Motivations Behind Crypto Leaders Efforts to Extinguish the Fire at Curve

Author: Steven, Researcher at E2M
Source: E2M Research
Everyday Discussions and Reflections
After Curve was stolen at the end of July last year, various OGs, institutions, and VCs came to its aid. Wu Jihan, co-founder of Bitmain and Matrixport, posted on social media, stating, “In the upcoming RWA wave, CRV is one of the most important infrastructures. I’ve bottomed out and bought in, this is not financial advice.”
Huang Licheng confirmed on social media that he purchased 3.75 million CRV from Curve’s founder OTC and locked it into the Curve protocol. The next day, Sun Yuchen’s related address transferred 2 million USDT to Egorov’s address and obtained 5 million CRV.
Subsequently, projects such as Yearn Finance, Stake DAO, and institutions and VCs participated in the rescue operation for CRV.
What is the significance of these groups supporting Curve? Why the need to rescue? This is very confusing.
Yield is now a matter of horizontal comparison in web3 and is no longer a specific sub-track.
CM: If the founder of Curve sells his chips and has no relationship with Curve, will it have any impact? No problem. The infrastructure layer protocol is no longer necessary to develop at a certain stage. It is mature enough. Aside from the market aspect, not developing it will not affect its usage. Many people who are rescuing the market realize this point, hence the motivation. Curve has several models, all of which can allow VeCrv holders to govern themselves. With the existing institutions, parameters, configurations can completely operate on their own, in line with the original intention of decentralized applications, with authority completely devolved to the community. DEX Llama stablecoin algorithm + lending market VE model bribery and liquidity system. As for market performance, that’s another thing. It’s basically confirmed that the fundamentals are worse than the last time. It will not have a particularly outstanding performance compared to before, but liquidity mining will still be in demand as the cycle extends. If you think that the future of the chain requires incentives, then Curve still has a chance, Uni cannot solve the problem. Curve provides a complete framework, and the chips have completed a decentralized process. The future prospects across cycles will be better, provided that the future of the chain requires incentives. There are many buyers from the project side. Liquidity mining was the core way to start in the last cycle. In the early stages, projects were all renting liquidity. Crv solves the problem that projects do not need to inflate their own economic models at the early stages of launch, and instead uses rented Crv liquidity to solve the problem of token inflation and utilize the token elsewhere. The token still has meaning even after unlocking. Crv can also support non-stablecoin transactions, similar to Uniswap. At the time of purchase, it was not possible to buy it when queuing, and it was given priority to the project side. The project will not die and will not be eaten away by Uniswap in the short term.
1. Event timeline 1
Arkham posted that Curve founder Michael Egorov currently has 140 million US dollars worth of CRV pledged as collateral for 95.7 million US dollars of stablecoins (mainly crvUSD) on 5 accounts in 5 protocols. Among these, Michael has 50 million US dollars crvUSD borrowed on Llamalend, and Egorov’s 3 accounts have taken up over 90% of the crvUSD borrowed on the protocol.
Arkham pointed out that if the price of CRV falls by about 10%, these positions may start to be liquidated. Subsequently, the decline in CRV continued to expand, dropping to a historical low of less than 0.26 USD, and Michael’s CRV borrowing positions on multiple addresses gradually fell below the liquidation threshold.
2. Curve data comparison as of 20240616
Trading volume: 3pool ($12.3m), steth ($6.7M), fraxUSDC ($756.8M)
TVL: fraxusdc ($15.8m), steth ($249.7m), 3pool ($178.3m)
Frax TVL is too low, so it has been singled out.
Data as of 202307 – reference to the previous research report
Top ten TVL pools: fraxusdc ($0.6b), steth ($0.58b), 3pool ($296.65m)
Top 3 trading volumes: 3pool ($47.86m), steth ($18.64M), fraxUSDC ($17.96M), with a trading volume over 2.5 times that of the top 2 TVL 3pool.
Comparison to Uni
Income comparison
Left new, right was at the time.
Uniswap bull market trade Shiba Inu, bear market trade mainstream assets.
3. Some issues revealed in this event
The Ve model’s top-effect has brought about terrible liquidity
CurveWar’s essence is to compete for Curve’s liquidity. Obtaining liquidity and then boosting one’s pool as an LP through Boost is better for the project. However, higher liquidity is certainly better for the project. Different projects buying voting rights for CRV have caused the so-called “war,” which may lead to market instability and manipulation.
When discussing Curve initially, it was believed that Curve could potentially be a traffic platform, and new projects would buy voting rights to boost their pools (such as the then Frax). Over the past year, it has not achieved this effect at all, and the yield has been abandoned after it failed to match the display of points or Pendle. Loan liquidation
Collateral with large price fluctuations, such as Crv, Aave, Comp, may not be suitable for collateral. In the future, the crypto world should still be able to do well with usdt/usdc/dai+BTC+ETH.
The risks of borrowing are complex, with the price fluctuations of the collateral itself and the leverage and bubbles caused by stacking and playing with blocks, making it difficult for Web3 lending to have a scale effect.