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Curve Finance – One Man’s DEX Out to Achieve Market Supremacy

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Curve Finance – One Man’s DEX Out to Achieve Market Supremacy

With the emergence of the DeFi market, centralized exchanges witness the rising threat of decentralized platforms that can do everything they do, only faster, cheaper, and smaller crypto spillage.

One of the decentralized exchanges that challenge the old order is Curve Finance. The protocol started from one man’s vision and straight into the top-5 DeFi protocols in less than a year. With the recent release of its native token, CRV, Curve is turning into a DAO and becoming even more appealing to crypto investors.

Curve Finance is constantly evolving and defying the rules tying down cryptocurrency trading through centralized exchanges. This Curve Finance review will tell you how far the protocol has come and what it has in store for the future.

What is Curve Finance?

Curve Finance is a decentralized exchange that enables crypto trades between assets worth the same amount. The platform started as an alternative to the popular Uniswap DEX, but after this year’s release of its governance token, CRV became a decentralized autonomous organization (DAO).

Curve is built on the Ethereum blockchain, and it is one of the many exciting projects riding the wave of the Decentralized Finance (DeFi) boom.

On Curve Finance, traders have access to eight asset pools that contain cryptocurrencies of equal value. Some of these pools contain stablecoins, while the others have some versions of wrapped Bitcoin such as wBTC, renBTC, and sBTC.

Curve users can deposit assets into these pools and have the chance to win high annual interest on their funds. Curve uses their deposits to deliver liquidity to other DeFi protocols such as Compound or Aave. Next, the platform takes the interest to earn on the other protocols to distribute it to its liquidity providers and some CRV tokens as incentives.

Another DeFi protocol, the Yearn. The finance aggregator uses Curve Finance as an engine and instantly swaps stablecoins with its users’ highest possible yield.

A Brief History of Curve Finance?

Curve Finance is the brainchild of Russian physicist and crypto investor Michael Egorov. After several more or less successful ventures in the cryptocurrency industry, he founded a fintech company specialized in encryption, called NuCypher.

After a 2018 Initial Coin Offering (ICO), NuCypher transformed into a cryptocurrency project that managed to raise more than $30 million by selling its native digital asset, the NU token.

In November 2019, Egorov developed a decentralized crypto exchange called StableSwap and published its whitepaper shortly after. Two months later, he released the protocol publicly under the name Curve Finance and chose a rainbow Klein bottle as its logo.

In May 2020, Egorov talked about his ambition of transforming Curve Finance even further and allow it to become a decentralized autonomous organization (DAO). For the transition to occur, Curve needed its governance token, which was finally launched in August 2020, and called CRV.

Today, Curve Finance operates from “Crypto Valley” in Zug, Switzerland, and it features a small team of only five members, Egorov included.

What is the Curve CRV token?

CRV is an ERC-20 token built on the Ethereum blockchain. It is the native token of the Curve Finance exchange and provides voting rights to its holders.

While participants on Curve Finance cannot modify the exchange or the DAO roadmap, they can still vote for proposals that include:

  • Adding new yield pools
  • Changing fee structures
  • Introducing token burning schedules

The CRV holders can vote if they lock their tokens and transform them into vote-escrowed CRV (veCRV). The voting power varies according to the duration of their “locked” status, with the maximum locking period being 4 years.

Participants to the Curve Finance protocol can vote on proposals if they have at least 2,500 veCRV.

The Curve Finance team is forced to consider any proposal that amasses at least 33% of the existing veCRV. The proposal also has to achieve a 50% voting quorum for it to be implemented.

CRV Release and Distribution

One of the most interesting facts about the CRV cryptocurrency is launched without an Initial Coin Offering (ICO).

The CRV release came as a small shock for the crypto industry. On August 13, 2020, a Twitter account named 0xc4ad (0xChad) instantly deployed a CRV smart contract by paying over $8,000 in Ethereum gas fees.

It appears that the user had pre-mined more than 80,000 CRV tokens. At the time of their release, one CRV was trading for $1,275 on Uniswap, which meant that the Curve Finance token had a mind-blowing market cap of $3.8 billion.

Compared with other assets, the low ratio of CRV tokens in Uniswap pools made CRV’s value ridiculously high. Shortly after more tokens were added to the pool, the ratio became more balanced, so CRV’s price dropped accordingly.

Upon its release, the total supply of CRV tokens was over 3 billion, which were distributed as such:

  • 5% CRV went to the addresses that sent liquidity to Curve Finance before the token launch
  • 5% went to the Curve Finance DAO reserves
  • 3% went to the Curve Finance employees
  • 30% went to the shareholders (Egorov plus 2 angel investors)
  • 57% of tokens will be given to current and future liquidity providers on Curve Finance

All of these CRV tokens are still locked, and they will be distributed to their receiving addresses gradually over a period between 1 and 4 years.

CRV Price, Exchange Options, and Storage

At the time of this writing, CRV has a market capitalization of $68,169,248. There are about 67,998,887 CRV tokens in circulation, and one CRV is trading for around $1.

CRV started trading on Binance shortly after its release, and since then, it has been listed on other crypto exchanges, including OKEx and Huobi.

If you choose to invest in CRV, you have several storage options, including Exodus Wallet, Trezor, or Ledger.

The Risks of using Curve Finance

The DeFi craze has caught many crypto investors in its mind-twisting whirlpool. The promise of unspeakable riches has led to many users depositing huge amounts of money into this emerging market that, at the time of this writing, had amassed more than $11 billion in locked value protocols.

Contrary to most DeFi ventures out there, Curve Finance warns its users about the risks of using the platform. There is an entire section on the Curve website listing the dangers of DeFi investments and the precautions that users have to take before pouring their hard-earned money into such projects.

Besides urging people to do their due diligence, Curve Finance also mentions that its DEX code has already undergone an audit twice and that the CRV token contract and DAO have undergone an audit three times.

The Curve Finance creator, Michael Egorov, is willing to pay up to $50,000 as a bug bounty to anyone who can find coding errors in the Curve DEX, the Curve DAO, or the CRV token. His challenge is mostly a preventive measure against possible protocol issues and incentivizes the Curve users to review the codes constantly.

How does Curve Finance work?

Despite being a platform that only allows trades between same-value cryptocurrencies, Curve Finance works, and it has built quite a strong community around it.

Curve encourages users to deposit cryptos into its DEX, thus increasing its quality and popularity. At that point, they become liquidity providers, and they are the ones driving this DeFi protocol forward. Liquidity providers also receive CRV tokens and a share of the fees on the platform.

Curve Finance uses a unique Automated Market Maker (AMM) protocol to determine the value of the assets in its pools.

On any crypto exchange, investors can be divided into:

  • Makers – Those who list an offer to buy or sell assets

and

  • Takers – Those who purchase the Makers’ listings

An AMM is any entity that trades assets by providing liquidity to the market, and in turn, profiting from the spread between the bid and the ask values.

On Curve, the AMMs have to deliver equal ratios of two or more assets to begin a liquidity pool on the platform. This way, the balance of the ratios within every pool on the DEX is constant.

According to Egorov, this unique algorithm enables Curve to match orders on the platform quicker than other DeFi protocols. Both the traders and the liquidity providers have something to earn as the “returns are higher than on Uniswap and alike by the same factor as the market depth.”

Curve users also benefit from minimal fees, small impermanent loss, and extremely low slippage.

The Bottom Line – Curve Finance Exchange Review

When it first surfaced on the DeFi market, Curve Finance was dubbed as just another Uniswap copycat exchange, but only for stablecoins.

Slowly but steadily, Curve is shedding that unfair label and turning into a popular DEX / DAO with stand-alone features. Egorov’s recent claim that the team is looking into adding more cryptocurrencies, not only stablecoins, to the liquidity pools is indicating the company’s high ambitions.

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Curve’s unique algorithm and use of automated market makers define the race’s advantages for becoming one of the most powerful decentralized exchanges on the market.

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Born and raised in Romania, currently living in Spain. Iulian discovered a knack for writing from a tender age, won some minor awards for fiction that didn't pay much.

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