FIP-53: Enter the Curve Wars

Status: Draft
Author: @eswak


This proposal mints 50M FEI to deposit in the Curve d3pool (FRAX, FEI, alUSD), and stake the LP tokens on Convex to earn CRV & CVX rewards (currently ~30% APR).

Motivation / Background

There is a heated battle happening between protocols called the Curve Wars, and I think now is the time to join it.

In short, how Curve works : the CRV token is distributed through liquidity mining : anyone providing liquidity on the Curve protocol in a pool that have a gauge can earn CRV rewards by staking their LP tokens in the gauge. CRV tokens can be locked for up to 4 years to get veCRV, the voting token of Curve. The veCRV tokens can be used to vote for gauge weights, increasing or decreasing the CRV rewards in certain pools, and they provide a boost of up to 2.5x on CRV rewards when staking LP tokens in gauges.

This gauge mechanism is similar to what we are doing with the TribalChief, where we distribute TRIBE rewards to users staking FEI+3CRV lp tokens. Holding CRV (directly or indirectly) is a way to direct the liquidity mining incentives of the Curve protocol towards our desired pools, instead of spending our own TRIBE tokens to attract liquidity. And that is why there is currently a “war” to get the largest share of CRV between protocols : it allows liquidity mining without spending DAO treasury, so it is sustainable over the long term. Holding veCRV also entitles users to half of the trading fees collected by the Curve protocol, paid in stablecoins (3pool LP tokens), so it is a revenue stream sustainable over the long term :

Thanks to our TribalChief rewards, we have attracted more than 230M liquidity in our “metapool”, which allows users to trade FEI against DAI, USDC, and USDT at a very low slippage. We are the 4th largest Curve pool today by trading volume :

Our FEI Metapool currently have a very low A factor (10) and no gauge, but we are currently discussing with Convex to get these changes passed on the Curve DAO. Also, smartcontracts need to be whitelisted in order to lock CRV and get veCRV, and today only Yearn, Convex, and StakeDAO are whitelisted.

Fortunately, there is a way for us to join the Curve wars today without asking for a whitelisting, by using Convex. Convex is a protocol where users stake their LP tokens, and the Convex protocol then stakes these LP tokens itself in the gauges. This is better because users benefit from boosting thanks to Convex’s veCRV holdings. In exchange, Convex keeps a part of the CRV rewards, and offers CVX rewards. The CVX tokens can be used to vote in the Convex governance, which votes in the Curve governance with its veCRV holdings.

CVX holders that staked their CVX can vote in the Convex governance, and since it allows protocols to earn additional LM rewards, protocols sometimes offer bribes to CVX holders, so CVX holders vote for the protocol’s pool.

Fei Protocol has bribed 2 times so far for the d3pool (using the grants wallet), along with FRAX and Alchemix that also offered FXS and ALCX rewards. The D3 pool is a joint initiative between Fei, Frax, and Alchemix, and it has a gauge that earns CRV rewards. Its liquidity is around 60M$ :


The A factor of this pool is large (100), meaning that we could deposit 50M FEI in this pool and only incur 0.24% slippage right now. For reference, we got around 0.8% of slippage for the 100M FEI->LUSD auction that spanned two weeks, so under 0.5% is a pretty good deal. Also, this makes proposal execution super straightforward (and it’s instantaneous) !

By holding these LP tokens, the protocol would effectively own some ~10-40M FRAX and alUSD, depending of the balance in the pool, and the rest of the 50M$ would be protocol-owned FEI.

The LP tokens can then be staked on Convex, where it will earn around 30% APR of CRV and CVX rewards, and we can start to build our position in the Curve wars :grinning_face_with_smiling_eyes:


As suggested by Joey, we can acquire d3pool LP tokens and stake these on Convex.

Execution is super straightforward, as we can execute everything in one transaction, directly in the proposal. The DAO Timelock will mint itself 50M FEI, deposit in the d3pool, and then stake the LP tokens on Convex.

Looking forward

this is not part of the proposal, just some forward-looking statements

Later, when we have a more complete smart contract infrastructure to interact with the Curve/Convex protocols, we can unstake from Convex with the DAO Timelock and transfer the LP tokens to the new contracts, and re-stake from there.

I propose to pass this proposal first, and then I’ll work on the contracts to manage the deposit. These new contracts will be used to claim CRV and CVX rewards regularly, stake CVX on Convex to do meta-governance, earn bribes, and convert CRV to cvxCRV or build a stash to later stake as veCRV.

In the mean time, we can earn ~30% APR on ~50M$ liquidity, i.e. ~40k$/day, and start building a position in CRV/CVX.

When our metapool gets a gauge, we could even imagine adapters for the TribalChief, where users would be given TRIBE rewards for FEI-3crv or d3pool LP tokens, and the protocol would stake the LP tokens itself in Convex to earn CRV & CVX rewards, which will offset part of the cost of the liquidity mining program.

We could also offer leverage farming, i.e. users provide stablecoins and the protocol mints the associated FEI to deposit in Curve pools, keeps the CRV/CVX rewards, and offers TRIBE rewards instead. For instance, the current yield of 3pool tokens on Convex is around 7.5%. If we offer superior TRIBE rewards to stake these in our protocol, we can earn CRV/CVX rewards on twice the amount by farming CRV emissions of our metapool when it gets a gauge. If we don’t want to spend TRIBE rewards on that, we can also just keep 25% of the CRV/CVX rewards, for users it would still be a 1.5x leverage vs staking alone on Convex. And for the protocol it’s free liquidity/rewards, because the stablecoin associated with FEI collateralizes the FEI.

If we are comfortable with holding d3pool tokens (or other pool tokens where FEI is present), I would also like to build a PCVDeposit similar to FRAX’s Curve AMO : such a contract would be able to mint FEI when FEI is above peg, and the protocol would benefit from this arbitrage while building a larger and larger stablecoin position over time. This deposit could earn CRV/CVX rewards by staking its LP tokens on Convex, too.


Participating in acquiring CRV and CVX is an important part of any long-term focused DAO at this point. Especially with our stablecoin focus, control of CRV governance is key. This proposal uses a low-cost way to acquire a vast supply of CRV and CVX rewards, which can cement the Tribe as being a core player in the Curve Wars. In favor.


I think this is a good idea insofar as it is cheaper than liquidity mining and would increase the liquidity of fei

however I think we should take this gradually

  1. keep it limited to being under a specific fraction of the pcv (e.g. 1% - 5%)
  2. avoid any form of long term lockups

can relax these constraints as the situation evolves

on 1, if frax and fei both start minting a lot into this pool and being backed by each other, that seems bad. as an extreme example, fei and frax could each mint 1B and perform a swap. both would have an additional 1B in collateral on paper, but the real collateral in the system did not increase. a much less healthy situation

on 2, the defi landscape changes fast. fei might need to alter pcv deployment strategy to adapt to these changes and it would be undesirable to be locked in

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I think we’re aligned here, minting more than what we would be willing to hold would indeed be bad for CR and not make any sense. But if we target to get ~50M additional stablecoins & hold some FRAX/alUSD anyway, then it makes sense to get d3 LP tokens & farm on Convex, because we increase FEI liquidity and also get some good yield.

About locking, I also don’t think we should lock collateral, but I’d be fine with locking staking rewards (i.e. the CVX/CRV, TOKE, ANGLE, or not unwrap the stkAAVE we are earning for instance). We can discuss that topic later, but before deciding what to do, let’s farm them :stuck_out_tongue:


Moving this proposal to last call, so we can get things done next week !

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Snapshot vote is up

On-chain vote is on : Tally | Fei :rocket: