Key points
- Curve Finance is a decentralised exchange using an automated market maker (AMM-DEX), initially launched on Ethereum. It is designed for efficient trading between stablecoins and other like‑priced tokens with minimal slippage and fees.
- Curve is governed by the Curve DAO, a decentralised autonomous organisation of CRV governance‑token holders.
- Curve ranks among the leading DeFi protocols by total value locked (TVL) and number of active users.
- As of July 2022, Curve supports swaps among more than 40 assets and is deployed across ten networks: Ethereum, Arbitrum, Aurora, Avalanche, Fantom, Harmony, Optimism, Polygon, xDai and Moonbeam.
Who created Curve?
The decentralised exchange Curve Finance was created by Mikhail Egorov. He graduated from the Moscow Institute of Physics and Technology, earned a PhD in physics at Swinburne University of Technology, worked on research related to quantum computing and cryptography, and co‑founded the fintech firm NuCypher and the LoanCoin project.
In November 2019 Egorov published a technical paper describing the efficient StableSwap liquidity mechanism for trading stablecoins.
The Curve Finance exchange implementing this approach launched in January 2020. The team is based in Switzerland. According to the founder, as of mid‑2020 it comprised just five people, including two developers.
How does Curve work?
As with other AMM‑DEXs, trading on Curve Finance relies on liquidity pools. These are smart contracts holding two or more assets in equal proportions that users can swap automatically via a simple interface by connecting with any Web3 wallet.
Relative prices are set by a mathematical formula. Slippage (price impact) is inversely related to pool size.
One of the first pools was 3Pool, which holds equal parts of DAI/USDC/USDT. Later came pools for other stablecoins (BUSD, TUSD, HUSD, USDN) and correlated wrapped tokens such as wBTC/renBTC.
Each swap on the platform carries a fee (0.04% of trade value), part of which is distributed to liquidity providers. Anyone can add assets to a pool and earn a share of fees. Since 13 August 2020 liquidity providers have also received additional rewards in CRV.
In June 2021 the second version of the protocol—Curve V2—went live. It added the ability to trade between uncorrelated assets; for example, a WETH/WBTC/USDT pool was launched.
The new version also introduced automatic concentration of liquidity around the current price, enabling large trades with minimal slippage.
How does Curve’s tokenomics work?
Curve Finance has a governance token, CRV, an ERC‑20 issued on Ethereum. CRV primarily incentivises liquidity providers via yield farming and involves users in protocol decision‑making.
CRV launched on 13 August 2020, though not as the Curve team intended. The code had been posted on GitHub in advance, which an anonymous developer used to deploy the token’s smart contract independently.
Because the launch proceeded without errors, the team was forced to recognise it as official.
The maximum CRV supply is 3.03bn tokens, to be distributed by August 2026 as follows:
- 62% to liquidity providers;
- 33% to the team and investors;
- 5% to the Curve DAO reserve.
The emission rate declines by roughly 30% each year. After the first reduction in August 2021 it is about 633,126 CRV per day.
Token holders can use CRV in three ways:
- vote on proposals in the Curve DAO;
- stake and receive 50% of protocol fees;
- boost liquidity‑provision yields by up to 2.5×.
All three functions require locking CRV for between one week and four years. In return, depositors receive veCRV. With a one‑year lock the holder receives only 0.25 veCRV per 1 CRV; only a four‑year lock yields veCRV at a 1:1 ratio.
As of mid‑2022, about 47.6% of circulating CRV is locked. The token ranks in the top 100 by market capitalisation and trades on most major crypto exchanges.
How is Curve governed?
All questions of Curve Finance’s development are decided through the autonomous Curve DAO, launched immediately after CRV emission began in August 2020.
To participate, users must lock their CRV for one week to four years and receive veCRV.
With at least 1 veCRV, users can vote on existing proposals or create “signal votes” to gauge community interest in particular issues.
Holding at least 2,500 veCRV allows users to submit new proposals, such as opening new pools, closing obsolete ones or reallocating rewards among them.
Each vote lasts one week. For a proposal to pass, at least 30% of existing veCRV must participate and at least 51% must support it. In line with Curve DAO decisions, the Curve Finance team changes DEX parameters.
Most votes in Curve DAO belong to three DeFi protocols (Convex, StakeDAO and yEarn), which built yield‑farming strategies by providing liquidity and earning trading fees as well as CRV.
How is Curve developing?
Since yield farming launched, Curve Finance has become one of the most successful DeFi protocols by both locked liquidity and trading volumes.
At its peak in January 2022, TVL exceeded $24bn and monthly trading volume topped $6bn. Even after the crypto‑market slump, by mid‑2022 Curve remained among the top five DeFi services with more than $5.7bn locked.
The vast liquidity provided by Curve enables numerous other DeFi services to use its pools within their ecosystems. In particular, Curve Finance is integrated with the 1inch liquidity aggregator, as well as leading lending protocols Aave and Compound.
During 2021–22 the protocol was deployed beyond Ethereum to nine EVM-compatible networks: Arbitrum, Aurora, Avalanche, Fantom, Harmony, Optimism, Polygon, xDai and Moonbeam.
Curve’s popularity and open‑source code have prompted several forks (copied protocols). The largest include Ellipsis Finance on BNB Chain and Kokonut Swap on Klaytn.
With close attention to smart‑contract security and user experience, Curve remains one of the most useful tools for decentralised stablecoin trading with low slippage and fees.