Introduction
The founding narrative of the blockchain ecosystem has been opening up financial services to all people without reliance on a centralized entity. This was the main impetus around Bitcoin and Ethereum. To further facilitate this, DeFi (Decentralized Finance) platforms were launched to replicate the expected functionality of traditional financial tools. DeFi provides a new financial ecosystem that is decentralized, global, transparent, resistant to censorship, without intermediaries, and easily accessible.
As demand for censorship-resistant mediums of exchange increases, platforms like Uniswap and Balancer are starting to rival their centralized counterparts in terms of volume traded. With this monumental shift in volume, the industry has already faced numerous growing pains, including but not limited to the issue of slippage when a user facilitates trade on a DEX. Unlike a centralized exchange, a decentralized exchange relies on anonymous users to create liquidity for various markets. Low liquidity and large transaction volume can result in higher fees for the end-user. To combat this problem, new ways of transacting have been created for certain assets.
One such platform is Curve, which created an Automated Market Maker(AMM) that reduces slippage and fees by only accommodating assets that behave similarly (stablecoins, wrapped tokens, etc.) and using a bonding curve formula to facilitate swaps.
A Decentralized Autonomous Organization (DAO) was formed and controlled by the veCRV governance token to ensure that this protocol was properly governed. To participate in voting and earn rewards, CRV has to be locked for 1, 2, 3, or 4 years at a time. This mechanic leads to a reduced circulating supply on tokens as users and protocols can align with a long-term focus. As a secondary effect, users who want the benefits of locked tokens without the illiquidity of a ve position can opt for a liquid wrapper of the token, opting for moderately reduced rewards and a lower market value token.
As the value of Curve’s voting rights increased, something known as the Curve Liquidity Wars started between Yearn, Convex, and Stake DAO. While these protocols fought for voting rights, use cases for interest-bearing tokens became a quick afterthought.
Curvance aims to supercharge participation in Liquidity Wars across numerous chains by simplifying and optimizing the process for participants and protocols alike.