cvxFXS is a liquid version of locked FXS, as the latter is not tradeable. cvxFXS helps investors auto-reinvest Frax protocol fees, while earning CVX rewards on top.
cvxFXS is a low-cap asset that represents the protocol's native governance or utility token. cvxFXS is exposed to death spiral risk as its price depends on another asset, thus creating negative feedback loops. This asset is exposed to the underlying risks of Frax and Convex, which are protocols both rated as Moderately Risky. cvxFXS is a liquid version of vote-locked FXS as the latter is not tradeable. cvxFXS helps users maximize yield from locking FXS as cvxFXS auto-reinvests FXS rewards and receives CVX rewards as well. Even when cvxFXS is fully collateralized with locked FXS, the secondary markets for cvxFXS can make the asset trade below 1 FXS as investors seek liquidity. It is expected that cvxFXS trades at a discount to FXS. The asset has an uncapped supply but has inflation control or burn mechanisms in place.
cvxFXS is moderately correlated to the overall market. Even when cvxFXS is fully collateralized with locked FXS, the secondary markets for cvxFXS can make the asset trade below 1 FXS as investors seek liquidity. It is expected that cvxFXS trades at a discount to FXS.
Convex is a liquidity aggregator built on top of Curve that issues cvxFXS as a liquid version of locked FXS (veFXS). The FXS token is used to govern the Frax protocol and give holders the ability to submit proposals and potential changes to the allocation of pool rewards. The amount of voting power a user has is determined by how many FXS tokens are staked and for how long. The longer FXS is staked (max of four years), the more voting rights are granted.
cvxFXS has the same token supply as FXS as it is minted 1:1 for all FXS deposits. The total supply of FXS is capped at 100M tokens. The initial supply includes 60M tokens distributed to the community for yield farming programs and DeFi initiatives (maximum one year emission between 18-30M depending on the collateral ratio of FRAX), 5M to a community governed treasury, and 35M to the team and investors (20% team, 3% strategic advisors and early contributors, 12% accredited private investors). The actual supply is intended to be deflationary as long as there is demand for FRAX and while it is minted at higher collateral ratios.
cvxFXS can be staked on the Convex platform to receive Frax protocol fees. Users also receive CRV from Convex revenue, as well as inflationary CVX emissions. FXS has value accrual mechanisms through its power to promote certain pools across its AMO and locking mechanism to accrue rewards for long-term liquidity providers. Voters determine the different allocations of FXS tokens to each pool, which can boost rewards for liquidity providers. Users are incentivized to lock their FXS tokens within the protocol in return for veFXS tokens. FXS lockers are entitled to fees generated from minting and redeeming as well as by the protocol's several product lines.