What is Curve?
Curve is a decentralized exchange (DEX) focused on efficient stablecoin trading, offering an alternative to centralized exchanges (CEXs) by using liquidity pools instead of order books. Users maintain self-custody while benefiting from lower fees and slippage. Curve's unique invariant sets it apart from standard Automated Market Maker (AMM) models, enabling it to be a primary liquidity source for various stable and non-stable assets.
Key features of Curve include high liquidity, reduced slippage and fees, permissionless and customizable pools, plain pools, lending pools for earning interest, and metapools for listing less liquid assets. This combination of features makes Curve a powerful and versatile platform for users looking to trade stablecoins and other assets in the DeFi ecosystem.
Is Curve Safe?
Curve's core smart contracts have undergone audits by Trail of Bits, while the Curve DAO contracts have been audited by Trail of Bits, Quantstamp, and mixBytes. However, audits don't guarantee complete safety. Curve smart contracts, like all contracts, carry inherent risks, and joining a pool as an LP exposes users to the systematic risk of all tokens in the pool.
Using lending protocols to increase yield adds further risk. Nonetheless, Curve has been operating securely for over two years, managing billions in pools, and has established itself as a trusted and security-conscious DeFi protocol.
Who Runs Curve?
Curve Finance is a decentralized platform governed by its community of CRV token holders through the Curve Decentralized Autonomous Organization (DAO). The core team handles development and maintenance, but the community drives the overall direction and decision-making.
What is Curve V1 vs Curve V2?
Curve V1 pools are solely composed of stable-like assets pooled together. The below diagram shows how the curves differ. When a pool is balanced within a certain range, slippage is optimised to ensure an equal swap — allowing for around 100 times less slippage.
Curve V2 broke free from the shackles of stable pools and enabled pools to hold assets with different prices. This new model, similar to Uniswap V3, concentrates liquidity around current prices to achieve higher efficiency. Unlike in Uniswap V3 where market makers must update their positions, Curve V2 manages this all for the liquidity providers (LPs). As trades occur, the pool re-adjusts its internal price to the highest liquidity region (to minimise slippage). This is achieved by taking a running EMA (exponential moving average) of the pool and re-centering liquidity at the EMA when it would not incur losses for LPs.
For a further dive into the mechanics behind Curve V2, visit this article.
What Networks is Curve Available on?
Curve is available on several EVM (Ethereum Virtual Machine) compatible chains. It is currently available on:
What Assets are Available on Curve?
As the Curve protocol is permissionless, any ERC20 token can be pooled with multiple other tokens to create a pool using the Factory smart contract. These pools can be freely traded once liquidity is added.
Providing Liquidity on Curve
When providing liquidity on Curve, a liquidity provider (LP) earns yield through trading fees paid by swap users. LPs receive 50% of all trading fees, causing the base vAPY to increase with pool volume. Swap fees typically range from 0.04% to 0.4% in V2 pools when the price deviates significantly from the internal oracle (EMA) price. Note that LPs have exposure to every asset in the pool they provide liquidity for.
In addition to trading fees, some pools earn interest from lending protocols, generating higher yield for LPs but introducing additional risk layers. Some pools also include incentives, such as a protocol's native token, to deepen liquidity. CRV tokens may be emitted to pools based on gauge weights, controlled by the Curve DAO (veCRV holders). Lastly, veCRV holders can boost their LP rewards up to 2.5x, adding extra incentive.
What is veCRV?
As introduced above, veCRV is a representation of CRV tokens that have been vote-locked to earn rewards and participate in governance. CRV can be locked for up to 4 years, where the amount of veCRV returned is proportional to the lock time.
veCRV holders receive the other 50% of trading fees from the Curve protocol. These rewards are distributed in the form of purchased 3CRV LP tokens. Further incentives for veCRV include boosting your LP rewards and voting to direct gauge rewards.
As mentioned above, swap fees on Curve range between 0.04% and 0.4%. These fees are split equally between LPs and veCRV holders. The main source of fee data currently available is at Defillama, as shown below.
Additional data can be found at the following links:
- Daily fees (table)
- Weekly fees (table
- Historical revenue (cumulative chart)
The CRV token serves to incentivise LPs on Curve in addition to incentivising users to participate in the governance of the protocol. The three main uses are voting, staking and boosting, as discussed above. All these actions require you to vote-lock your CRV in return for veCRV.
Curve Token Allocations
A total of 3.03b tokens were initially minted, and were reserved at the following allocations:
- 62% to community LPs
- 30% to shareholders (team and investors at 2-4 year vesting)
- 3% to employees (2-year vesting)
- 5% for the community reserve
The initial supply of 1.3b tokens (~43%) was distributed to the allocations for shareholders, employees and community reserve, with 5% going to pre-CRV LPs with 1-year vesting. The initial release rate of CRV to LPs was around 2m CRV per day. See below for the full release schedule.
Curve Finance provides a great opportunity to earn yield on your assets by providing liquidity and earning fees. LP rewards can be further boosted by holding veCRV, which also has the added benefit of governance participation. While there are risks in any DeFi protocol, Curve has been operating with no major issues since its inception in 2019, making it one of the most trusted and secure platforms in DeFi.
As such, Curve is a great opportunity for any investor looking to take advantage of DeFi yield farming. With its low fees, high liquidity pools and attractive incentives, Curve is sure to be one of the top protocols for yield farms and liquidity providers in 2023 & beyond.