After a Convex Bug, the token sink and then bounce back!

By Crypto_Lemon | Analysis by Cryptolemon | 5 Mar 2022

Hi HODLers,

What is Convex?

Convex is a platform separated from Curve which is a lending/borrowing platform. One of the first and with one of the highest TVL.

Convex’s vote locking mechanism is key to the project’s token economy, one that allows for users to collect “bribes” from protocols and direct liquidity deposits into another protocol, Curve Finance.

To collect these bribes users need to lock their tokens for 16 weeks**.

Last friday, 72% of all $CVX tokens were locked to benefit from these rewards.

What happened?

A smart contract bug has forced a team to prematurely unlock a huge portion of its token’s circulating supply, sending markets into disarray.

It unlocked 30mn $CRX worth about $420mn which as mentioned, provoked a supply shocked.

Additional comments from the Convex team

“There were no instances of [the bug] being used prior to deployment of the new vlCVX contract. However, since Convex Finance contracts are immutable and non-upgradeable, a new contract had to be deployed. The new vlCVX contract has implemented a fix for this potential bug going forward,”