Convex Finance CVX Token Crashes After A Bug Forced Token Unlock

The Convex Finance cVX token crashed just recently after a bug forced a token to unlock on the platform and dragged the prices down so let’s find out more in today’s latest altcoin news.

The smart contract bug forced a team to unlock a huge portion of the token and its circulating supply which sent shockwaves on the markets. The Convex Finance team wrote that it deployed the contracts that were responsible for the vote-locking governance mechanism after the discovery of the bug that will grant users some disproportionate rewards.

Important update for vote-locked $CVX holders: the vote-locking contract has been re-deployed, and users will need to re-lock their $CVX tokens.

Full details in our latest medium post:https://t.co/qMGhn7aAqP

— Convex Finance (@ConvexFinance) March 4, 2022

There were no instances of the bug being used before the deployment of the new vICVC contract but since these contracts are immutable, the new contract had to be deployed. The new contract has implemented a fix for the potential bug going ahead and the team even wrote it in a blog post making it the latest example of the experimental nature of DEFI and the $200 billion industry where supply shocks and smart contract bugs are often the usual.

The vote locking mechanism plays a huge role in managing the CVX token circulating supply with more than 72% of the supply locked. The mechanism plays a huge role as well in controlling the voting power in another protocol’s token, Curve Finance. As such, the unexpected unlock of millions of tokens led to a huge supply shock, and the prices crashed as much as 20%.  the larger holders stepped in and added to their positions with most users opting to re-lock their tokens rather than take the chance to sell.

Also people buying during the past lockup period did so at a 18% to 66% mark to market loss so unlocked sellers are likely selling at a loss, not factoring in relockers though.

Opportunistically bidding here. pic.twitter.com/v1GhP0pub7

— Matt Casto (@mcasto_) March 4, 2022

As recently reported, Curve Finance voted to disperse the $3 million in fees to the governance token holders after a community vote. the voting period that was looking to determine the admin fees and how they are allocated, closed in favor of the token holders. In three days, about $2,631,601.92 worth of fees that were accrued before the vote opened and now will head to community coffers. The protocol will continue to disburse the fees on a weekly basis after the initial payout as Curve CEO, Michael Egorov explained. Curve Finance voted and now the recent vote will be seen as a successful exercise in a distributed governance manner where platform users will be encouraged to participate by having skin in the game.