Curve is a decentralized exchange liquidity pool which is designed on Ethereum for stablecoin trading in an efficient way. Curve Finance was innovated by Russian physicist Michael Egorov. Since its launch in January 2020, it is leading in the DeFi ecosystem. Egorov explained it as an exchange designed for stablecoins and bitcoin tokens on Ethereum Blockchain. It is a protocol which gives users a platform to swap a few Ethereum-based assets. The Curve is an automated market maker (AMM) protocol since it uses market-making algorithms for reinforcing the liquidity of markets. This protocol offers a decentralized platform,which allows users to earn returns on their cryptocurrencies and to trade altcoins.
Curve uses a comparable AMM automated market maker mechanism to follow the trading behavior of traditional market makers, and smart contracts acting as counterparties. The mainstream stablecoins are all anchored at $1. Even Though there are fluctuations, stablecoin exchanges should be more or less lossless in the long run. Curve invented the StableSwap market maker algorithm for stablecoin transactions.
If someone trades on Curve, the liquidity provider (LP) will get a transaction fee. The LP’s annualized income will increase, as the transaction volume of Curve increases. As an additional interest, Compound’s can give more revenue than Curve transaction fees by providing loan tokens. In addition to this, Curve has issued the CRV governance token to reward liquidity providers.
You might be wondering about the key aspect of Curve and how it differs from other DeFi protocols. Curve is known for its market-making algorithm, which provides hundreds to thousands of times higher market depth for the same total value locked, that is beneficial for both traders and liquidity providers.
Curve provides liquidity to any customer with assets by its markets. The best part about this protocol is that it is open about its potential risks. It was seen that Curve Finance’s DEX code was inspected twice, and the CRV token contract and DAO have been reviewed three times.
The curve platform’s liquidity pool enables direct token trades among the classified pairs. With its direct swap function, users have to pay lower trading fees(0.04% per transaction). Compared to other DeFi protocols, Uniswap focuses on maximizing available liquidity. So traders save more, with the use of Curve.
According to the statistics of October 2020, it was reported that Curve Finance has processed around $2.8 billion of trades. There was a hike of almost 450 percent higher than its previous record high in September 2020.
According to statistics of September 2020, CRV is the third-largest DeFi token in the crypto space. It was mentioned that investors had locked around $1.26 billion in the CRV. Uniswap proved new heights with the value rising to $1.94 billion and Aave occupying the second spot with $1.32 billion in locked funds.
Curve’s governance token is CRV. CRV token holders can participate in the online governance of Curve in the future.
Curve is able to mitigate slippage for users who are trying to swap stablecoins like Dai and USDC in a decentralized fashion. This is achieved by accommodating for varieties of bonding curves. By the use of swaps, it’s useful for liquidity providers who want to earn a return on top of their interest earned through Compound.
Instead of Compound’s interest, Curve enables liquidity providers to use yTokens to bring passive earnings. Instead of interest automatically accruing through Compounds cTokens, yTokens are rebalancing the underlying tokens to the highest interest rate among a handful of other tokens while allowing the user to hold the stablecoin itself.
Doubts surrounding Curve is that what’s the point to have a DeFi platform that only lets you trade assets worth the same amount. The other tokens related to this protocol is that it is highly volatile. It was reported within three days that there was a sudden decline in prices. By14th August 2020, prices were at an all-time high of $54.01 and went to all-time low of $4.17 on 17th August.
The CRV team is planning to support assets beyond stablecoins and various varieties of Bitcoin, then Curve Finance could become one of the most powerful DEXs ever.