Sirwin
Sirwin

crvUSD & Lending-Liqudating AMM (LLAMA) Algorithm

By idiosyncratic | Idiosyncratic Crypto | 12 Jan 2023


If you fed up with the dilemma of taking too much risk by holding centralized stablecoins like USDC, USDT and BUSD or if you do not want to feel the stress of liquidation for decentralized stablecoins like DAI, then you need something like... LLAMA 🦙

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As it is highlighted in Curve Stablecoin Whitepaper(), LLAMA is a mechanism of "soft" liquidation and lending system designed by Curve team to find a sustainable solution for the stablecoins dilemma. I do not want to hype you beforehand but, honestly, it is likely to be the best system built for a stablecoin so far.

How does Curve Stablecoin Work?

Basically, when you deposit ETH for crvUSD loan, your ETH is locked in a smart contract that is adapted to LLAMA algorithm. When your ETH loses its value drastically, the system is designed to self-liquidate your ETH to crvUSD and watch for a higher band to buy your ETH back again!

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With this new system, you may assume that you hold ETH and it lost value in a red crypto day. This new system is expected to be a booster for De-Fi on Ethereum as it is going to accept Ethereum in the first stage. In addition to ETH deposits, Curve token will be the next collateral for this amazing concept.

LLAMA will push De-Fi Forward

I believe this is one of the most positive things in crypto after a long time. The automatic monetary policy by Curve team is likely to be copied by other largest DeFi service providers as there will be hardly any investor who would take the risk of liquidation for their loans.

> lending protocol Aave has its own dollar-pegged stablecoin, GHO, in the works. And the world’s largest centralized crypto exchange, Binance, recently delisted several competing stablecoins, converting user balances in those to its own BUSD stablecoin. - The Defiant(https://thedefiant.io/curve-crvusd-whitepaper)

As we all are concerned about the situation in stablecoins, besides upcoming stablecoin regulations, the crypto ecosystem needs a profound change in the way stablecoins are handled. It is only a matter of success for crvUSD smart contracts to go viral and be adopted by all other De-Fi & Ce-Fi platforms.

Many people expect smart contracts to be deployed and stress-tested before they put their money at risk. I believe oracles will play a critical role in spotting the price ranges for ETH deposits to be soft liquidated and set for a possible buy-back.

Like most of the crypto investors, I'm not comfortable with the tyranny of centralized stablecoins in crypto. Since FTX case, the Proof of Reserves craze and the FUD on Crypto Twitter made the ecosystem look even more dangerous and worthless.

What do you think? Will crvUSD succeed and change the fate of De-Fi ?

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idiosyncratic
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