What is Curve Finance?Curve Finance is a decentralized exchange (DEX) with stablecoins as its core. It was developed by Russian scientist Michael Egorov in September 2019 and officially launched on Ethereum in December of the same year. As of August 2023, Curve has been successfully deployed on 11 public chains including Avalanche and Polygon, providing users with diverse transaction options.
How Curve works
The working principle of Curve is relatively simple, using the automatic market maker model (AMM):
Create/add a new liquidity pool: Users transfer token assets to the liquidity pool.
Buy and sell: The liquidity pool acts as the counterparty and users trade with it.
Handling fee reward: Each transaction requires a 0.04% handling fee. This fee will be rewarded to users who contribute to the liquidity pool. The specific rewards are distributed according to the proportion of contribution.
The role and use of CRV token: Curve launched decentralized governance (DAO) in August 2020 and launched the governance token CRV. The maximum supply of CRV is 3.03 billion, which is mainly divided into four parts:
Liquidity contributors: 1.878 billion (62%), linearly unlocked within 1 year
Investors: 909 million (30%), linear unlocking within 2-4 years
Reserves: 152 million (5%), unspecified
Team: 91 million (3%), linearly unlocked within 2 years
The main uses of CRV tokens include:
Liquidity mining: Users holding CRV can obtain CRV airdrops and transaction fee rewards by creating or increasing liquidity.
Staking mining: Deposit CRV into the Convex platform to obtain cvxCRV, and obtain CVX (Convex platform currency) rewards by staking cvxCRV.
Governance voting: Locking CRV can earn veCRV, which in turn can earn voting rights and transaction fee rewards, as well as possible airdrops.
Mortgage lending: You can borrow stablecoins (such as USDT, USDC) and other assets by mortgaging CRV on the AAVE platform.
Advantages and Disadvantages of CRV
Although Uniswap dominates the market, Curve has still achieved remarkable results in the DEX market. The following is an analysis of its advantages and disadvantages:
Advantages: High efficiency and low cost: Focus on stable currency transactions, sufficient liquidity, fast user transaction speed, low slippage, fees and free losses.
Friendly deflation mechanism: Through the pledge and repurchase and destruction mechanism, the CRV liquidity is reduced, which helps to increase the CRV price.
Make full use of idle liquidity: Provide liquidity to Compound, yearn.finance, etc. to reduce liquidity waste and create more income for liquidity providers.
Safe de-liquidation mechanism: Curve’s stablecoin (crvUSD) adopts a continuous liquidation mechanism to avoid bad debts.
shortcoming
DeFi portfolio risk: Curve provides liquidity to other platforms, forming an interdependent portfolio. If there is a problem with a certain protocol, it may trigger a chain reaction.
Governance risk: Curve’s governance rights are highly concentrated, and Convex controls nearly half of the governance rights, which is prone to governance problems.
Security risks: Curve has encountered security problems many times, including contract vulnerabilities and attacks, resulting in heavy losses.
CRV coin price trend analysis
CRV coin opened for trading for the first time on August 14, 2020, with an opening price of $13 and hit an all-time high of $70 that day. But then the price continued to fall until it fell to an all-time low of $0.3 on October 26, 2020.
As the Bitcoin bull run began, CRV rebounded to $4 in April 2021 and topped $6.5 in January 2022. However, since June 2022, CRV's rebound has gradually weakened, its price highs have continued to fall, and it has been affected by attacks again recently, putting heavy pressure on shorts.
Looking forward, if the attack does not worsen, CRV’s support level of $0.4 is expected to hold. However, if the situation escalates further, CRV may hit an all-time low of $0.3. At that time, investors can consider raising funds in this price range and look forward to the arrival of a new round of bull market.
in conclusion
As the governance token of Curve Finance, CRV token has multiple uses and potential investment value. Despite facing market competition and security risks, CRV has demonstrated strong resilience and development potential. For investors looking for high returns in the DeFi field, CRV is undoubtedly an option worth paying attention to. Before investing, be sure to conduct sufficient research and risk assessment to ensure the safety of your assets.