Contents
Introduction
DeFi is one of the Web3 sectors that we have been bullish on throughout the market cycle, and Curve is the go-to project that we concern the most in the DeFi space. Compared to other DeFi projects, Curve presented high research value by following features:
- DeFi has the largest market shares and fierce competition: 1. Assets trading; 2. liquidity market, and Curve has achieved its position in the top-tier list.
- Introducing a sophisticated “ve” economic model to synergize at two levels:
- Business: Achieving coordination among different business appeals such as “trading”, “liquidity acquisition and distribution”, “governance”, “market value management”, and “expansion of eco-partners”.
- Participants:Achieving coordination of interests among “trading users”, “market-making users”, “liquidity acquisition users” and “token holders”.
- Establishing a protocol ecosystem: A multi-layered financial “Lego” has been built based on Curve’s projects.
- Multiple chain layout: Actively deployed on mainstream EVM-compatible chains, holding up a leading position in terms of business volume.
- Proactive token value capture: The team has been putting so much effort into increasing more value to its token since the project was launched, in contrast to some free public goods type of DeFi.
We have been following Curve since 2020 and released our first in-depth report on Curve in September 2021“CRV under the attack of Uni V3: In-depth analysis of Curve’s business model, competition status, and current valuation”
Curve is still one of the top-tier projects by its market share of liquidity and trading volume, yet its dynamic of product mechanism, business composition, and governance game enables a much more comprehensive protocol ecosystem.
Therefore, we try to re-examine Curve and its ecosystem to answer the following questions:
- Business: How good are Curve’s current business and its position in the market?
- Ecosystem: What projects are in the Curve ecosystem, how do they compete with each other, and their values?
- Moat: Does Curve still have a solid moat? Will the endgame of the DEXs be a monopoly of leading protocols or long-term fierce competition?
- Valuation: Curve’s current valuation compared to similar protocols.
This report will emphasize the dynamic changes on Curve and its ecosystem since 2021. Please refer to “CRV under the attack of Uni V3: In-depth analysis of Curve’s business model, competition status, and current valuation”to learn more about its business scope,tokenomics, and fundamental concepts, since it is not covered in this report.
Project Overview
Business Scope
Curve is renowned for its DEX services based on the AMM (Automated Market Maker). In the early days, compared to DEXs that adopted traditional Uniswap V2 AMM, Curve mainly served the note marketplace with extremely low slippage and trading fees. Stablecoins, as well as wrapped assets (e.g. wbtc\renbtc) and LSD assets (e.g. stETH) are the main trading classes of Curve. Currently, Curve has gradually increased its share of non-pegged asset pairs (V2 pairs).
Another core business is the procurement, allocation, and management of liquidity, which distinguishes itself from Uniswap. Generally speaking, Curve procures liquidity from the market by paying its governance token CRV, and then provides an “auction market” for liquidity demanders (various project owners) through Gauge, its voting governance module, to help them uniformly purchase the liquidity they need. In this process, the staked CRV is the payment currency used for bidding.
Curve has created the need of eco-players for CRV via providing trading and liquidity services as below:
- Distribute cash flow to obtain the transaction fee of the protocol.
- Get the profits obtained from vote buying to govern votes.
- Purchase governance votes (veCRV) to obtain liquidity.
- Obtain Curve’s governance rights for indirect rent-seeking or direct protocol control.
The specific methods will be described later.
Project History & Roadmap
The following are the important milestones of Curve since its inception, as of February 2023.
| November 2019 | The project was established. |
| January 2020 | On January 20, 2020, Curve protocol was launched, with cUSDC/cDAI as its first pool. |
| May 2020 | Proposed a plan to issue governance tokens for the first time. |
| June 2020 | Launched a new liquidity incentive pool with Synthetix and Ren to offer liquidity incentives for wrapped BTC on Ethereum to ensure the lowest slippage in transactions between sBTC, renBTC, and WBTC. |
| July 2020 | Announced the framework of CRV, the governance token of Curve, with a total amount of US$ 3.03 billion, and revealed the draft of the governance organization CurveDAO. |
| August 2020 | Curve officially issued CRV with an initial offering of US$ 1.3 billion, and launched an incentive distribution campaign for the pre-mining. The tokens obtained from the pre-mining would be linearly unlocked within a year. |
| September 2020 | Initiated the dividend mechanism for governance tokens to allocate 50% of the transaction fee to users who deposit and lock CRV in the governance contract. |
| September 2020 | Launched three token pools, namely DAI, USDC, and USDT. |
| January 2021 | Cooperated with Synthetix to launch the function of the cross-asset swap, realizing the swap of tokens in various pools of Curve with Synthetix’s S assets, to lower the slippage of the block trade. |
| February 2021 | Curve integrated with Fantom. |
| April 2021 | Launched Polygon and received the award for liquidity mining from Matic. |
| May 2021 | Curve initiated a multi-chain deployment proposal. In addition to the multi-chain products, Curve rewarded stakers of various blockchains through Gauge (one of Curve DAO’s governance modules where veCRV users determine the distribution scheme of CRV incentives across liquidity for the next cycle). |
| June 2021 | Launched Curve Finance V2 and began providing asset transactions other than non-pegged assets through a new algorithm. |
| July 2021 | Curve integrated with xDai, an Ethereum sidechain, and started liquidity mining. |
| August 2021 | Curve’s TVL exceeded US$ 10 billion for the first time. |
| August 2021 | Curve launched Factory Pool, a permissionless asset pool, allowing users to create their asset pools on Curve. |
| August 2021 | Curve integrated with Arbitrum. |
| January 2021 | Curve integrated with Avalanche. |
| January 2021 | Curve integrated with Harmony. |
| November 2021 | Mochi, the issuer of stablecoin USDM, launched a governance attack through Convex. Specifically, Mochi bought CVXs in bulk and then voted to increase the liquidity of the USDM pool. Later, it issued a large number of USDMs in exchange for DAIs, causing a loss of more than US$ 30 million to users. |
| January 2022 | Curve hit its highest TVL record at US$ 24.3 billion. |
| February 2022 | Curve integrated with Moonbeam. |
| March 2022 | Curve integrated with Aurora. |
| May 2022 | The collapse of the Terra ecosystem triggered the USDT FUD. As a result, Curve set an all-time record of US$ 5.8 billion in trading volume in a single day, and the Curve community voted to remove CRV incentive authority from the UST-related asset pool. |
| June 2022 | The stETH-ETH ratio of Curve was severely skewed, and the Steth-ETH exchange rate fell to around 0.93 at the lowest point. |
| July 2022 | Curve disclosed the over-collateralized stablecoin plan for the first time but did not specify the name or the release date of the stablecoin. |
| August 2022 | Curve.fi, the domain name of Curve, suffered DNS attacks, resulting in users’ financial loss of approximately US$ 610,000. |
| September 2022 | Curve integrated with Kava. |
| November 2022 | Whales launched a short sale on CRVs by staking stablecoins on Aave to lend CRVs. The price of CRV bottomed at US$ 0.3 and then quickly rebounded. Curve released a stablecoin whitepaper on crvUSD the next day. |
| November 2022 | Curve integrated with Celo. |
| December 2022 | Curve was about to be deployed on zkSync, an Ethernet Layer 2 network based on ZK Rollup, and was being integrated with zkSync 2.0. |
The future project milestones announced by Curve are the launch of the crvUSD and the continuous optimization of interactive gas (which facilitates the allocation of a small number of transactions to various transaction aggregators). Although crvUSD adopts the over-collateralized mechanism, its LLAMMA model, which enables a partial liquidation mechanism, well leverages the advantages of Curve’s massive liquidity, which would stabilize the entire crypto market. However, the release schedule of crvUSD has not been unveiled yet.
Core Team
Curve is a real-name team with Michael Egorov (who lives in Switzerland) as the founder and Julien Boutelup (founder of Stack DAO, which provides revenue and governance aggregation services similar to Convex and has a white list of Curve governance) as the core member. Curve has a small and capable team with approximately 8 core members.
For more team information, please refer to the “Team Profile” section in previous Curve’s research report 👉：“CRV under the attack of Uni V3: In-depth analysis of Curve’s business model, competition status, and current valuation”. This report will not repeat it.
