In decentralized finance (DeFi), protocols rise and fall on their ability to attract and manage liquidity. Liquidity isn’t just a resource—it’s the prize in an unrelenting battle. Protocols fight to attract, control, and deploy liquidity, knowing their survival depends on it. At heart of this battle lies Curve Finance, the unassuming decentralized exchange (DEX) with an interface reminiscent of Windows 95 but a functionality that has revolutionized DeFi. What began as a competition for Curve’s governance token, CRV, has evolved into a full-scale liquidity race, reshaping the DeFi landscape.

Welcome to the Curve Wars, a high-stakes contest that has redefined how protocols compete, collaborate, and evolve in their pursuit of liquidity. This is the story of how Curve became the epicenter of DeFi’s most intense rivalry and the innovations driving the future of financial markets.

The Rise of Curve Finance

Curve launched in 2020, quickly establishing itself as the go-to decentralized exchange (DEX) for low-slippage, efficient stablecoin trading. Its core innovation, the StableSwap Invariant, a mechanism designed for trading assets with prices that are very close to each other, like stablecoins. It minimizes price slippage by amplifying liquidity around the 1:1 exchange rate, making trades more efficient compared to traditional constant product pools.

But Curve’s genius wasn’t limited to its algorithm. It also introduced a tokenomics model centered around its governance token, CRV, and its unique vote-locking mechanism, veCRV (vote-escrowed CRV)/ locked CRV. By locking CRV tokens for up to four years, users could earn veCRV, which granted:

• Governance Power: veCRV holders vote on how CRV emissions are distributed across Curve’s liquidity pools.

• Boosted Rewards: veCRV provides a boost to liquidity provider (LP) rewards, incentivizing users to lock CRV.

• Fee Sharing: veCRV holders receive 50% of trading fees from all Curve pools.

This structure created a powerful feedback loop: locking CRV for veCRV reduced circulating supply, boosted rewards, and gave holders control over liquidity incentives. As protocols recognized the value of directing CRV emissions to their own pools, the battle for veCRV began.

The Curve Wars Begin

The ability to control CRV emissions—and thereby liquidity—turned veCRV into a coveted asset. Protocols seeking to promote their tokens on Curve faced three options:

1. Lock CRV Directly: Protocols could buy CRV and lock it for veCRV, but this required significant capital.

2. Incentivize veCRV Holders: By offering bribes, protocols could persuade veCRV holders to vote for their pools.

3. Leverage Aggregators: Platforms like Convex Finance emerged to pool CRV and veCRV voting power, simplifying the process for protocols and users alike.

This competition for veCRV marked the start of the Curve Wars, with protocols jockeying for liquidity dominance.

Convex Finance: The Game-Changer

In 2021, Convex Finance entered the fray, fundamentally altering the dynamics of the Curve Wars. Convex’s value proposition was simple yet transformative:

• Users could deposit CRV into Convex to receive cvxCRV, a liquid derivative of veCRV.

• Convex aggregated the locked CRV to maximize veCRV voting power, making it the largest single holder of veCRV.

• Users earned Curve rewards and Convex incentives without committing to long lock-up periods.

By simplifying access to veCRV benefits and offering additional rewards in the form of CVX (Convex’s governance token), Convex quickly became the dominant player in the Curve ecosystem. Today, Convex controls over 40% of all veCRV, making it the most influential actor in Curve’s governance.

From Curve Wars to Convex Wars

Convex’s dominance shifted the battle’s focus. Instead of acquiring CRV to gain veCRV, protocols began targeting CVX, which allows holders to influence Convex’s veCRV votes. This gave rise to a bribe economy, where protocols pay CVX holders to vote for their pools.

Platforms like Votium have streamlined the bribery process, enabling CVX holders to delegate their votes in exchange for rewards. For protocols, bribing CVX holders is often cheaper and faster than acquiring CRV or CVX outright. For investors, CVX has become a lucrative asset, offering yields from Convex’s fees and bribes.

Expanding the Liquidity Wars

The Curve Wars have sparked a broader liquidity arms race, with new protocols adopting similar models to compete in this high-stakes environment. Dinero (formerly Redacted) is one such protocol, leveraging rebasing tokenomics to accumulate governance tokens like CRV and CVX, with the goal of dominating liquidity across multiple platforms. Tokemak has also entered the scene, decentralizing liquidity provisioning by allowing users to vote on where liquidity is deployed across various DEXs. Its governance token, TOKE, has emerged as another key battleground for liquidity incentives. Even Convex is expanding its reach beyond Curve, applying its model to other veToken ecosystems like Frax, signaling the start of a new era of multi-protocol liquidity wars.

The Curve Wars may have started as a fight for control over Curve Finance, but the battle for liquidity has since expanded beyond its ecosystem, evolving into a multi-protocol liquidity arms race. As DeFi grows more complex, the competition to direct liquidity is no longer confined to a single platform. Emerging protocols and established players alike are introducing innovative strategies to influence liquidity across multiple ecosystems, marking a new phase in DeFi's evolution.

The Risks and Rewards

The Curve Wars have sparked incredible innovation in DeFi, but they come with challenges. Centralization is a growing concern, with Convex controlling much of veCRV and dominating governance decisions on Curve. The system is also highly market-dependent. If CRV or CVX prices drop, it could disrupt the incentives that keep liquidity flowing. Layered protocols and the rise of the bribe economy add risks, both operational and technical. Yet, despite these hurdles, the Curve ecosystem has proven remarkably resilient. The partnership between Curve and Convex has created a powerful flywheel for liquidity, driving growth and innovation across DeFi.

What’s Next?

The Curve Wars have demonstrated the importance of liquidity in DeFi. As protocols like Tokemak and Dinero gain traction, the battle for liquidity is becoming more complex and expansive. Meanwhile, Convex continues to consolidate power, making CVX a central asset in DeFi’s governance ecosystem.

For investors, the opportunities lie in understanding these dynamics and positioning themselves strategically—whether through staking CVX, holding governance tokens, or exploring new entrants like Tokemak. For protocols, the fight for liquidity will require innovation, alliances, and efficient incentive structures.

Conclusion

The Curve Wars are more than a battle for liquidity—they’re a test of DeFi’s capacity for innovation and adaptation. Curve’s pioneering model, amplified by Convex, has created a powerful ecosystem that continues to evolve. As liquidity wars expand, they will shape the future of DeFi, ensuring that the protocols best equipped to adapt and attract liquidity will thrive.

The battle is far from over—and the stakes have never been higher.