Hey guys :) I’m back with another comprehensive Q&A piece, this time for the popular automated DeFi farming protocol and its native governance token – Curve (CRV).
Curve is a decentralized exchange liquidity protocol built on the public Ethereum blockchain. The project is built to support the efficient trading of stablecoins and is integrated with the Compound protocol and Yearn.Finance behind the scenes.
As of September 29, 2020, Curve Finance is ranked as the 4 largest DeFi protocol in terms of locked USD value with more than $1.2 billion locked in.
Now, before we dive in, the following piece is similar to my latest articles on Nexus Mutual (NXM), FTX (FTT), and Yearn Finance (YFI), so if you haven’t already seen those, be sure to check them out as well.
Hope you enjoy!
The list of Q&A is kind of long so first comes the list of questions that I have prepared the answers to:
- What is Curve Finance?
- Who and When Created Curve Finance?
- What is $CRV Token Used For?
- How Does Curve Finance Work?
- What is veCRV?
- How is Curve different from Uniswap?
- What Tokens Can You Swap at Curve Finance?
- Where to Store $CRV?
- Where to Buy & Sell $CRV?
1. What is Curve Finance?
Curve Finance website homepage
Curve or Curve Finance is a decentralized exchange liquidity protocol designed for extremely efficient trading of stablecoins and synthetic Bitcoin on Ethereum.
With the help of AMMs (automated market makers), Curve allows users to trade between stablecoins and different types of synthetic Bitcoin with extremely low slippage, and Curve liquidity providers earn trading fees while enjoying little-to-no impermanent loss.
That said, most arbitrage traders prefer Curve compared with other liquidity pools like Uniswap simply because of the savings in trades.
Curve Finance currently supports DAI, USDC, USDT, TUSD, BUSD, sUSD, and PAX stablecoins, as well as synthetic BTC pairs renBTC, wBTC, sBTC, and HBTC. On Curve, users can trade between these pairs extremely quickly and efficiently while benefitting from the best prices in the space.
The prices on Curve are better than other liquidity pool DEXes like Uniswap because the assets on Curve trade directly between each other, rather than needing to trade between ETH like on Uniswap.
That said, Curve Finance has been integrated into the backend systems of other DeFi protocols such as Yearn.Finance and the popular Compound protocol to increase yield for liquidity providers (LPs).
These other DeFi protocols leverage Curve liquidity pools using complex automated farming strategies to maximize yield. Alternatively, sophisticated DeFi degens can manually use Curve along with other DeFi protocols to maximize yield on their idle crypto assets by providing liquidity to earn fees and performing arbitrage between stablecoins and other crypto assets.
All in all, Curve Finance is a DeFi powerhouse that plays an integral role in today’s DeFi ecosystem and yield farming mania.
2. Who and When Created Curve Finance?
Curve founder, Michael Egorov
Curve Finance was created and developed by its CEO Michael Egorov who began working on the project in early September 2019 and launched the platform in December 2019.
Prior to founding Curve, Egorov founded NuCypher, a Big Data encryption layer company, and served as the company’s CEO for 5 years. His other work experience includes; Senior Software Engineer for LinkedIn and other Software Engineer positions at WorkLifeGroup, Netagi, and VGTRK.
That said, Egorov has extensive experience in programming and software development which is evident through the proficiency of Curve Finance.
Getting back to Curve Finance, while the platform launched in December 2019, the protocol’s governance token $CRV didn’t launch until August 2020. There was no ICO for CRV and the token was actually launched unexpectedly by someone who deployed $CRV based on smart contracts Curve Finance had published on GitHub, frontrunning the team’s efforts.
The $CRV token was distributed via liquidity mining on the Curve Finance platform and later added to various DEXes and CEXes thereafter.
3. What is $CRV Token Used For?
Curve (CRV) token logo
The native cryptocurrency of Curve Finance is the Curve DAO Token (CRV) and its main purpose is to incentivize liquidity providers on the Curve Finance platform as well as getting as many users involved as possible in the governance of the protocol.
- Governance - voting
- Staking - trading fees
- Boosting - liquidity rewards
CRV token holders can vote on various DAO proposals and pool parameters by locking their CRV into a voting escrow and receiving veCRV (voting escrow CRV) tokens in return. These veCRV tokens can then be used to vote on various proposals.
The longer you lock your CRV for, the more voting power you have (if you vote lock 1,000 CRV for a year you’ll have a 250 veCRV weight.) Also, if you want to create and submit a proposal to the DAO you will need veCRV.
CRV can be staked (locked) to receive trading fees from the Curve protocol. Also, as of September 15, 2020, 50% of all trading fees are collected and used to buy CRV which are then distributed to veCRV holders.
As of October 1, 2020, the distributing contract for claiming earned fees has not been finalized. Fees will be retroactively distributed once the contract is approved by governance.
Curve Finance liquidity providers can boost their rewards on provided liquidity by vote locking their earned CRV to participate in the DAO and earn a boost of up to 2.5x. The longer you lock CRV for, the more your rewards will be boosted.
4. How Does Curve Finance Work?
Curve Finance trading interface
Curve Finance is a decentralized exchange (DEX) protocol that uses liquidity pools funded by liquidity providers to facilitate trades. The algorithm behind Curve maximizes liquidity and offers extremely low slippage between conversions because tokens are traded directly between each other.
This differs from Uniswap which requires users to switch between ETH as well as the tokens they are trading. That said, Uniswap trades have increased slippage as well as higher fees while Curve Finance trades are faster, have lower fees, and little-to-no slippage.
When a user deposits a stablecoin into Curve, it is divided between each token according to its composition and the percentages constantly change depending on the exchanges that take place on the platform.
Curve Finance currently supports stablecoins DAI, USDC, USDT, TUSD, BUSD, sUSD, and PAX, as well as BTC pairs renBTC, wBTC, sBTC, and HBTC.
5. What is veCRV?
veCRV, short for voting escrow CRV, is a token used for voting on various proposals and pool parameters in the Curve Finance DAO as well as for creating and submitting DAO proposals.
CRV token holders receive veCRV tokens by locking up their CRV tokens into a voting escrow. The longer they lock it up, the more veCRV tokens they’ll receive (if you vote lock 1,000 CRV for a year you’ll have a 250 veCRV weight.)
Apart from the voting and submitting proposals use case for veCRV, Curve Finance liquidity providers can also take advantage of veCRV to boost their rewards on providing liquidity.
For instance, when a liquidity provider (LP) vote locks their rewarded CRV they receive veCRV which allows them to participate in the Curve Finance DAO and earn a boost of up to 2.5x on the liquidity they provide on Curve.
The number of CRV an LP is required to lock-up is dependent on the pool they’re providing liquidity for. Some pools are easier to boost than others and it depends on how much others have locked and how much the liquidity gauge has.
As seen in the image above, LPs can gauge how much boost they will get for providing liquidity to certain pools.
6. How is Curve different from Uniswap?
Curve Finance is different from Uniswap in the following ways:
- Lower Slippage
- Lower Fees
- More Depth
- Faster Matching
- Fewer Trading Pairs
Like Uniswap, Curve is a decentralized exchange liquidity pool protocol that enables its users to provide liquidity and earn trading fees and rewards as well as to swap tokens for one another.
However, while these two DEXes are very similar, they have some key differences that set them apart from each other in a big way.
First of all, Curve focuses solely on stablecoins and synthetic Bitcoin assets on Ethereum while Uniswap supports the trading of basically any ERC-20 token.
Secondly, Curve is able to offer traders extremely low slippage, lower fees, faster matching, and its liquidity providers enjoy little-to-no impermanent loss. Uniswap on the other hand has very expensive token-to-token trades, higher slippage, slower matching, and their liquidity providers can experience impermanent loss.
How does Curve outperform Uniswap on these metrics?
On Uniswap, tokens only trade directly against ETH so every time you trade between tokens, there are technically two trades; Token A is traded for ETH and then ETH is traded for token B.
This results in double the trading fees, slower matching times, and higher slippage. However, Uniswap is designed this way to maximize available liquidity.
With Curve, stablecoins and synthetic bitcoin trade directly between each other, meaning traders only pay one set of trading fees, benefit from minimized slippage, and get faster matching time.
7. What Tokens Can You Swap at Curve Finance?
Trading Pairs at Curve
Curve Finance currently supports the following stablecoins:
And the following synthetic BTC pairs:
Curve users can swap directly between any of these supported assets and benefit from the lowest fees with minimal slippage.
Curve Finance currently has 8 different pools in which liquidity providers can contribute to:
- Compound - [cDAI, cUSDC]
- PAX - [ycDAI, ycUSDC, ycUSDT, PAX]
- Y - [yDAI, yUSDC, yUSDT, yTUSD]
- BUSD - [yDAI, yUSDC, yUSDT, yBUSD]
- sUSD - [DAI, USDC, USDT, sUSD]
- Ren - [renBTC, wBTC]
- sbtc - [renBTC, wBTC, sBTC]
- hBTC - [hBTC, wBTC]
- 3pool - [DAI, USDC, USDT]
8. Where to Store $CRV?
The Curve DAO Token (CRV) is an ERC-20 token residing on top of the public Ethereum blockchain. That said, you can store CRV in any ERC-20 token supported wallet.
However, the best wallets for storing CRV are non-custodial Web3 wallets that provide seamless access to the latest DeFi applications. DeFi wallets are the best for storing CRV because the token is widely used and supported in the Ethereum-DeFi ecosystem.
Popular Curve DAO Token (CRV) Wallets:
- Trust Wallet (mobile)
- Argent (mobile)
- Coinbase Wallet (mobile)
- Ledger Nano S (hardware)
- Metamask (web)
In addition to the above-listed wallets, Curve DAO Token (CRV) can be stored on a wide variety of other reputable wallets supporting ERC-20 tokens.
9. Where to Buy & Sell $CRV?
Curve (CRV) can be bought and sold on a peer-to-peer (P2P) basis but the most popular way to buy, sell, or trade CRV is through decentralized cryptocurrency exchanges (DEXes).
You can buy CRV with cryptocurrency or fiat currency at the following top DEXes and exchanges. In most cases, you will be able to buy CRV with BTC, ETH, or stablecoins.
- Uniswap - WETH
- Binance - BTC, USDT, BUSD, BNB
- OKEx - USDT, BTC, ETH
- Huobi Global - USDT, BTC, ETH
- Gemini - USD
In addition to the exchanges listed above, Curve (CRV) is also traded on a variety of other exchanges and platforms that enable people to buy, sell, or trade cryptocurrencies.
Hope you enjoyed that read :) Let me know if I have missed something in the comments.