Protocol Architecture

Curvance’s architecture builds on incumbent leading money market protocols to offer greater composability and capital efficiency not seen before.

Purpose-built from scratch, Curvance can accommodate yield-bearing assets and any other ERC-20 token. It fosters an environment that allows these assets to participate within a robust money market framework seamlessly.

Risk-Isolation

The money market structure of Curvance involves multiple pod-style markets. These include different isolated-margin and cross-margin markets and allow stablecoin depositors to choose their risk tolerance based on the long-tail assets supported in each pool. This model sits between the conventional shared pool model of Aave V2/Compound V2 and the completely isolated pool model of Compound V3.

To manage protocol risk, each market can and may be capped in terms of exposure through the use of collateral caps and bad debt socialization.

With the complexity and variety of yield-bearing DeFi assets, Curvance’s model makes the most sense as it ensures that the risk and potential flaws of other pools do not compromise the entire money market.

Yield-Bearing Asset Focus

Curvance stands as a game-changer in DeFi, addressing the evolving landscape of yield-bearing assets. The surge in popularity of yield-bearing assets spans a wide spectrum, from assets like LSDs to perpetual DEX liquidity tokens such as GLP and MUX-LP. This growing asset class offers both fungibility and income-generating potential.

With Curvance, users experience a paradigm shift – no longer constrained by the traditional choice between capital efficiency in money markets and other facets of DeFi. Now, individuals can use strategies like staking ETH in Aave for leverage or participating in staked ETH/ETH liquidity pools on Curve simultaneously, unlocking new levels of financial optimization and flexibility.

The flow on Curvance will be as follows:

  1. A user is interested in unlocking more capital and depositing assets into the lending pools, e.g. GLP. Curvance will redirect the supplied GLP back into the respective underlying protocol to earn the native yield (in this case, GMX) while permitting the user to borrow against it.

  2. Upon deposit, the user will receive representative cTokens (collateral tokens) minted from Curvance, equal to their pool share. These cTokens will redeem the supplied collateral after the loan is paid back.

Modular Framework

The architecture of Curvance’s money markets is designed with a modular framework in mind. Leveraging the ERC-4626 standard, Curvance offers a plug-and-play solution for any ERC-20 token. Moreover, third-party developers will have the opportunity to construct composable solutions that complement the Curvance ecosystem.

ERC-4626

The ERC-4626 vault standard is an important piece within the protocol. It introduces functionality and composability that traditional representative token-operated vaults lack. ERC-4626 is a widely adopted token standard within the DeFi space.

Implementing ERC-4626 allows for auto-compounding and collateralized loans, maximizing yield while maintaining active loans on the Curvance platform.

The ERC-4626 token standard was proposed in December 2021 by a group of smart contract engineers among others Joey Santoro, founder of Fei Protocol, and T11s, a notorious researcher at Paradigm. After several reviews and deliberations, the standard was approved and implemented in Ethereum’s codebase in May 2022.

The goal of ERC-4626 was to standardize tokenized vaults and make protocol integration into vaults easier. ERC-4626 can best be understood as a unified plug for connecting several tokens to services through vaults where the token can streamline the integration of ‘traditional’ yield-bearing representative tokens in other DeFi protocols.

Attached the Original proposal can be found.

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