Curve Finance crvUSD, expanding its DeFi Stablecoin Platform

2023-05-18, 09:08

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![](https://gimg2.gateimg.com/image/article/1684400249SDFX.jpeg)

## [TL; DR]

Curve Finance launched its stablecoin, crvUSD, on the <a href="/zh-tw/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> blockchain on 3 May.

It publicly announced the launch of crvUSD which has a collateral of $1.8 million, on 4 May.

Nevertheless, the stablecoin has been performing below its peg since the launch.

The launch of the crvUSD has not created an upward price momentum on <a href="/zh-tw/price/curve-dao-crv" target="_blank" class="blog_inner_link">Curve DAO</a> Token (CRV).

## Introduction

DeFi stablecoins are among the most popular cryptocurrencies as many people use them to transfer value between decentralized applications and blockchains.  Since they maintain constant value over long periods individuals often accept them as means of payment for services and products offered. Today, we discuss a new DeFi stablecoin on the market, Curve Finance’s crvUSD.

Read also: [What is Curve? ](https://www.gate.io/learn/articles/what-is-curve/425 "What is Curve? ")

## Curve Finance introduces its stablecoin, crvUSD

Curve Finance, [a decentralized finance (DeFi)](https://www.gate.io/blog_detail/1038/everything-you-need-to-know-about-defi "a decentralized finance (DeFi)") protocol, recently launched its stablecoin, crvUSD, on the <a href="/zh-tw/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> blockchain. On 3 May, Curve Finance, the stablecoin platform, tweeted that it had deployed its stablecoin. [It wrote](https://twitter.com/CurveFinance/status/1653872243556986880 "It wrote"), “As many have figured out, deployment of crvUSD smart contracts has occurred. This is not finalized yet because the UI also needs to be deployed. Stay tuned.”

Read also: [10 Best DeFi Protocols to Invest During Bear Markets](https://www.gate.io/blog_detail/1672/10-best-defi-protocols-to-invest-during-bear-markets "10 Best DeFi Protocols to Invest During Bear Markets")

[Data on Etherscan shows](https://etherscan.io/token/0x95ecdc6caaf7e4805fcef2679a92338351d24297 "Data on Etherscan shows") that Curve Finance created 20 million crvUSD. Interestingly, Michael Egorov, the founder of Curve Finance was the first one to [take a 1 million crvUSD loan](https://platform.arkhamintelligence.com/explorer/address/0x7a16ff8270133f063aab6c9977183d9e72835428 "take a 1 million crvUSD loan") using 957 <a href="/zh-tw/price/frax-frax" target="_blank" class="blog_inner_link">Frax</a> Ether ($1.8 million), a type of ether derivative token, as collateral.

Although the smart contract for the crvUSD was deployed on the mainnet, by 5 May the web UI for borrowing the stablecoin had not been set up. Therefore, the users who intended to borrow the stablecoin could interact directly with the smart contract.

## Understanding crvUSD

[The crvUSD](https://github.com/curvefi/curve-stablecoin/blob/master/doc/curve-stablecoin.pdf "The crvUSD")  is pegged to the United States dollar but is backed by a number of cryptocurrencies that include USDC, <a href="/zh-tw/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> and liquidity provision tokens of stablecoin pools as well as liquid staking derivatives such as <a href="/zh-tw/price/frax-frax" target="_blank" class="blog_inner_link">Frax</a>’s sfrxETH. However, at the moment users can only use <a href="/zh-tw/price/frax-frax" target="_blank" class="blog_inner_link">Frax</a>’s sfrxETH as collateral to borrow crvUSD.

It is important to note that crvUSD is an overcollateralized stablecoin. In other words, it is backed by other crypto assets in a ratio like 2:1. Overcollateralization helps to maintain the peg of the crvUSD against the United States dollar when the assets that back it experience high price volatility.

Basically, what happens is that if one of the price of a collateral falls below the liquidation level the protocol sells it to ensure that there is no loss. In the same way, Curve Finance provides overcollateralized loans to its users.

The introduction of the crvUSD on the Curve Finance protocol brings an important additional dimension to the DeFi platform. This is because it will facilitate cheap swaps among stablecoins and various fixed-priced assets.

Read also: [The Power of Decentralized Finance (DeFi): A Web3 Breakthrough for Financial Inclusion](https://www.gate.io/es/blog_detail/2611/the-power-of-decentralized-finance-defi-a-web3-breakthrough-for-financial-inclusion "The Power of Decentralized Finance (DeFi): A Web3 Breakthrough for Financial Inclusion")

## How Curve Stablecoin Works

The Curve Finance protocol maintains the stability of the crvUSD stablecoin through a burn-and-mint mechanism in a manner similar to MakerDAO’s DAI token. For example, for investors to get crvUSD they need to deposit the required digital assets into the Curve Finance smart contract. Once someone deposits the required crypto assets the protocol mints the crvUSD.

On the other hand, if the borrower closes his position to reclaim his/her deposited cryptocurrencies or crypto derivatives; the smart contract burns an equivalent amount of crvUSD.

What makes Curve Finance different from its competitors is its lending-liquidating algorithm (LLAMA) which rebalances the collateral of the users when its price fluctuates. As an example, if the price of its collateral falls below the liquidation level, the protocol converts that asset to crvUSD. However, it will reconvert crvUSD to that appropriate digital asset when its price rises again.

It is also important to note that the collateral is kept in an automated market maker (AMM) pool where it provides liquidity to traders instead of just sitting in a vault. This increases the efficiency of the system.

## Curve Stable coin (crvUSD) Competition
As a point, crvUSD faces much competition in the market since there are [several stablecoins](https://www.gate.io/learn/articles/what-is-stablecoin/40 "several stablecoins") with the same use cases. The stablecoin market is dominated by <a href="/zh-tw/price/tether-usdt" target="_blank" class="blog_inner_link">Tether</a> USDT, USDC and DAI with a market capitalization of $4.6 billion. The other competing stablecoin is <a href="/zh-tw/price/aave-aave" target="_blank" class="blog_inner_link">Aave</a>’s GHO which is under the testing stage. It remains to be seen how crvUSD will perform on the market and its effect on the <a href="/zh-tw/price/curve-dao-crv" target="_blank" class="blog_inner_link">Curve DAO</a> token (CRV).

## The price outlook of CRV

Despite having collateral of $1.8 million crvUSD is still trading below its peg, at $0.927. At the same time, the launch of this stablecoin has not created much upward price momentum for the <a href="/zh-tw/price/curve-dao-crv" target="_blank" class="blog_inner_link">Curve DAO</a> token, CRV. However, the price of CRV token rose by 10% within 24 hours after the launch of crvUSD. However, it is now in a downward trend.

At the time of writing, the <a href="/zh-tw/price/curve-dao-crv" target="_blank" class="blog_inner_link">Curve DAO</a> token has a value of $0.805 and is showing signs of distress as <a href="/zh-tw/price/the-graph-grt" target="_blank" class="blog_inner_link">The Graph</a> denotes.

![](https://gimg2.gateimg.com/image/article/1684400808Curve 1.png)

As <a href="/zh-tw/price/the-graph-grt" target="_blank" class="blog_inner_link">The Graph</a> shows, the value of CRV increased to $0.911 on 3 May and dipped on the 4th before rising again on the 5th, following the launch of the crvUSD. As the next graph shows, the price of CRV reached $0.976 on May 5. Nonetheless, it has been falling since then to close the day at $0.796 on 14 May.

![](https://gimg2.gateimg.com/image/article/1684400828Curve 2.png)

Currently, the CRV is trading at 97.67% lower than its all-time-high which occured on 14 August 2020. Potentially, CRV is a good investment asset since it drives the Curve Finance protocol.

## Conclusion
Curve Finance successfully launched its stablecoin, crvUSD, on the <a href="/zh-tw/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> blockchain on 3 May 2023. However, since then crvUSD has been performing below its peg despite having a collateral of $1.8 million.  Also, the launch of its stablecoin has failed to influence the price of CRV to rise in a way which the market has expected.

<div class="blog-details-info">
<div>Author:** Mashell C. **, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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