May 22, 2023
I
Yaoher Pang
Introducing Convergence: The Governance Blackhole
DeFi has been a cornerstone of the web3 industry, ranging from basic features such as Collateralized Debt Positions (CDPs) to complex financial engineering products within the Curve ecosystem. The industry as a whole constantly innovates and pushes the boundaries of Defi straddling the fine line of revolutionary financial products and degen ponzinomics.
On that note we’re excited to be backing Convergence and the new ideas they bring to the DeFI ecosystem. Convergence aims to be a “Governance Blackhole” where they accrue governance rights across various protocols to optimize both the underlying yield generated and the routing of liquidity.
How Convergence Interacts with the Broader DeFi Ecosystem
Various mechanisms where we are all familiar with such as gauges, bonding or tokenization of staked assets will be used but Convergence goes a step further to improve on these existing models. Besides these mechanisms Convergence introduces a new token model for their governance token CVG.
CVG can be staked for either vote-escrowed CVG (veCVG) or yield-sharing CVG (ysCVG) where one directs the emissions and one accrues protocol revenue. Accrued governance tokens such as veCRV / sdCRV / vlCVX / sdFXS will be used for voting for either CVG pools (CVG-FraxBP & cvgTOKE/TOKE) or bribing pools that increase protocol revenue.
One scenario of how the bribes earned from veCRV/sdCRV is that they will be swapped to CRV and compounded into CRV/ETH on Stake. Bribes earned from vlCVX swapped to CVX and compounded into CVX/FraxBP.
Convergence will be working with key players throughout the DeFi ecosystem starting with Tokemak followed by other partners within the Curve ecosystem. Eventually ysCVG can be viewed as an index token to the Curve ecosystem by gathering rewards from all the different protocols.
By supporting Convergence we hope to bring more efficient liquidity routing, especially in current times where the market is facing a lack of liquidity as compared to before. With all that being said the various mechanisms Convergence brings are rather unique and can be better understood here.
Disclosure: OS Venture may have investments in some or all of the tokens and projects mentioned in this article. This statement discloses potential conflicts of interest, and should not be construed as a recommendation to purchase any token or participate in any of the aforementioned ecosystems. The content is intended purely for educational purposes and should not be interpreted as investment advice. Please exercise caution and conduct your own due diligence if considering any involvement in these projects.
