🤔 What is Curve Finance ?
Curve is a decentralized exchange built on Etherium for trading cryptocurrencies that have similar prices like stablecoins.
💡 What role does CRV token play ?
- Governance: CRV is the governance token for Curve finance. CRV token holders propose and vote on updates to Curve protocol.
- Staking: Users can also lock their CRV tokens to get additional CRV tokens and voting rights as rewards.
- Liquidity minning: Liquidity providers receive CRV tokens as reward for providing liquidity. This incentivizes more liquidity providers to join the network.
📝 Origin of Curve Finance
- November 2019: Curve’s white paper was published.
- August 2020: Launch of Curve DAO and CRV token.
👴🏻 Michael Egorov - Founder
- 2008: Egorov graduated from the Moscow Institute of Physics and Technology in Moscow, Russia.
- 2008 – 2015: Worked as a software engineer at VGTRK, Netagi. WorkLifeGroup and LinkedIn.
- 2016 – 2019: Founded NuCypher, a startup that provides cryptographic infrastructure for applications.
- 2019: Founded Curve Finance.
😌 What problems does it solve ?
- No trusted third party: Users are in control of their funds. The exchange does not involve any middleman.
- Centralized exchanges pool all the funds and cryptocurrencies in one place, presenting a lucrative target for hackers.
- No complicated paperwork like KYC and long waiting period is involved for trading cryptocurrencies on Curve Finance.
- Governments cannot regulate Curve Finance because:
- It is deployed on Etherium.
- Its governance is decentralized.
- Efficiency gains: Curve Finance does not have to run servers and hire an army of developers.
- Minimum slippage: Curve finance uses a special automated market maker curve(will be explained subsequently) that results in minimum slippage.
🤖How does it work ?
Curve finance uses “stable swap invariant constant product market maker” equation instead of the order book model to provide quotes for trading assets.
The liquidity pools consist of token pairs of cryptocurrencies that have similar prices. The product of quantity of first token and the second token should lie on the stableswap invariant curve:
A trader can take a portion of an asset by supplying adequate quantity of second asset such that the product of new quantities of both the assets still lies on the stable swap invariant curve.
The stableswap invariant curve was chosen because it provides minimum slippage in a range where the two assets would most frequently trade. For example, a trading pair of two stable coins like DAI and USDT would usually trade at 1:1 ratio.
Anyone can become a liquidity provider by adding their resources to the liquidity pool. The liquidity providers receive transaction fees and CRV tokens as rewards for providing liquidity.
⚙️ How to use Curve platform
🏛️ Governance model
The team decentralized the governance of Curve finance in 2020. CRV token holders propose and vote on updates to the Curve protocol.
CRV holder can also lock their tokens for a minimum of week and a maximum of four years. Users who lock their tokens receive additional voting power and staking rewards for showing long-term commitment to the protocol.
- Crypto industry is growing. So is the demand for cryptocurrencies.
- Network effects: More liquidity providers will attract more traders. More trading fees will attract more liquidity providers. This positive feedback loop has potential to cause exponential growth in a short period of time.
CRV token launch controversy
Curve Finance team posted their code on Github before deploying it on Etherium mainnet. An anonymous user deployed the smart contract before the team.
Yo, @CurveFinance ! Saw your DAO is ready to rock and I gots to MAXIMIZE MY ALPHA ! So I went ahead and deployed it for you. Get at me in DM to verify and lets get this party started!! pic.twitter.com/D0KqEg4Ldr— 0xc4ad (@0xc4ad) August 13, 2020
The anonymous user did not change code, data and admin keys while deploying the smart contract. Hence the Curve team accepted the smart-contract deployment.
😨 Risks and challenges
- Trading sector is heavily regulated by their respective governments, central banks and securities & exchange commission. Many governments will try to ban/regulate Curve Finance for operating without a license.
- Liquidity pools hold tokens worth millions of dollars presenting a lucrative target for hackers.
- There are many crypto projects building decentralized exchanges.
CRV token had initial supply of 3.03 billion tokens which were distributed as follows:
- Liquidity Provider: 62% – 2,047,878,785 CRV.
- Shareholders: 30% – 990,909,090 CRV.
- Employees: 5% – 165,151,515 CRV.
- Community Reserve: 3% – 99,090,909 CRV
CRV tokens will be released as follows:
Token’s price increases due to demand pressure.
Demand pressure on CRV token will come from:
- Governance: Users will acquire CRV tokens to participate in governance.
- Staking: Users will acquire and stake CRV tokens to earn rewards.
- Speculators: They will buy CRV tokens for future price appreciation.
Crypto exchange market is a multi-billion dollar industry growing at an exponential rate. The governance token of a project that aims to disrupt this industry will be worth a lot.
🧐 Indicators to watch out for
- Total value locked in Curve Finance is growing:
- Twitter following is growing:
😊 Do further research
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