Blog Crypto Curve DAO Token (CRV) Review: ETH’s Largest Asset?

Curve DAO Token (CRV) Review: ETH’s Largest Asset?

date March 9, 2021 time 7 min read 955 views

The Curve Finance decentralized exchange (DEX) is one of the most popular stablecoin trading platforms among yield farmers and liquidity providers today. Curve’s liquidity pools are designed to reduce spillage, trading costs, and the risk of loss from a shift in crypto prices. Its native governance token, Curve DAO token, is popular among crypto stakers who earn 50% of all trading fees on the Curve Finance platform.

On the 19th of September 2020, Curve Finance made good its promise to start distributing 50% of revenue from fees on their platform to holders of their Curve DAO token.

For a platform that reported daily trades worth over half a billion dollars in January 2021, the new dividends from trading fees serve as great news for current and aspiring investors in CRV.

But should you invest in CRV and the future of Curve Finance? In this article, we’ll review Curve DAO and whether it is a worthy investment in 2021.

Investors who stake Curve DAO on Curve Finance get dividends of 50% of all trading fees
Investors who stake Curve DAO on Curve Finance get dividends of 50% of all trading fees (source: cryptoadventure.org)

What is Curve?

Curve Finance is a decentralized exchange (DEX) for stablecoins and wrapped assets like renBTC and wBTC.  It was founded by Michael Egorov and launched in 2020.

Curve has established itself as one of the leading DEX’s for stablecoins, offering lower volatility and trading fees than almost any of its competitors. Curve trading fees are set at a flat rate of  0.04% of assets traded compared to, for example, Binance’s 0.1%.

Besides simple crypto exchange, Curve Finance has become the go-to place for DeFi yield farmers and liquidity providers who need to acquire stable assets fast, autonomously, and at low prices. 

Currently, Curve has over 30 liquidity pools, with each pool containing a pair of like-assets (similarly behaving cryptos).  These include pools for coins like Compound, BUSD, sUSD, and PAX.

How does Curve work?

Curve is first and foremost an exchange based on the Ethereum blockchain allowing you to swap freely between stablecoins for a very small fee. Behind Curve’s swapping system is a complex liquidity pool earning interest for investors.

Here’s how Curve works:

Liquidity pools

Decentralized liquidity pools face 3 major challenges:

  1. Impermanent lossAssets lose value compared to assets outside the exchange because of price volatility. For example, a USD – tied stablecoin can be temporarily worth slightly more or less than $1 due to high or low demand. It is called ‘impermanent’ since activities in the liquidity pool can trigger a rebalance in token value. 
  1. Slippage This is the difference between the actual price during a trade and the original price expected. For example in the time it takes for you to trade a $3 asset, it decreases to $2.

Slippage comes as a result of high volatility as the actions of traders pull the price of a token in different directions and increase with higher-volume trades.

  1. Trading fees On DEX liquidity platforms that pair assets differing greatly in price and volatility, value fluctuation in one asset can cause fees to suddenly skyrocket. On Uniswap, for example, trading fees are as high as 0.3%. Curve promises 0.04%.

Curve solves the above problems by trading stablecoins tied to the value of the USD. Because these stablecoins are always equal to $1 regardless of the market environment, it reduces the risk of impermanent loss, fees, and slippage.

Trades in DeFi platforms like Uniswap and Binance suffer from high volatility as liquidity pools are made up of tokens that follow different market patterns
Trades in DeFi platforms like Uniswap and Binance suffer from high volatility as liquidity pools are made up of tokens that follow different market patterns (source: blocksocial.com)

Providing liquidity

Decentralized exchanges don’t hold their own assets to cover trades. They instead rely on liquidity providers who provide their own assets in exchange for interest. You can become a liquidity provider on Curve by depositing tokens in any of the 30 liquidity pools on the platform.

Besides interest from the exchange trading fee of 0.04%. Curve ensures that liquidity providers earn even more by investing your assets for you in other DeFi interest platforms like Compound and Aave.

Trading

Trading is one of the main drivers of revenue on Curve as well and most liquidity pools.

To trade in any liquidity pool, you need to connect a Web 3.0 enabled wallet (that’s a regular crypto wallet with an added browser) like MetaMask and then choose the crypto you want to trade on the Curve platform. 

DeFi trading has several benefits over normal trading. These include:

  • Removing the need to associate directly with other traders, increasing liquidity

In a normal trading system, a trader will place a buy/sell order at a specific price and their order only gets executed if there’s an opposite order available. Assets with low volume or demand, therefore, become very difficult to trade. 

DeFi trading eliminates this problem through liquidity pools. Assets are always available for matching orders.

  • Automated pricing through smart contracts

In normal trading, professional market makers have to constantly aggregate prices across exchanges to determine the bid/ask price. In a DeFi exchange system, the process is automatically done using smart contracts and decentralized oracles.

Efficient price calculations translate to lower fees for traders.

  • DeFi trading opens doors for most traders

Normal trading centralized trading comes with restrictions such as listing fees. With DeFi trading, anyone can contribute to a liquidity pool at any time. More liquidity pools can be added at any time if there is enough demand from the community.

Yield farming can help you get a high return on investment (ROI) in the Curve ecosystem
Yield farming can help you get a high return on investment (ROI) in the Curve ecosystem (source: qtxasset.com)

What is Curve DAO token and how can you use it?

Curve DAO token (CRV) is an ERC-20 token that’s also the governance token of the Curve Finance platform. There are several ways that you can use CRV as an investor. These include: 

Staking on Curve

The development of DAOs necessitated the launch of the CRV token, giving voting rights to those who lock CRV tokens into the system in a process known as staking. 

The more CRV you stake and the longer your staking period, the more voting rights you gain on the platform. By staking you get voting power on the chain, but in exchange, if you are found to act maliciously your coins can be taken away. The maximum staking period on Curve is 4 years.

Curve DAO token history

In August 2020, Curve Finance made a step toward decentralized governance by launching the Curve DAO (Decentralized Autonomous Organization). The DAO provides a more open way for Curve to manage platform changes such as fee allocation and additional liquidity pools.

As of December 2020, CRV was valued at $0.615668 having grown by roughly 20% over the course of the year

The biggest break for CRV was between the 11th and 17th of January 2021 when the value of CRV went up by more than 300%, reaching $1.78. Some of the reasons for the price hike are:

  • Curve’s collaboration with Yearn.Finance

On January 1Oth, Andrew Cronje, the founder of Yearn.Finance tweeted that Yearn would be collaborating with Curve Finance to enable people to create permissionless pools.

This move, expected to attract more people to the Curve platform, led to an increase in Curve token prices.

  • Increase in value locked on the platform and user activity

DeFi Pulse reported an increase in value locked on Curve Finance from late 2020 and early 2021. 

Since an increase in platform engagement is a metric for platform success, this may have led more people to join the platform, increasing Curve token’s price.

  • New regulation allowing banks to use stablecoins for bank-permissible functions

On 4th January 2021, the United States Office of the Controller of the Currency (OCC) stated that banks could make payments using stablecoins. The announcement was seen as an avenue to increase the usage of Curve (as it specializes in stablecoin trades), hence the price hike. 

The price of CRV has continued to rise and was at $2.33 on 4th March 2021 according to Coingecko.

Is Curve DAO a good investment?

Curve DAO is a unique project with lots of potential. Some of the reasons why you can benefit from investing in Curve DAO are:

  1. Platform security

Curve is often audited. Its DEX was audited twice while its DAO and CRV smart contract have been audited on three separate occasions.

Trail of Bits conducted an audit of Curve’s code between June 22 and July 10 of 2020 after which Quantstamp, a blockchain security firm, fixed the code.

In January 2021, Curve launched a bug bounty program, paying between $150 and $12,000 to anyone who discovers and reports critical vulnerabilities in their protocol. The award depends on how dangerous the vulnerability you discover is plus other factors like how well you write your report. 

Those who discover vulnerabilities may also enjoy other benefits like early access to upcoming features.

  1. High demand from the expanding DeFi marketplace

Curve’s integrations with DeFi interest platforms like Compound, Aave, and Yearn.Finance have quickly turned it into a staple of the DeFi economy.

Since DeFi is currently one of the hottest areas of crypto due to the extremely high rates of interest it provides investors, it has received most of the growth and attention outside of institutional BTC hype.

And as a platform based on the Ethereum blockchain, any growth in the second most popular crypto also affects the growth of CRV.

Curve’s efficiency in terms of low costs, minimal volatility, and high yields are some of the top reasons why the Curve DAO token can make a lucrative investment opportunity. 

With expectations of new crypto additions on Curve and future integrations with other DeFi platforms, returns will likely increase and the future of Curve DAO token looks quite bright.

 Where to buy Curve DAO token

If you have done your due diligence and have decided to invest in Curve, here’s where you can get it:

  • Exchange your fiat money for CRV on Coinbase
  • You can swap your crypto for CRV on major exchanges like Binance, Huobi Global, OKEx, HBTC, and Dsdaq

Where to store Curve DAO tokens

After purchase, remember to store your crypto in a wallet for better safety. You can store CRV in any ETH-2.0 wallet like Guarda and Freewallet.

Another way to get Curve DAO token: Take out a fast crypto loan on MyConstant

If you don’t want to exchange your crypto or you don’t have enough fiat to buy CRV, you can take a loan at a low rate of between 6-7% on MyConstant

With MyConstant, we offer loans against more than 70 cryptos including major ones like BTC, ETH, BAL, and AAVE, and offer features not found anywhere else in the industry including:

  • 24/7 customer support
  • Real-time best rates sourced from exchanges
  • Early loan repayments for lower rates
  • Loans against multiple collaterals

Sign-up for a free account on MyConstant and get in on the growth of Curve DAO today.

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