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Footprint: The reasons why Curve Finance CRV leads the DEX pack

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Footprint: The reasons why Curve Finance CRV leads the DEX pack

This article is written by Footprint analyst Zoni [email protected]

Before mid-May this year, Curve Finance, referred to as Curve, only supported the Ethereum public chain network, with a TVL of up to $9 billion, surpassing the leading DEX Uniswap. Although Uniswap also upgraded to V3 at that time, the total TVL was gradually pulled apart by Curve. On the one hand, as Layer2 solutions and other new chains emerged, Curve gradually deployed applications on multiple public chains. On the other hand, Ethereum still dominates about 88% of Curve's TVL.

On October 25, 2021, Curve's TVL exceeded a new record of $18 billion.

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Source: Footprint Analytics – TVL of Curve & Uniswap

About Curve Finance

Curve was launched in January 2020 by Russian scientist Michael Egorov. As early as 2016, Egorov founded NuCypher, a cryptocurrency company that focused on building privacy-preserving infrastructure and protocols, where he served as the Chief Technology Officer. Egorov is also the founder of decentralized banking and lending network LoanCoin. With his experience in managing multiple cryptocurrency projects, Egorov's expertise gives Curve a strong technical edge.

Curve is a decentralized exchange (DEX) that specializes in providing efficient stablecoin swapping services. The Curve team started developing Curve in December 2019, and the product was officially launched a month later. The real breakthrough for Curve came in August 2020 with the launch of Curve's native token, CRV.

Curve's Performance Data

1. Total Value Locked (TVL):

Curve is deployed on 7 different blockchains, with TVL exceeding $18 billion.

Source: Footprint Analytics – Curve TVL Cross-chain

2. Leading the DEX Race

According to Footprint Analytics' "Top 20 DEX Dashboard" data, Curve has pulled ahead of the second-place SushiSwap by nearly $12 billion, capturing almost one-third of the total TVL in the DEX race.

Source: Footprint Analytics – Top 20 Dexs Dashboard

3. All-Time High for CRV

As the native token of the Curve platform, CRV's price has remained stable around $2. With the development of a multi-chain ecosystem, CRV has shown preliminary upward trends, hitting an all-time high on October 25, 2021.

What factors have made Curve so competitive? Footprint summarizes Curve's highlights as follows.

Curve Project Highlights

1. Low Slippage and Competitive Trading Fees

Building on the Uniswap AMM constant product formula X * Y = K, Curve introduced an upgraded calculation formula called Stableswap. While Uniswap's AMM was an innovation for DEX, it could result in significant slippage if a pool's liquidity was insufficient. Especially for stablecoins with minimal price fluctuations around $0.9-1.1, Curve's Stableswap curve tends to allow a slight fluctuation around 1, as illustrated in the Curve whitepaper curve diagram.

This not only controls slippage to a sufficiently low level but also enhances the competitiveness of transaction fees. Currently, Curve charges a fee of 0.04%, approximately 1/10 of Uniswap's.

Support for 7 Blockchain Networks and Over 100 Pools

As mentioned, Curve has already deployed its application on 7 networks. Ethereum is the main network for Curve, offering over 80 pools for investors to choose from. Recent high-demand networks like Polygon, Fantom, and Arbitrum each provide an average of 10 pools. Networks that are relatively new or still developing have fewer pools available.

Attractive APY Mechanism

Investors can earn over 3 types of APY from Curve:

  • Base vAPY: v for variable, calculated based on the trading activity of the pool on that day
  • Reward tAPY: t for token, determined by the CRV token price and reward rate
  • Boosted tAPY: Investors can increase the reward rate by buying and staking more CRV
  • Extra APY: For some pools, platform tokens are provided as additional rewards, such as SPELL in the MIM pool

This multi-APY mechanism that encourages investors to deposit more funds first appeared in Curve and has been widely adopted by other platforms offering similar services.

Healthy Loop of Curve DAO

Curve's project governance, or DAO, uses CRV reward tokens and veCRV governance tokens to positively stimulate and connect investors, protocol participants, and the Curve project itself.

For investors, the APY mechanism encourages them to deposit more stablecoin assets and stake more CRV (rather than "mine and sell") to earn more CRV rewards. Pools with high reward rates are attractive.

As for protocol participants, they need higher voting power to offer attractive reward rates, leading to increased demand for purchasing CRV on the open market.

For the Curve project itself, it is focused on two things: the total value locked on its platform and the growth of the CRV price. These two goals can be achieved by introducing more pools, more attractive rewards, and better CRV price control – sell less, buy more.

According to official Curve data, the average lock-up time for CRV exceeds 3.46 years. This figure provides investors with confidence to invest, stake, and for protocol participants to introduce new pools on the platform, serving as an implicit incentive. Footprint will delve deeper into Curve's APY mechanism in the next article "How Investors Can Earn Multiple APYs in Curve" to provide a more objective understanding of the mechanism behind it for investors before they invest.

Footprint's Real-Time Dashboard for Curve

To provide the latest key data on projects, Footprint has created a real-time dashboard for Curve to showcase the project's key indicators, such as cross-chain total TVL, CRV token price trends, trading volume, and related pool statistics in a more clear and concise manner. Anyone can use Footprint's data to create their own dashboard for a clearer view.

Disclaimer: The content of this article represents personal opinions, is for reference and information purposes only, and does not constitute any investment advice.

About Footprint Analytics

Footprint Analytics is an all-in-one visual blockchain data analysis platform. Footprint helps solve the problem of on-chain data cleaning and integration, allowing users to enjoy a zero-threshold blockchain data analysis experience for free. With over a thousand chart templates and a drag-and-drop plotting experience, anyone can create personalized data charts in 10 seconds, gaining insights into on-chain data and understanding the stories behind the data.