Curve is a decentralized exchange for stablecoins that uses an automated market maker (AMM) model to manage liquidity. Curve launched in early 2020 and is now a pillar of the decentralized finance (DeFi) movement.
In late 2020, Curve launched its DAO (decentralized autonomous organization) with CRV as its primary token used for rewarding and governance.
What makes Curve cool?
Stablecoins are very popular due to their low volatility (the Luna UST debacle excluded). This has meant such projects have captured a lot of attention. The Curve protocol is a stablecoin swap market which allows swaps between different stablecoins needed for different protocols and uses in DeFi.
CRV Tokens are earned as a reward for providing liquidity over a period of time.
What are liquidity pools?
A liquidity pool is a crowdsourced pool of tokens staked in a smart contract. They’re used to facilitate trades on decentralised exchanges.
Instead of traditional order book markets which require sellers to match exact buyers’ orders, many DeFi platforms utilize automated market makers (AMMs) to allow for automatic, permissionless trades of digital assets through liquidity pools.
In return for providing liquidity, the liquidity provider (LP) is rewarded with special LP tokens in proportion to the liquidity they provided. When a pool facilitates a trade, a trading fee is distributed amongst all LP token holders in proportion to their share of the total liquidity. Click here to read about the risks associated with liquidity pools.
The Curve Wars
The Curve Wars refer to the multiple protocols competing to form a monopoly on CRV governance to vote on which pools emissions are distributed to and in what ratio. There are multiple key players in the running as of 2022, with Convex Finance leading the charge.
Essentially, multiple companies are offering incentives to encourage individual investors to provide liquidity through them. Why? The more liquidity they provide, the greater the influence they have over Curve, the more CRV they are – a very profitable model.
What are the Tokenomics of Curve (CRV)?
Curve (CRV) launched in August 2020, along with the Curve DAO. Its purpose is to function as a governance token, incentive structure and fee payment method.
There is a maximum supply of 3.03 billion CRV tokens, 62% of which are distributed to liquidity providers. The remaining allocations are 30% to shareholders, 3% to employees and 5% to a community reserve.
CRV had no pre-mine, and the gradual unlocking of tokens means that there are currently 1.75 billion in circulation.
Disclaimer: THIS IS NOT FINANCIAL OR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.