex pool, the pool automatically locks the LP token into gauges and provides additional incentives to what is administered on Curve. CVX can be locked, creating vlCVX which can then be used to vote on how CRV incentives are distributed on the Curve platform. Convex Finance controls around $379M worth of veCRV, which using coingecko represents around 35% of CRV circulating supply.

Smart contract risk: B

The CVX token was launched in May 2021. The CVX token is central to the DAOs model which enables holders to lock their CVX and vote to determine how best to use the veCRV holdings. This model, in 9 months,has generated more than 445K transactions. Convex has been audited by MixBytes and all recommended changes were implemented prior to launch.

Counterparty risk: C

Convex is a DAO where decisions are made with governance proposals and votes. However, some functions are controlled by the team multisig.

The multisig is a ⅗ required signatures controlled by a part of the team but also by other people:

  • C2tP - Convex Finance
  • Winthorpe - Convex Finance
  • Charlie - Curve Finance
  • Tommy - Votium
  • Sam - Frax Finance

The multisig does not have direct access to user deposit but he can perform different functions:

  • Update a range of parameters such as stash factory, pool manager, change platform fees which enables things like third party incentives to be distributed and incorporating new types of Curve pools.
  • Vote on Curve DAO proposals, Curve gauge weights, set the distribution weights on the Convex Master Chief and set the parameters relating to vlCVX tokens.
  • Shutdown/pause new deposits to Curve pool staking contracts: Allow users to withdraw all funds.
  • Shutdown/pause new deposit to everything: Allow users to withdraw all funds.
  • Apply a new “operator” on the whitelisted proxy contract if and only if the current operator is completely shutdown: After removing all liquidity from Convex, the system can be shutdown and rebooted as a new version.

Market risk: C+

Convex is a leading DeFi project. Conves has amassed a large holding in veCRV and is now attaining a significant holding in FXS. CVX market cap is 1.35B$ with 74% of the circulating supply locked. The CVX/ETH pool has only 155M$ of TVL on Curve. Recently, Chainlink created an oracle feed for CVX which can be found here. There are several large DEX liquidity pools and CVX is listed on numerous CEXs which supports a robust oracle feed and also supports efficient liquidation events.

CEX:

DEX:

  • Curve: TVL CVX/ETH: $163M, Daily volume: $5M
  • Uniswap: TVL CVX/ETH: $7.71M, Daily volume: $900K
  • Sushiswap: TVL CVX/ETH: $8.5M, Daily volume: $1.5M
  • Binance CVX/USDT: Daily volume $2.9M

Proposed risk parameters:

  • LTV: 55%
  • Liquidation threshold: 65%
  • Liquidation bonus:10%
  • Reserve factor: 20%

UOptimal 50%

R_0 0%
R_s1 7%
R_s2 200%

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