Mar 1, 2021
[Company Watch] How to Invest Your CRV? (Curve Series 1/3)
Curve Finance today is the largest automatic market maker by TVL, with US$3.8 billion locked in the platform. Each pool of Curve receives some CRV, its platform token as rewards. As of today, the CRV in circulation is US$430m according to Messari.
CRV is a value-generating token, as analysis in our earlier article Curve and Its Investment Value. We have also explained the mechanism of Curve’s stablecoin exchange in detail in the article Curve’s Formula for Stablecoins Swap. For the above articles, please refer to our twitter or Medium.
CRV’s economic value are two folds:
- Share of admin fee: most of the pools of Curve charges 0.04% of transaction fees and 50% of which goes to the stakers of CRV;
- Pool Boost: CRV can be staked and locked to boost the pool yield, if you are a Liquidity Provider in any of the pools as well.
In either case, you have to lock your CRV for a period of time, ranging from 1 week to 4 years, under the Curve DAO page. 1 veCRV is given for 1 CRV locked for 4 years, and the amount of veCRV given is proportionate to the locking period, e.g. 0.25 veCRV is given for 1 CRV locked for 1 year. veCRV can be used to vote in the Curve DAO for administrative matters, one of which being the weekly vote on how many CRV rewards to allocate to each pool.
Share of Admin Fee
Share of admin fee is automatic to veCRV holders. This is a trade-off of liquidity for earnings. Curve Finance collects trading fee and deposit/withdrawal fees from each pool, and converts them into 3CRV token, the LP token of Curve’s largest pool, 3pool. 3CRV is roughly the volume weighted average price of USDT, USDC and DAI in 3pool, so its price is approximately US$1.
Trading fee is 0.04% and 0.02% fee for deposit and for withdraw, which 50% of them goes to veCRV holders.
As of now, there’s a total of 106.8m CRV (45.76% of all circulating CRV), with an average period of 3.63 years. There CRV are entitled to the 50% of the trading fees. As of today, Curve reports a weekly earning of US$2,650k, annualised to be US$138.2m, to be shared proportionally by veCRV holders. This is approximately a yield of 77.13% (based on the average lock-up period of 3.63 years).
In other words, the longer you commit to the lock-up of your CRV, the more trading fees you will receive. If you prefer a balance of liquidity and yield, e.g. locking CRV for 1 year, the your yield will be 77.13% / 3.63 year x 1 year = 21.2%.
The fees is distributed on a weekly basis; whilst the week screenshot here might be on the high end (due to exploit incidents happened during that week), Curve provides a weekly earning distribution records here and daily trading fees income here.
Boost Pool Yield
In addtion to receive trading fees in 3CRV, holders of veCRV can also use veCRV to boost the CRV rewards in the pools (where one has liquidity). This can be done by locking your CRV and there’s a detailed guide here in the official website.
The CRV you have locked will be applied to every pool where you provided liquidity. So for the given amount of CRV locked, the more pools you have, the higher the boosting effects in aggregate.
Having boosting effect does not negate or remove your share of admin fees.
If you have 10,000 CRV and lock then for one year, the below is the current boosting effects you can have on every $10,000 in each pool:
If you have liquidity in 5 pools, the maximum boost you can achieve by locking up 10,000 CRV for 1 year (which gives you 2,500 veCRV) will be 70.92%.
Each pool of $10,000 and 70.92% will translate into a boost of US$7,092 additional yield per annum. At this moment, 10,000 CRV costs US$19,000, so the yield is about 37.3%.
Lock in Yearn
Yearn uses a significant amount of CRV to boost its pools and it also has a y-veCRV pool, where users can lock CRV permanently (yes, permanently) into the pool. Yearn will lock all the CRV into 4-year and rolling veCRV. Then, Yearn will harvest its entitled 3CRV rewards weekly and make it available for users to claim.
The yveCRV also receives 10% of the CRV harvested by other Yearn vaults boosted by the yveCRV pool. This means the veCRV in the pool is a sum of the CRV users deposited and the CRV other Yearn vaults have contributed. Since the Yearn vaults are not receiving the 3CRV, users who contributed to the yveCRV will have a more than 1 CRV share of 3CRV per CRV. This ratio will also increase over time, as more Yearn vaults contribute to the yveCRV vault.
Currently, the yield of this pool (how fast your locked CRV will grow) is about 25% per annum.
Whilst these CRV are locked permanently, you can actually trade the LP token of this pool, yveCRV in Sushiswap. You can also provide liquidity for this pair to earn more. (Note: according to the admin of Yearn in discord, if you have yveCRV tokens that are in an amm, then you cannot claim 3crv rewards.)
Also note that 2/3 of Sushiswap rewards will be distributed 6 months later.
Providing Liquidity in Uniswap
Lastly, providing liquidity for CRV-ETH in Uniswap is also a choice, given that ETH and CRV move more or less in the same direction (although not always at the same time). The yield is about 40% to 60% recently.
(Serenity Team, 2 March 2021, Twitter: https://twitter.com/SerenityFund)
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