Why do the big shots in the crypto world want to "rescue" Curve?

Authored by: Steven, E2M Researcher

Daily Discussion

Reflection

After Curve was hacked in July last year, OGs, institutions, and VCs all came to the rescue. Wu Ji Han, co-founder of Bitmain and Matrixport, posted on social media, ‘In the upcoming RWA wave, CRV is one of the most important infrastructure. I have bought the dips, not financial advice.’

Justin Sun confirmed on social media that he acquired 3.75 million CRV from the founder of Curve through OTC and staked it in the Curve protocol. The next day, a related address of Sun Yuchen also received 2 million USDT and obtained 5 million CRV locked in Egorov’s address.

Following that, projects like Yearn Finance, Stake DAO, and numerous institutions and VC have all joined the rescue operation of CRV, along with DWF and others.

What is the significance of these groups for the Curve platform? Why save? This is very confusing.

Yield is a web3 horizontal comparison, no longer a specific subdivision track.

CM: Will it have any impact if the founder of Curve sold his own chips and then had nothing to do with Curve? No problem. The infrastructure layer protocol does not need to be developed after a certain stage. It is already mature enough. Apart from the market aspect, not developing it will not affect its use. Many people who are rescuing the market realize this point, hence the motivation.

• Curve has several models, all of which allow VeCrv holders to govern autonomously. With the existing mechanisms, parameters and configurations can operate independently, in line with the original intention of decentralized applications, where authority is completely vested in the community.
• DEX
• Llama Stablecoin Algorithm + Lending Market
• VE Model
• Bribery and Liquidity System
• As for how the market performs, that’s another matter. It is basically certain that the fundamentals are worse than last time. There won’t be outstanding performance compared to before, but there will still be demand for extended liquidity mining. If you think that the on-chain is in a state of vigorous development, Curve still has a chance, while Uni cannot solve the problem. Curve provides a complete framework and at the same time completes a decentralization. The prospects for cross-period planning will be better, provided that incentives are needed on-chain in the future.
• There are many project parties for buyers. Liquidity mining is the core method that emerged in the previous cycle. In the early stages of the project, liquidity was rented. Crv solves the problem that project parties do not need to inflate their own economic models in the early stages of launch, but instead use rented Crv liquidity to solve the problem of token inflation and use tokens for other utilities. At the same time, the token remains meaningful after unlocking. Crv can also support trading of non-stablecoins, similar to Uniswap. At that time, it was not possible to buy when queuing, and priority was given to project parties. The project will not die and will not be eaten away by Uniswap in the short term.

1. Event

Time point 1

Arkham’s post stated that Michael Egorov, the founder of Curve, currently has $140 million CRV collateralized and borrowed $95.7 million stablecoins (mostly crvUSD) from 5 accounts in 5 protocols. Among them, Michael has $50 million crvUSD borrowed on Llamalend, and Egorov’s 3 accounts have already accounted for over 90% of the borrowed crvUSD on that protocol.

Arkham pointed out that if the price of CRV drops by about 10%, these positions may start to be liquidated. Subsequently, as the decline in CRV continued to expand, it once fell below $0.26, reaching a historical low. The CRV borrowing positions on Michael’s multiple addresses also gradually fell below the liquidation threshold.

Time Point 2

Time Point 3 Current Situation

Data source:

Investors are facing a disaster.

On the one hand, it is the liquidation of the remaining lending platforms triggered by the price drop. Fraxlend’s lenders suffered millions of dollars in liquidation. According to Lookonchain monitoring, users were liquidated 10.58 million CRV (3.3 million US dollars) on Fraxlend.

2. Comparison of Curve Data

20240616

Volume 3pool (12.3m), steth (6.7M), fraxUSDC ($756.8M)

TVL compared to the top three last year fraxusdc ($15.8m), steth ($249.7m), 3pool ($178.3m)

Frax TVL is too low, so I took a screenshot separately

202307 - Reference to the research report at that time

The top ten pools in TVL are fraxusdc ($0.6b), steth ($0.58b), and 3pool ($296.65m), which are ranked in the top three.

The top 3 in trading volume are 3pool ($47.86m), steth ($18.64M), and fraxUSDC ($17.96M), with only 1/2 of the top 2 in 3pool TVL, but the trading volume exceeds 2.5 times.

Comparison Uni

Income Comparison

New on the left, old on the right.

Uniswap trades meme tokens in bull markets and mainstream assets in bear markets.

3. Some issues revealed in this incident

The Bad Liquidity Brought by the Ve Model Head Effect

The essence of CurveWar is to compete for the liquidity of Curve. After obtaining the liquidity, it is used to boost the pool where oneself provides liquidity as an LP. However, higher liquidity is definitely better for the project. Different projects’ ways of purchasing CRV voting rights trigger the so-called ‘war’, which may lead to market instability and manipulation.

When discussing Curve at the beginning, it was thought that Curve could be like a traffic platform. New projects would boost their pools by buying voting rights to gain a certain level of attention (such as Frax at that time). After nearly a year of observation, it is clear that this effect cannot be achieved. The yield is inferior to point display or Pendle, and it has basically been abandoned.

Lending and Borrowing Settlement

Collateral with large price fluctuations, such as Crv, Aave, Comp, may not be suitable for collateral. In the future, the encryption world should still be dominated by usdt/usdc/dai+BTC+ETH in order to grow.

The risks of borrowing and lending are complex, with fluctuations in the price of collateral and leverage and bubbles caused by the combination of derivatives and LEGO, making it difficult for Web3 lending to achieve economies of scale.