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DeFi: What is Curve and how do I use it?

Curve is a decentralized exchange, with a focus on stablecoins and with the CRV governance token.

Curve is a exchange protocol based on Ethereum, providing stablecoin transactions with low slippage (i.e. better price even for big trades). In that it is similar to Uniswap. However, Curve’s algorithm is specially designed for stablecoin exchange, which can achieve low slippage and low handling fee (0.04%).

While providing liquidity, Curve liquidity providers can not only obtain transaction fees, but also obtain additional benefits from other DeFi protocols (such as Compound, Yearn, Synthetix, RenBTC, etc.).

At present, the Curve smart contract has passed the audit of Trail of Bits. However, security audits cannot avoid all risks. Please invest carefully. If you need to participate, please invest funds that you can afford to lose.

How Curve works in general

How does Curve achieve low slippage in stablecoin transactions?

  • Curve uses a similar AMM automated market maker mechanism as Uniswap, using algorithms to imitate the trading behavior of traditional market makers, and smart contracts acting as counterparties.
  • However, Uniswap’s constant product market maker model works well, but is not perfect for all types of assets. Using Uniswap for stable currency transactions will cause more losses in comparison.
  • The mainstream stablecoins are all anchored at $1. Although there are fluctuations, stablecoin exchanges should be more or less lossless in the long run. Based on this assumption, Curve invented the StableSwap market maker algorithm specifically for stablecoin transactions on the basis of Uniswap. With Curve’s curve being smoother stablecoin trading slippage can be low than on Uniswap.

How does Curve achieve higher annualized returns?

  • As long as someone trades on Curve, the liquidity provider (LP) will get a transaction fee. As the transaction volume of Curve increases, the LP’s annualized income will also increase.
  • Providing loan tokens such as Compound’s can give even more revenue than just Curve transaction fees, as they provide additional interest
  • In addition, Curve issued the CRV governance token to reward liquidity providers.

CRV token

Curve’s governance token is CRV. CRV holders can participate in the online governance of Curve in the future.

The tokens issued

The total amount of CRV tokens is 3.03 billion, distributed as follows:

  • 62% distributed to liquidity providers
  • 30% to shareholders, linearly unlocked within 2–4 years
  • 3% to team members, linearly unlocked within 2 years
  • 5% as a community reserves

Among the, 1.3 billion CRV (43% of the total) will be distributed in the initial issuance, as follows:

  • 5% will be distributed to early Curve liquidity providers, and linearly unlocked within 1 year
  • 30% will be to shareholders, within 2–4 years linearly unlocked
  • 3% to team members, and linearly unlocked within 2 years
  • 5% as a community reserve

Initial Curve liquidity mining has ended at block height 10627591 (Singapore time: 2020–8–10 3:24:29 AM). Users who provided liquidity in Curve before this time can check their initial CRV quantity at the following address: https://www.curve.fi/earlyCRV . These CRVs will be linearly unlocked within 1 year.

At the beginning of the launch, the circulation of CRV was 0, and the initial release rate was about 2 million CRV per day. This 2 million CRV is mainly composed of the following:

  • The initial issuance to liquidity providers and team members, for which CRV is gradually released
  • CRV rewards for subsequent liquidity providers

How to obtain CRV

As an ordinary user, there are two ways to obtain CRV:

  1. To provide liquidity at Curve and obtain CRV as a liquidity provider,
    see the section “How to become a liquidity provider to obtain CRV” in this article.
  2. Buying on exchanges that support CRV. If you need to know about exchanges that support CRV, please follow the official announcement of Curve or check Coingecko at https://www.coingecko.com/en/coins/curve-dao-token#markets

Anti-fraud reminder

CRV tokens have just been officially issued today. Follow this link to get official information on the CRV contract address: https://www.curve.fi/contracts. Beware of fake issued CRV tokens by scammers.

How to use Curve for token swaps

  1. Open the imToken application and the Curve webpage (https://www.curve.fi/) and

2. Click “Connect Wallet” on the Curve webpage, click “Show More” in the pop-up window, and then click “WalletConnect “icon.

3. Click the QR code icon in the upper right corner of the imToken app. Scan the QR code on the web page, and perform DApp connection authorization on the mobile phone.

4. After the connection is successful, select the tokens to be exchanged and the quantity in the “From” and “To” columns, and click “Sell” to perform currency exchange. You can view the estimated handling fee at the bottom of the page.

Click Advanced options, to select the liquidity pool and customize the acceptable maximum slippage and miner fee

Slippage: Can be simply understood as the spread which gets bigger for bigger trades.

5. Click “Next” on imToken to authorize the transaction, select “Continue to send” after authorization, and click “Next”.

6. After the authorization transaction and token swap transaction are successful, you can see in the asset interface that DAI has been successfully converted to USDT (the display effect is the same as the screenshot on the rightmost page in the above figure).

How to become a liquidity provider to obtain CRV

There are many ways to become a Curve liquidity provider. Here we introduce one of the simpler operations: Joining the Compound pool.

First of all, follow the “How to use Curve for currency exchange” section steps 1–3, scan and authorize the Curve webpage connection via WalletConnect in imToken.

  1. After the connection is successful, select a liquidity pool in Curve Pools. Here, take Compound as an example. Click Compound.

In actual operation, if you participate, it is recommended to choose a liquidity pool with a larger amount of funds and a higher return rate.

2. After entering the Compound pool, click “Deposit” in the menu bar at the top of the page.

3. The Compound pool supports the deposit of stable coins DAI and USDC, and deposits all DAI and USDC in the wallet by default. If you want to customize the amount of stablecoins deposited in the liquidity pool, you can click “Use maximum amount of coins available” to make the X in the box disappear and enter the custom mode.

4. After the X in the box disappears, enter the custom mode. The two input boxes of DAI and USDC will change from dark gray to dark blue. At this time, we can manually set the number of stablecoins deposited in the liquidity pool.

5. Click Deposit to deposit, and click “Confirm” on imToken to authorize the transaction. You can view the number and unit price of LP tokens (which can be understood as deposit certificates) obtained after the stablecoins are deposited in the liquidity pool, as well as the estimated miner fees on the Curve’s web page.

Due to the very high Ethereum network fees, stablecoin deposits may cost more than you might benefit. Therefore, please first calculate whether your final income can cover the paid miner fees.

6. After authorization, select “Continue to Send” and click “Next”. After the transaction is sent, you can see two transactions waiting to be packaged on the ETH historical transaction interface, namely the authorized transaction and the transaction of the stablecoin DAI converted to LP Token. After the two transactions are successful, you can view the received LP Token on the asset interface. The corresponding token name of the LP Token obtained from the Compound pool is “cDAI+cUSDC”.

The above only takes the Compound pool in the Curve liquidity pool as an example. Mind that using the different pools works slightly different. Before using, please do your own research to avoid mistakes.

If you are familiar with liquidity mining and want to maximize the benefits, you can also deposit the LP token obtained after joining the Curve pool into Balancer and other protocols that support liquidity mining to obtain greater benefits.

We don’t introduce those specific operations here today. If you need to perform such operations, please ensure that you have a full understanding of these items and do not operate blindly.

Note

  1. Contract risks: Although Curve has passed the security audit, it does not mean that there are no risks of bugs
  2. Impermanent loss: As a liquidity provider, you need to pay attention to impermanent loss. Understand “Impermanent Loss”: https://medium.com/balancer-protocol/calculating-value-impermanent-loss-and-slippage-for-balancer-pools-4371a21f1a86
  3. Exchange rate risk: Pay attention to the fluctuation of stablecoin exchange rate, there may be risks.
  4. Miner fees: Participating in liquid mining in Curve requires the initiation of on-chain transactions. Due to the current high miner fees, the cost of miner fees is also a consideration that cannot be ignored if participation is required.

Learn more about

Risk Warning: None of the content of this article constitutes any form of investment advice or suggestion. imToken does not make any guarantees or promises for the third-party services and products mentioned in this article, nor does it assume any responsibility. Digital asset investment has risks. Please carefully evaluate these investment risks and make your own decision after consulting with relevant professionals.

… or directly on www.token.im

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