Announced last November, Curve’s new stablecoin (CRV) is now rolling out on Ethereum (ETH). Called crvUSD, a look back at this innovatively functioning asset.
Curve’s stablecoin is now launched
Announced for a few months now, Curve’s brand new stablecoin has just arrived on Ethereum (ETH).
As the Curve teams explained, not everything is finalized yet, only the smart contract is live and the user interface has yet to be published:
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
Nevertheless, the first transactions have already taken placeas we can see on Etherscan:
Figure 1 — Transactions on the crvUSD smart contract
When writing these lines, we could see that more than ten transactions had been made. Among them, there are additions of liquidity, and even position openings to borrow crvUSDas with this transaction with a collateral posting of $1.8 million:
Figure 2 — Borrowing one million crvUSD against Staked Frax Ether
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The innovative way crvUSD works
Like other decentralized stablecoins like MakerDAO’s Dai, or Aave’s GHO still in testnet, Curve’s crvUSD is based on a lending and borrowing model.
Thus, it is about over-collateralize its position to acquire this stablecoin : for example by depositing 2,000 dollars of guarantee to borrow 1,000.
Where crvUSD is innovative is in its liquidation algorithm. Indeed, while the main decentralized debt markets will liquidate positions when the latter is no longer sufficiently collateralised, the stablecoin’s LLAMMA module offers an optimized version of this liquidation.
To use the example from earlier, let’s say an investor deposits $2,000 of ETH to borrow $1,000 of crvUSD. With a classic model, this investor would start being liquidated if ETH lost more than 50% of its value.
With LLAMMA, this position in ETH will be gradually converted into stablecoins as the price of the asset decreases. Conversely, these stablecoins will be changed back to ETH if its price rises again. This operation should thus make it possible to withstand greater market volatility, thus reducing the risk of capital loss.
With $4.4 billion in cash deposited on the protocol, Curve is largest decentralized exchange by TVL. As such, it will be interesting to watch the adoption of its new stablecoin. Over the past 24 hours, the CRV has shown a little more than 5% increase.
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Source: crvUSD Whitepaper
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