Curve Finance Has a Stablecoin in the Works
Curve is likely to launch an overcollateralized stablecoin.
A stablecoin from leading automated market maker (AMM) Curve Finance may be around the corner.
The news comes right after DeFi lender Aave announced plans for its GHO stablecoin earlier this month.
Information is limited so far, but a post from Twitter user mrblocktw, who lists Curve Finance in his bio and also holds the “Curve Team” role in the project’s Discord, indicates that a stablecoin from the protocol is imminent.
Curve founder Michael Egorov reportedly confirmed that the stablecoin will be overcollateralized at a web3 summit.
It stands to reason that the basic mechanism for a Curve stablecoin would be to mint it against liquidity provider (LP) positions. At a high level, this would be similar to MakerDAO’s collateralized debt position model.
Using LP positions as collateral should theoretically make liquidity more sticky on Curve, as an outstanding loan against an LP position would require users to pay down that loan before retrieving their collateral. After all, people use Maker partially so they don’t have to sell their ETH. In this case, people could borrow against their Curve LP positions so they can access liquidity without giving up that fee-generating collateral.
Another potential advantage of a native stablecoin for Curve would be borrowing fees earned from it. This, too, would be similar to Maker.
Members of the Curve team did not immediately respond to requests for confirmation and further details regarding the forthcoming stablecoin.
Another user, fiddy, who is listed as a “friend” of Curve on their Discord, also tacitly confirmed the stablecoin’s release — they responded “no” when asked whether today, July 21, was meant to be the stablecoin’s official announcement date.
fiddy also said that users can follow Curve’s Github in order to be among the first to read the code for Curve’s forthcoming stablecoin.
Popular crypto trader Hsaka tweeted that Curve may have gotten tired of serving as the battlefield for stablecoins and decided to enter the arena themselves.
Curve has been the home of what has been dubbed the “stablecoin wars”. Broadly speaking, the stablecoin wars entail the fight amongst stablecoin issuers to attract and provide the deepest liquidity. The deeper liquidity there is for a stablecoin, the more reliably it can maintain its desired peg, usually to the US Dollar.
This war has been fought primarily on Curve because the AMM’s bonding curve makes Curve well-suited for like-priced assets, like multiple stablecoins or ETH and stETH.
To be sure, without more details, it’s difficult to say exactly how a Curve stablecoin will fit into DeFi’s stablecoin space.
But as the bear market rages, protocols are no doubt racing to try to solidify their position once increased activity comes back to DeFi.