DeFi Protocol Curve Finance Deploys Native Stablecoin on Ethereum Mainnet
Decentralized finance (DeFi) protocol Curve Finance deployed its highly anticipated native stablecoin called crvUSD on the Ethereum mainnet Wednesday afternoon.
Blockchain data on Etherscan shows that the contract has minted a total of $20 million in crvUSD tokens in five transactions within five minutes. After the first tokens were minted, a crypto wallet labeled as Curve.Fi Team by blockchain intelligence firm Arkham Intelligence created a $1 million crvUSD loan using $1.8 million of frxETH, a type of ether (ETH) derivative token issued by DeFi protocol Frax Finance.
Curve confirmed the deployment on Twitter later in the afternoon.
The protocol’s governance token CRV has jumped up to 97 cents on the news, and is up 7% for the day, according to CoinDesk data.
The deployment marks a major milestone for rolling out Curve’s long-awaited stablecoin to the public. Curve, one of the largest decentralized marketplaces focusing on stablecoins, with some $5 billion of assets on the protocol, announced last year it started developing its own dollar-pegged stablecoin.
Curve’s stablecoin will face heavy competition as a slew of rival DeFi protocols issue are, or in the process of, developing their own native stablecoins to attract users and increase activity at a time when crypto trading and lending is flagging.
Aave, another giant DeFi protocol with some $7 billion of assets locked, deployed on testnet its native stablecoin GHO this February. Lending protocol MakerDAO issues the largest decentralized stablecoin, DAI, which has a $5 billion market capitalization.
The crvUSD stablecoin won’t be accessible to the public until later as it is not yet integrated into Curve’s user interface. An admin in the protocol’s official Telegram channel said the stablecoin’s public release is “waiting on front end,” which will come “soon.”
As many figured - deployment of crvUSD smart contracts has happened!
This is not finalized yet because UI also needs to be deployed. Stay tuned!— Curve Finance (@CurveFinance) May 3, 2023
How Curve’s crvUSD work
Curve’s crvUSD is an overcollateralized stablecoin backed by crypto assets, according to the product’s whitepaper released by Curve in November. The token’s price is pegged to $1.
Curve will control the supply of crvUSD with a mint-and-burn mechanism similar to MakerDAO’s DAI or Aave’s forthcoming GHO. Investors can create crvUSD by a collateralized debt position (CDP), depositing digital assets in Curve’s smart contract as collateral. When the borrower closes its debt position to reclaim the collateral, Curve destroys (burns) crvUSD.
What differentiates crvUSD from competitors is its novel, lending-liquidating algorithm, called LLAMA, that constantly rebalances users’ collateral as crypto prices fluctuate, according to the whitepaper.
For example, when the price of the crypto asset posted as collateral falls below the liquidation level, the protocol will gradually convert the assets into crvUSD, and later will convert back to the collateral asset (de-liquidate) as the price recovers.
The mechanism offers a smoother, continuous liquidation process as opposed to a single, drastic event that sometimes causes turmoil and huge losses on lending protocols when cryptocurrency prices crash.
Curve stable ELI5:
Old fashioned CDPs have a liquidation price. If your collateral goes below price then boom!
LLAMMA is a loan that constantly rebalances your collateral, such that if your collateral price dips, your collateral gets swapped for what you borrowed.— Alunara | 阿露那 (@0xAlunara) November 22, 2022
Additionally, the collateral is stored in an automated market maker (AMM) pool providing liquidity for people to trade against, instead of sitting in a vault or lending pool. “This makes the overall efficiency of the system high,” Dustin Teander, an analyst at crypto research firm Messari, said in a note.
UPDATE (May 3, 22:55 UTC): Adds context throughout the story.
