# Abracadabra x Convex x Curve x Votium

###### tags: `Abracadabra` `Curve` `Convex`

EDIT 10/10/21 : Proposal has been updated to redirect SPELL bribes
to Votium instead of vlCVX delegators.
See "SPELL Bribes" section for more details.

### Introduction

Hi fellow wizards, as the MIM stablecoin requires a strong Curve pool to maintain peg and liquidity, this proposal aims for Abracadabra to accumulate voting power in two forms : veCRV and vlCVX.

### Context

To fully grasp this proposal, here’s a quick breakdown of Curve and Convex :

[Curve Finance website](https://curve.fi/)

[Cur.vote website](https://cur.vote/)

[Convex Finance website](https://www.convexfinance.com/)

[Convex Finance voting page](https://vote.convexfinance.com/#/)

[Votium application](https://votium.app/)

Curve is an AMM, distinguishing itself from the others AMM as it allows users to lock their CRV as veCRV for a certain time period ( up to 4 years ). Once a user has those veCRV, he is allowed to vote for two things :

- Proposals to add a new gauge on a specific pool ( direct a part of the CRV emissions to that pool )

- The gauge weight vote of pools ( once it receive CRVs, how much will the pool receive compared to the others )

Those mechanisms allow liquidity attraction on specific pools as they are now receiving CRV emissions as rewards on top of the trading fees and eventuals other incentives.

The Convex protocol which launched in May of 2021 aims to abstract some parts of the Curve protocol. At the time of writing, Convex holds almost 9.5bn TVL, and has a voting power of 116m veCRV.

Those veCRV are controlled by the Vote Locked CVX, a version of the native CVX token locked for 16 weeks epochs.

Convex automatically votes for all of it’s gauges on Ethereum depending on fixed parameters, from their documentation :

- Each gauge will be able to use up to 5% of Convex's veCRV per 30 million USD value in the curve pool

- Each gauge will have a hard cap of 20% of Convex's veCRV assigned to it.

If they **can not** vote for specific gauges, holders of vlCVX however are able to vote to add new gauges on pools.

### How does that affect Abracadabra ?

On the Curve side, having people vote for the MIM pools is very important as it attracts liquidity on those pools by assigning CRV rewards. This unlocks deeper liquidity and a stronger peg security for MIM.

With the recent launch of bribes, we saw the TVL of the MIM pool skyrocket to reach 1.5bn$ as of today, thanks to the SPELL rewards distributed to people voting for the pool’s gauge. Proof that voting incentives are a really good way to attract liquidity in a pool.

On the Convex side however, since gauge weight votes are automatic, the most interesting thing is to have enough voting power to start a proposal to assign a gauge on a newly created pool ( for example, propose to add a Gauge to an ETH/wBTC/MIM pool when it comes out ) so it can receive CRV rewards.

Considering the fact that the liquidity mining/bribes budget will dry out over time, I think there’s multiple advantages for Abracadabra to start accumulating both **veCRV** and **vlCVX** :

- **veCRV** will allow the protocol to constantly vote for MIM pools on **every chain** they are deployed to ensure the pools have significant enough CRV rewards to keep the liquidity at bay ( Convex doesn’t impact L2 pools ). This becomes even more important once the bribes and liquidity mining budget is dried out, as people won't receive SPELLs anymore for their liquidity/votes.

- **vlCVX** will give the protocol the power to start a vote to assign a gauge to a newly created MIM or SPELL pool on the Curve protocol, in order to attract liquidity. This gives Abracadabra the power to strongly vote for their pools proposals as **1 vlCVX = ~9 veCRV voting power** at the time of writing ( [Source](https://dune.xyz/Marcov/Convex-Finance) ), it became way more interesting than using veCRV straight up.

This will give Abracadabra a continuous mechanism for pool incentivization over time, whether or not it gives out SPELL rewards.

### How to do it ?

The proposal here, aims for a simple way of accumulating both of those tokens.

I suggest that **5%** of the protocol weekly fees are used to buy up CVX on the market and lock it on the Convex protocol. This buy can be separated from the SPELL buyback as it does not include any front-running risk, and can be done on a fixed time period ( once a week seems good ). This should be done on a **brand new address** to avoid confusion.

As the time of writing, the Abracadabra cauldrons have accumulated around 1,300,000$ in fees ( [Source](https://byebyedai.money) ) during the last week, that would result in a 65,000$ CVX market buy, around 5,500 CVX.

Once they are locked, those vlCVX will yield the protocol **cvxCRV**, which is the liquid version of Convex’s **veCRV** locked for an infinite amount of time.

Abracadabra can then also stake those cvxCRV in order to receive multiple rewards :

- CVX, a part of the CVX distribution program
- CRV, a share of all the CRV farmed by Convex
- 3CRV LP tokens, a share of the Curve platform fees

Those rewards should be compounded, and not sold on the market.

- CVX compounded as **vlCVX**, growing the yield in cvxCRV and the voting power for new proposals.

- CRV would be locked up **as veCRV** directly on the Curve platform. This gives Abracadabra the power to vote on gauge weights, and more specifically on **multichain gauge weights**, something not possible on Convex. This will also allow the protocol to vote for L2 gauges establishment since Convex doesn’t touch L2 pool votes.

- The 3CRV LP tokens would be deposited in the 3CRV-MIM pool, growing it’s liquidity, and staked onto Convex in order to capture more CRV and CVX to compound. This could serve as the beginning of **a yielding treasury for Abracadabra in the form of CVX-3CRV-MIM LPs**.

This last point will only increase liquidity in 3CRV however, not in MIMs, so how can we help the MIM balance for that pool ?

- On top of those native rewards, the cvxCRV and veCRV will allow the protocol to get **EPS** airdrops on the **Binance Smart Chain**. Same as the veCRV, those should be locked as well ( 3 month period ) in order to gain more **EPS**, and **BUSD** rewards. Those BUSD must be swapped into MIMs and bridged back to Ethereum via **Anyswap** to be deposited in the MIM-3CRV pool, strengthening the liquidity in MIM.

- With the current bribes system in place, the **vlCVX** will receive all the bribes distributed by Convex. Those bribes would be sold for MIMs on the market, and those MIMs would then be deposited and stacked in the Convex 3CRV-MIM pool. There’s a special case for SPELL bribes detailed below.

This would create a positive liquidity feedback loop that would constantly grow the 3CRV-MIM pool in order to have deeper liquidity and a better peg protection.

### SPELL bribes

As said previously, voting on the MIM pools with veCRV and vote locking CVX allows the protocol to receive SPELL bribes. Instead of selling those bribes for more CVX or MIMs, those can be send back to the Votium dedicated pool. This allow Abracadabra to get again more voting power from people delegating their votes. This will dilute those SPELLs for a longer bribe period as it's a re-injected budget by the Abracadabra protocol and not a new allocation.

This removes the hurdle for Abracadabra to manage and redistributes the received SPELLs, and gives delegators a single place to manage their delegations the way they want.

### Breakdown

Here is a complete breakdown of the rewards and mechanisms that would be in place.

Note that this would be complete only after the first claim + staking of **cvxCRV**.


### Recap for each protocol involved

**Abracadabra**

- Gain voting power to deploy new pools with a gauge on Curve ( veCRV + vlCVX )
- Gain voting power for the weight of CRV distribution on multi-chain pools ( veCRV )
- Attract more voting power thanks to vote delegation ( vlCVX )
- Earn a part of the Convex fees to grow a treasury as Convex staked 3CRV-MIM LPs
- Earn a part of the Ellipsis fees to grow a treasury as Convex staked 3CRV-MIM LPs
- Strengthen the liquidity and peg of 3CRV-MIM pool
- Allow for long-term switch from SPELL bribes/LM to CRV redistribution
- Have a voting power system independent of the Kashi platform ( riskless )

**Convex finance**

- More CRV farmed by the platform thanks to the staked 3CRV-MIM LPs treasury
- More CRV farmed as the 3CRV-MIM pool attract more liquidity with CRV rewards
- Constant CVX buy pressure
- Constant CVX vote locking
- Constant cvxCRV staking, growing the Convex global voting power

**Curve finance**

- Generate more fees from the staked 3CRV-MIM LP treasury deposits
- Constant lock of CRV in the form of veCRV and cvxCRV reducing CRV supply
- Constant growth of the 3CRV pool
- Constant growth of the MIM metapools, on multiple chains
- More volume on the CRV/cvxCRV pool due to Abracadabra converting it’s farmed CRV
- Bigger probability to have MIM and SPELL factory/metapools with gauges, bringing more volume overall

**SPELL holders**

- Receive proportionally reduced fees during buybacks as a 5% cut is used to buy CVX
- Ultimately earn more absolute fees as voting brings in more users and volume

**CVX stakers**

- Receive more fees as cvxCRV as the platform generates more fees overall from the loop

**vlCVX holders on Votium**

- Receive SPELLs for a longer period of time as the share farmed by the Abracadabra vlCVX would be re-injected in Votium

As the CVX rewards are reduced on every 100,000 CRV claimed by the Curve LPs on the Convex platform, I think it is critical to start accumulating this voting power as fast as possible to remain competitive among the stablecoins war. ( [Source](https://docs.convexfinance.com/convexfinance/general-information/tokenomics#fb3b) )

This proposal is completely decorelated from the proposed CRV cauldron as it doesn’t include any borrowing or leverage. It also remains independent from the rest of the platform, making it insensible to liquidations/borrows/MIM supply.

I think this proposal is great for all 3 parties involved as it brings voting power on the Abracadabra protocol, more fees for Convex and Curve, and more veCRV locked for Curve.

Let’s make some more magic !

Written by Clonescody, a fellow wizard.