DISCLAIMER: CLever will go live with a limited beta mode to give the community a sneak peek, and a chance to play around with the system before full launch. Check out important details about the beta period, including the whitelisting opportunity, at the end of the article.
The Curve Wars, to which an avalanche of pixels has already been dedicated, hold an incredibly rare opportunity, right now, for DeFi users that have conviction to bet.
This opportunity is created by three conditions that exist now and should make every regular crypto user’s eyes bulge:
- A major event, the fundamental fight for liquidity (initially among stablecoins) is occuring
- The battle is being fought in the open, public forums and DEXes, rather than in closed-door meetings and with OTC deals
- There is a clear mechanism (CVX, voting bribing) by which everyday users can participate and benefit.
A big opportunity that doesn’t require insider access and where there’s nothing stopping regular people from getting involved? These are the opportunities that can make fortunes. It’s the dream of DeFi, and it’s now.
So you’ve found your rocket ship, sitting on the launch pad and fuelling up, with the door open to you. What next? It’s time to bet with conviction and make use of your resources as efficiently as possible. On this front there is big news. We (AladdinDAO, the makers of Concentrator) have created a powerful new weapon for the Curve/Convex ecosystem that will significantly boost the earning capability of regular CVX holders.
It’s called CLever, and it’s a way for CVX holders to earn more bribes and rewards, and compound those into more CVX. With CLever, when users deposit their CVX two things happen immediately. First, their CVX is vote-locked on Convex and used to vote for gauge weights and proposals on their behalf. Second, the user can immediately claim their future yields (up to 50% of the locked amount) in a synthetic CVX token called clevCVX. clevCVX can be swapped into regular CVX in two ways (Curve pool, clevCVX Furnace) and the resulting CVX can even be re-deposited as further collateral, increasing the users bribes and rewards.
And what about the bribes? The locked CVX, as mentioned, is used to vote on behalf of the user, with votes cast to maximize bribe value for them. All bribes and rewards are then harvested and swapped into CVX. Users who claimed their future yields already will see that their outstanding debt to the system is reduced by the amount of the harvest. They now have the option to claim more future yield, up to the maximum. Users that did not have outstanding debt at the time of the harvest receive their yields as claimable clevCVX. In both cases, the harvested regular CVX is placed into the Furnace.
CLever uses each user’s locked CVX to vote for Curve gauges in order to gain the maximum bribe income. Users gain the full benefit of their locked CVX voting power, and are able to get a big part of their future yields immediately.
The Furnace allows any user to request to burn clevCVX and get CVX at 1:1. When new CVX enters the Furnace it is distributed proportionally to all users with an active request. If there are no active requests, the CVX is held in the Furnace and available immediately for the next request. The Furnace helps keep the value of clevCVX close to CVX by creating an arbitrage opportunity any time the value of 1 clevCVX is lower than that of 1 CVX, while also creating an alternative to the Curve pool for swapping.
The Benefits of CLever Borrowing: Liquidation, Risk, and Cost
CLever’s future yield claiming mechanism is essentially borrowing against the user’s locked CVX, while using the yields to automatically pay back the loan. The details are important here, as CLever uses a significantly different (and in our opinion, better!) mechanism than most borrowing in crypto. The mechanism works by minting a synthetic version of CVX (called clevCVX) against the real thing, and then providing ways for users to swap their clevCVX for CVX, thus increasing the amount of CVX the user can earn with. Each clevCVX is fully backed by at least one real CVX token in the system.
The first benefit of this system is in liquidation risk… as in, there isn’t any. Liquidation in a money market or lending protocol occurs when the value of the borrowed assets exceeds a given fraction (LTV) of the value of the collateral, but in the case of CLever that doesn’t happen because the value of the borrowed (clevCVX) and collateral (CVX) tokens do not vary independently. It is possible for clevCVX to come off its peg and be worth slightly less at times, but not more as there would be an immediate arbitrage opportunity. So users never have to worry about the health of their loan, it’s always fine… no liquidation possible.
The next big benefit is in the risk exposure. For typical on-chain lending, users deposit an asset and borrow an unlike asset. For example, someone may deposit ETH as collateral and use that to mint/borrow a stablecoin. There are several risks here. In order to monitor the value of the collateral vs the value of the borrowed amount, protocols must rely on oracles. Oracles create extra failure modes and extra attack surfaces. In fact, many DeFi exploits are executed by disrupting or manipulating an oracle’s price feed in order to trick a lending protocol into thinking the collateral is worth more or less than the reality.
Another aspect of risk to typical borrowers comes from the fact that usually multiple different assets are accepted as collateral to borrow the same token. If any one collateral asset collapses in value or is exploited, it could risk affecting the borrowed asset for everyone. In the case of a borrowed stablecoin, the borrower takes on the risk of every single collateral accepted by the protocol. Yikes! Better double check that you’re comfortable with the risk of every different accepted collateral token, and not just the one you are supplying.
CLever’s mechanism requires no oracles at all, and the borrowed token is paired with the collateral token in a single pool so there is no risk of contagion.
The final big benefit to CLever’s leverage mechanism is the certainty in funding cost. There is zero interest charged on borrowed clevCVX. Instead, CLever charges 20% of the yield harvested (these fees are split between liquidity providers in the clevCVX/CVX pool and the (eventual) revenue sharing system). The CLever fee structure allows users to know up front how much their borrowing will cost. Again, this is very different from typical overcollateralized lending where users generally pay a variable rate on their borrowed tokens. For those systems, the borrowing rate can change suddenly as liquidity enters or exits the system, or as the liquidity utilization rate spikes. It’s impossible to predict borrowing costs precisely in such a system, and in the worst case a spike in borrowing cost could force a loan into an unexpected liquidation. Again, with CLever, there is no such risk.
More Awesome CLever Details
The Aladdin team has thoughtfully crafted CLever to be an unconditional benefit to the CVX community and the Convex protocol. The Aladdin team philosophy, as we have said over and over, is long-only: we identify the best protocols and build synergistic, not parasitic, tools for the community. CLever is perhaps the best example of that yet. Consider the following:
CLever provides a side benefit: yields on liquid CVX, without impermanent loss
Since the CLever mechanism relies on liquidity in the clevCVX/CVX Curve pool, it will incentivize that liquidity by sharing fee revenue denominated in clevCVX/CVX pool tokens. This is significant because it represents real CVX yield paid on liquid CVX. Additionally, depositors in the clevCVX/CVX pool do not experience impermanent loss as they would in a pool 2. The net result is that CLever provides a way for liquid CVX to earn real yields without locking. (Spoiler… Concentrator might just be planning to take advantage of this soon!)
Claiming future yields now gives maximum choice for users
CLever’s gives users the ability to claim more future yields up to their limit as soon as yields are harvested, or wait until later, or just wait while their yield is earned. Different users can use this flexibility to put CLever to work in different ways, depending on their needs users can:
- Immediately claim the maximum future yield and re-deposit to create/maintain maximum leverage
- wait and allow yields to accrue more then claim the maximum and re-deposit after multiple yield harvests to save on gas, or
- treat withdrawn clevCVX as securitization of future yields; swap or sell now to enjoy the next year’s yields today
Once a user’s claimed future yields have been fully earned, or if they choose not to borrow, they will continue to earn yields on their locked CVX in the form of withdrawable clevCVX. Users’ assets are never idle, they are always earning. This helps take the pressure off smaller users by giving them flexibility to execute transactions at a time and frequency that works for them, while still allowing larger users the ability to maximize their earning by more frequent operations.
The system of claiming future yields is essentially borrowing, so may also bring tax flexibility, depending on your tax jurisdiction. Since yields are harvested automatically and pay off your debt without requiring you to claim, users can keep borrowing more to add leverage while deferring the taxable event.
CLever is an opportunity for everyday CVX holders to gain the maximum benefit of the war being fought by the big guys, while simultaneously supporting these foundational protocols and betting on the future of DeFi. It is a set-and-forget protocol that allows CVX holders to rest easy while still earning the most yield. If you believe, as Aladdin’s Boule council does, that Curve and Convex are solid, long-term investments representing the future of DeFi, then you will find CLever represents an indispensable tool to take maximum advantage of the Curve wars. Check it out https://clever.aladdin.club, follow us on Twitter or head over to the Aladdin Discord to ask questions and learn more!
Nothing in this article is financial advice.
Details of CLever Beta Period
For the beta:
- CLever will charge only 3% on all yields harvested (to cover gas), rather than 20%
- CLever project will not be seeding initial liquidity in the official Curve pool, so be aware that the only official way to swap clevCVX to CVX will be the Furnace which is refilled only when bribes/rewards are harvested. Expect delays.
- All wallets who use CLever during the beta period will be added to a whitelist for an upcoming token sale, where a small tranche of tokens will be sold for CVX to seed Curve liquidity. Whitelisted addresses will be offered the best price.
More details will be released in future.