On May 4, Curve Finance announced that it had deployed the smart contracts for its highly-anticipated stablecoin crvUSD.
Its launch on the Ethereum blockchain introduces another next-generation decentralized stablecoin into an increasingly crowded market.
Just Another DeFi Stablecoin?
On May 5, Curve posted an update stating that the third deployment of crvUSD was complete. There were no errors, it added, but it needed to fix an issue of unexpectedly high gas usage in certain cases.
Curve Finance is a decentralized exchange offering stablecoin yield opportunities and token swaps. It has a total value locked of around $4.97 billion, according to DeFiLlama.
Users will be able to mint crvUSD against crypto collateral deposited in the protocol. This allows them to access liquidity yet still earn yields on their deposits.
The new decentralized collateralized-debt-position (CDP) stablecoin is in competition with MakerDAO’s DAI, which is very similar. It also competed with the Aave stablecoin GHO which does pretty much the same thing for Aave users.
According to the crvUSD white paper, the stablecoin has a novel lending-liquidating automated market maker algorithm called LLAMMA. The mechanism is designed to lessen the effects of liquidations for borrowers.
When the ETH backing crvUSD approaches liquidation price, the protocol starts converting it to stablecoins. When prices adjust back upwards, it is automatically converted back into ETH. As a result, there will be smoother transitional liquidations rather than it occurring suddenly all in one go.
Furthermore, Curve is pushing the decentralization angle following the collapse of several high-profile centralized exchanges and firms last year.
According to DeFiLlama data, $1.83 million in collateral was already locked in crvUSD. However, it was trading below its one-dollar peg at $0.927 at the time of writing.
Curve CRV Price Outlook
The Curve Finance native token, CRV, saw an uptick in prices following the stablecoin launch. CRV jumped 10% on May 4 to just below a dollar but has fallen back since.
CRV was trading down 2.25% on the day at the time of writing. As a result, the DeFi token was changing hands for $0.934.
Moreover, CRV has been underperforming its DeFi brethren. The asset is still almost 94% down from its August 2020 peak price of $15.92.
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