Supply-Side: Earning Interest By Providing Liquidity

The Curvance protocol enables users to earn yield by supplying assets to borrowers in its peer-to-peer lending markets. Depending on the market, most deposits can be used as collateral, allowing users the ability to borrow against their holdings. Assets supplied solely for lending, however, cannot be borrowed against.

Characteristics

• Common Borrowable Assets:

  • Stablecoins: Stablecoins are commonly borrowed by users who want to improve their net DeFi strategy yields.

  • Volatile Non-Yield-Bearing Tokens: Volatile Non-Yield-Bearing Assets are commonly borrowed by users who want to create cross-token strategies such as longing BTCETH or farming staked ether yield.

• Adding New Supported Tokens: New tokens can be introduced as lending options by the Curvance DAO, expanding opportunities.

How It Works for Lenders

When users deposit tokens into Curvance as lenders, they receive a proportionate amount of eTokens (earn tokens), representing their share in the lending pool. Earned interest is automatically compounded, increasing the user’s overall position over time.

Key Benefits of Lending:

• Instant Yield Access: Users can deposit into earning positions for no cost and immediately earn yield on their assets.

• Automatically Reinvested Yield: Interest on outstanding debt is managed by automation across all positions for all users simultaneously, continuously reinvesting accrued interest back into all user's positions.

• Instant Liquidity Access: After a 20-minute cooldown period, lent liquidity can be redeemed at any time unless there is 100% utilization in that particular market.

Demand-Side: Supercharged DeFi opportunities

Curvance offers users on the demand side various options to generate yield and access liquidity by borrowing against their deposited assets. Deposited assets are routed to all supported yield opportunities. Users can then use them as collateral to access new liquidity.

Characteristics

• Common Depositable Assets:

  • Interest-Bearing Stablecoins: Stablecoins are commonly borrowed by users who want to improve their net DeFi strategy yields.

  • Liquid Staked/Restaked Tokens: Assets such as LSTs are natively supported, offering streamlined yield generation.

  • LP Tokens: More complex assets, such as LP tokens for AMMs, Perps, CLOBs, etc., benefit from auto-compounding, optimized yield generation, and improved user experience.

• Adding New Supported Tokens: New tokens can be introduced as deposit options by the Curvance DAO, expanding opportunities.

How It Works for Depositors

When users deposit tokens into Curvance, they receive a proportionate amount of pTokens (position tokens), representing their share in the managed vault. Earned yield is automatically compounded, increasing the user’s overall position over time.

Key Benefits of Depositing:

• Instant Yield Access: Users can deposit into earning positions for no cost and begin earning yield on their assets immediately.

• Instant Liquidity Access: Deposited assets can, in most cases, be collateralized, allowing access to borrowed liquidity against the market value of deposited assets.

• Automatically Reinvested Yield: Yield on deposited assets is managed by automation across all positions for all users simultaneously, continuously reinvesting accrued yield into all users' positions.

• Economies of Scale: By pooling all users' positions together, any managed actions are executed for all users simultaneously, minimizing automated management costs. For example, If 10,000 users deposit into a particular asset vault, auto compounding operations are executed for all 10,000 positions at once, reducing user costs by (9999 / 10000) 99.99%.

Enabling Collateralization for Borrowing

To enable an asset as collateral, users can follow these steps:

1. Go to the main dashboard to view all deposited assets.

2. Locate the assets to be used as collateral.

3. Enable the desired assets as collateral using the "Increase Collateral" button.

Note: When enabled, the corresponding deposited assets continue to earn yield, ensuring efficient capital utilization across DeFi.

Yield-Bearing Assets

The surge in popularity of yield-bearing assets spans wide, from assets such as LSTs, LRTs, yield-bearing stablecoins, Perpetual Exchange/DEX LP tokens, and more. This growing asset class offers both fungibility and income-generating potential.

With Curvance, users can embrace a new paradigm that removes the compromise between participation in lending protocols and yield farming across DeFi. This enables individuals to explore new strategies, such as providing liquidity on Aerodrome while simultaneously borrowing against their LP tokens, maximizing both composability and capital efficiency.

The flow on Curvance will be as follows:

1. A user is interested in unlocking capital on their yield bearing asset. The Curvance protocol will facilitate the user's redirection of the supplied assets back into the respective underlying protocol to earn the native yield while permitting the user to borrow against their position as it remains productive.

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

This unlocks the potential for users to leverage Curvance's advanced position looping, enabling participation in traditional strategies like LRT or yield-bearing stablecoin looping and more advanced strategies such as LP token looping.

Through advanced position looping, users can borrow against their LP tokens while continuing to earn the underlying yield. The borrowed funds are then zapped into the underlying protocol's LP token and redeposited into Curvance, effectively creating a leveraged yield farming position.

Non-Yield-Bearing Assets

The Curvance protocol accommodates a wide range of assets, including non-yield-bearing tokens like WETH, WBTC, USDC, and USDT. These assets, though lacking native yield generation, still play a vital role in DeFi by providing liquidity and stability within lending markets.

With Curvance, users can unlock the capital potential of non-yield-bearing assets without sacrificing flexibility. Unlike traditional lending protocols, which limit non-yield-bearing assets to passive roles, Curvance integrates them into a composable framework that allows users to borrow, lend, and manage positions across multiple chains.

How It Works on Curvance:

1. A user can deposit non-yield-bearing assets such as WBTC into a market on Curvance, using the asset as collateral for leveraging their original exposure or accessing liquidity without losing their original exposure. While these assets do not generate native yield, users benefit from access to CVE emissions and protocol incentives, enhancing passive yield on their holdings.

2. Upon deposit, users receive pTokens, representing their share in the pool. These pTokens can be redeemed for the original collateral once any outstanding loan obligations are repaid.

Introduction

Curvance makes DeFi lending more efficient, plain and simple. By enhancing the interaction between borrowers and lenders regarding collateral, liquidity, and yield, Curvance provides an alternative to legacy lending protocols that have stagnated in innovation.

What Makes Curvance Unique

Most lending protocols force users to choose between earning active yield or borrowing against their assets. Curvance is designed to remove that tradeoff while setting a new standard for capital efficiency.

• Borrow Against Yield-Bearing Collateral Users can supply assets, such as LSTs, LRTs, Stablecoins, or LP tokens, and continue earning yield throughout DeFi while using them as collateral.

• Industry-Leading LTV Ratios Borrow up to 97% against select assets like USDC, WETH, and WBTC, with a liquidation engine designed for all market conditions.

• Native Looping and Leveraging Boost exposure to assets and strategies with native one-click looping. One click to rule them all.

• Dynamic Liquidation Framework Utilizes orderflow auctions to recapture MEV from liquidation and dynamic penalties based on market conditions, enabling Curvance to adapt to any situation.

• Plugin System Developers can build directly on Curvance with simple modules that plug into existing infrastructure. No permission required. No rewrites needed.

How It’s Different

Curvance offers a modular, security-first lending protocol that supports the full lifecycle of productive on-chain capital. Instead of treating yield-bearing assets as edge cases, they’re the standard.

It’s not just an upgrade in interface or user experience. The foundation itself is built differently, designed for flexibility, adaptability, and sustained use across ecosystems.

This is lending built for scale.

Vision

Curvance was created to empower users to unlock the full potential of their digital assets. Our founding team believes in a future where financial tools are accessible, secure, and efficient for everyone in the world. Our mission is to make DeFi less intimidating and give users the confidence that they have the best opportunities at their fingertips.

Website: https://curvance.com/

X: https://x.com/Curvance

Telegram: https://t.me/curvance

Discord: https://discord.com/invite/curvance

Dynamic Interest Rates on Curvance

Interest rates within the platform are dynamic, adjusting in real-time to meet market demand within each lending pool. Inspired by models like Fraxlend, Rari, and Kashi, Curvance’s rates are determined by factors including pool utilization, usage multiplier, and time decay, ensuring stability and flexibility as conditions change.

Interest Rate Adjustments

• Pool Utilization: This metric reflects the proportion of total funds in a lending pool actively borrowed by users. A higher pool utilization rate indicates that a larger portion of the pool’s funds are being borrowed, while a lower rate shows more lending capacity.

• Interest Rate Dynamics: As pool utilization increases and nears maximum capacity, interest rates progressively rise, significantly beyond a set “vertex point.” This vertex point serves as a threshold where rates begin to accelerate, responding dynamically to increased demand and incentivizing liquidity supply.

• Time Decay: Interest rates adjust with a gradual decay over regular intervals (currently set to every 4 hours). If utilization drops below the target rate, the vertex multiplier lowers, leading to a decrease in rates to maintain stability.

Example Scenario:

Initial State: A lending pool contains 1,000,000 USDC, of which 800,000 USDC is borrowed, resulting in an 80% utilization rate with an interest rate of 2%.

• Surge in Utilization: If a large borrower enters and takes an additional 200,000 USDC, pushing utilization to 100%, the interest rate rises significantly due to exceeding the 85% vertex point. In this scenario, rates increase to 8%, which then double every 4 hours until utilization decreases.

This dynamic adjustment encourages borrowers to consider repayment while incentivizing suppliers to add more USDC to the pool, helping balance demand and maintain liquidity. The system’s responsiveness promotes an equilibrium within the lending ecosystem, supporting stability and addressing the evolving needs of the protocol users.

Borrowing Limits

A user’s borrowing capacity within Curvance is determined by two key factors: the collateralization ratio set by the Curvance DAO and the available liquidity within the isolated market.

1. Collateralization Ratio

The collateralization ratio defines the maximum borrowing threshold for each asset, reflecting its specific risk profile. Assets with lower risk have higher collateralization ratios. For example, an asset with a 75% collateralization ratio allows a user to borrow up to $0.75 for every $1.00 of the asset deposited as collateral.

Curvance calculates each user’s borrowing limit as a blended collateralization ratio across various assets within an isolated market. This blended Loan-to-Value (LTV) ratio represents the maximum amount users can borrow based on the combined collateral they’ve supplied.

Example: A user deposits $100 of WETH/wstETH LP tokens, which earns an APR of approximately 4%. Leveraging the ERC-4626 architecture, Curvance directs the LP tokens to an underlying protocol to capture yield. With a collateralization ratio of 80%, the user can borrow up to $80 in assets, against their LP tokens.

2. Available Liquidity

A user’s ability to borrow also depends on the pool’s liquidity. If the requested loan amount exceeds the available liquidity in a given pool, borrowing may not be possible.

Example: A user deposits $1000 of cbBTC into a market with $50 in available USDC liquidity on the lending side. With a collateralization ratio of 90%, the user can borrow up to $900 in assets against their wrapped bitcoin. Still, with only $50 in available liquidity, the user can only borrow up to 50 USDC even though the Protocol Risk Engine would support a larger debt position.

Repaying Loans and Collateral Redemption

To close a debt position, users must repay the borrowed amount and any accrued interest costs in the same asset initially borrowed. This can be done via the Curvance front end or directly through smart contracts. After repayment, users can redeem their collateral and underlying assets by returning the pTokens received at the time of the initial deposit.

Unlocking Native Yield for Builders

Curvance’s Universal Balance offers protocols a seamless way to integrate Curvance's yield into their products. The Universal Balance smart contracts enable protocols to route platform assets—such as USDC, USDT, or ETH—into the supply side of Curvance's low-risk money markets. This allows their native users to benefit from an additional passive yield stream without directly interacting with Curvance.

With a single integration, protocols benefit from:

• Enhanced yield is achieved by routing supported assets into Curvance’s lending markets, unlocking an additional source of yield for the protocol and/or its users.

• Accessible liquidity by allowing assets to remain available for immediate use.

• Universal Balance seamlessly integrates into existing vaults and liquidity pools without changing their structure.

• Simplified UX with one-click integrations that work across multiple chains.

End Users: Effortless Yield & Liquidity

Universal Balance automates passive earning while maintaining complete flexibility. Instead of leaving assets unproductive, funds are routed to yield-generating markets without requiring active management. There are no lockups, and users retain full control over their balances, ensuring capital is always available when needed.

Security & Risk Mitigation

Security is a core focus of Curvance, and Universal Balance is designed to minimize risk exposure while maximizing yield efficiency:

• Risk-Isolated Markets: Assets are only routed into audited, risk-adjusted lending pools.

• Dual-Oracles & Circuit Breakers: Every asset in Universal Balance is protected by redundant pricing oracles to prevent manipulation.

• Non-Custodial & Permissionless: Universal Balance never takes custody of user funds, ensuring assets remain accessible at all times.

Seamless Integration & Composability

Universal Balance is plug-and-play and requires minimal setup. With smart contract hooks and plugin compatibility, protocols can optimize how their assets flow through Curvance. Its modular design allows for effortless integration with DeFi protocols, automated strategies, and governance systems make it a scalable solution for builders across the ecosystem.

Example Integration

A Telegram trading bot integrates with Curvance’s Universal Account Balance, allowing users to earn passive yield on idle balances while maintaining full trading flexibility. The development team configures a risk profile that aligns with their strategy, giving users the option to opt in or out of yield generation.

Users experience no change in their normal trading interactions—idle funds are automatically earning yield until needed for execution. When a trade is initiated, the bot instantly pulls liquidity from Universal Balance, ensuring seamless transactions without delays. This integration enhances capital efficiency without disrupting the user experience.

New Age Liquidity Mining with Curvance

The Curvance protocol provides new innovations in liquidity mining infrastructure by streamlining incentive programs for protocols, token issuers, and blockchains while simplifying participation for liquidity providers and users. Traditionally, setting up secondary and tertiary incentivization layers involves complex processes and additional steps for users, leading to a measurable drop in participation and adoption. Curvance’s infrastructure delivers incentives directly while optimizing the underlying liquidity mining strategies for greater efficiency and growth. Additionally, user liquidity can be routed through multiple layers of incentivization, ensuring peak capital efficiency and maximizing yield.

Risk Factors In Decentralized Lending Protocols

As with any DeFi platform, using the Curvance protocol has inherent risks. Users need to understand these risks and manage them effectively.

1. Liquidation Risk

Borrowing on Curvance's lending markets exposes users to liquidation risk. The more assets borrowed, the higher the risk of liquidation if collateral values drop. Users are responsible for monitoring and managing their borrow positions. For detailed information, see the Liquidations section.

2. Smart Contract Risk

The protocol is comprised of various open-source smart contracts, which can contain vulnerabilities. Although the protocol undergoes regular audits to minimize this risk, no audit can entirely prevent potential exploits. Additionally, Curvance’s integrations with infrastructure providers and other DeFi protocols introduce added layers of smart contract risk. While auditors vet all protocols in use, users should conduct their own research and assess risks before interacting with any dApp.

3. Oracle Manipulation Risk

The Curvance platform depends on oracles for accurate pricing data. While the dual-oracle system is designed to prevent manipulation, edge cases could occur where both oracles are compromised. Users should be aware of this risk when interacting with the platform.

This documentation is a rough draft and currently undergoing legal review for compliance, and as a result, are subject to change.

Collateral Caps in Curvance

Collateral caps are used as a core safeguard for the lending markets, setting specific restrictions on the amount of each asset that can be used as collateral. This mechanism is essential for protecting the protocol against bad debt and unintentionally incentivizing market manipulation by bad actors.

Purpose and Function of Collateral Caps

While the protocol allows unlimited vault deposits to earn yield, only a percentage of total assets in each market can be used as collateral for borrowing. By setting these collateral caps, the Curvance protocol minimizes the risks posed by market volatility and sudden price shifts, aligning with industry risk management principles to ensure the platform’s stability.

• Mitigating Overexposure: Collateral caps prevent overexposure to specific assets within isolated markets, reducing potential adverse impacts during volatile market conditions.

• Ensuring Controlled Borrowing: Collateral caps create an over-collateralized borrowing environment, mitigating systemic risk while providing users with a secure lending and borrowing experience.

Determining Collateral Caps

Collateral caps are determined by a third-party risk management group elected by Curvance DAO participants known as the Curvance Collective. These caps are based on an asset’s on-chain liquidity across various pairs within the network. The elected third party also evaluates offside liquidity (liquidity distributed across asset pairs within the protocol) and sets caps to ensure stability.

Example: If USDY constitutes 80% of a skewed stable pool, with USDC making up 20%, the collateral cap for USDY is calculated based on USDC’s liquidity. If total offside liquidity is $10 million (with $8 million in USDY and $2 million in USDC) and Curvance allows a cap of 40% of offside liquidity, the collateral cap would be 40% of $2 million, or $800,000, translated into tokens based on asset value.

DAO-Controlled Updates

Shortly after the Curvance DAO launches, the Curvance Collective will vote to select their preferred third-party risk management group. This group will be tasked with determining risk parameters for all supported assets. Together, the Curvance DAO and the elected group will regularly review and adjust collateral caps in response to changes in offside liquidity, ensuring alignment with on-chain liquidity. This dynamic approach to risk management helps mitigate systemic risks and maintain stability within the protocol's lending markets.

Collateral Cap Example: On-Chain Liquidity Focus

Consider $100 million in sDAI within the Curvance protocol, earning native gauge emissions. With a focus on on-chain liquidity, the protocol caps collateralization for sDAI at approximately 10 million tokens. This cap means that no more than 10 million sDAI can be used as collateral, ensuring controlled asset exposure while minimizing systemic risk.

By carefully linking collateral caps to liquidity dynamics and adjusting them via DAO governance, the protocol can provide a robust, stable approach to collateralized borrowing. This method aligns user security with broader protocol health, allowing users to scale responsibly within DeFi.

Bad Debt Socialization in Curvance

Bad debt socialization is a critical mechanism within the Curvance protocol, designed to maintain market stability and manage risk in cases where borrowers default on their loans, leaving a shortfall in collateral. For example, if a borrower owes $500 but has collateral worth only $300, a $200 shortfall arises.

Bad debt socialization addresses isolated and cross-margin scenarios, providing a nuanced solution that differentiates it from other protocols.

How Bad Debt Socialization Works

When an undercollateralized position is liquidated, and a shortfall remains (e.g., $200), the deficit is socialized across the entire lender market to protect market health. This process involves an adjustment to the exchange rate of each lender’s token, allowing the shortfall to be absorbed proportionally by all lenders:

• Proportional Distribution: The shortfall is distributed across all lenders within the affected market. Each lender’s token value for redemption is slightly reduced to cover the debt, ensuring that the impact on each lender is proportional to their market participation.

• Exchange Rate Adjustment: Adjusting the exchange rate systematically distributes the deficit, preventing any single lender from bearing an excessive share of the loss. This method stabilizes the market and keeps it operational, even in significant default events.

Rationale and Lender Risk

Bad debt socialization aligns with the inherent risks lenders assume when participating in the protocol. Since lenders are exposed to borrower defaults, sharing the impact of bad debt across all participants is an equitable solution. This approach decreases risk to lenders and strengthens the protocol’s resilience by preventing bad debt accumulation that could destabilize the market.

Capital Efficiency and Composability in Curvance

The Curvance protocol offers a new solution to the challenge of capital efficiency and composability in DeFi. Designed from the ground up, the protocol enables users to interact with various DeFi ecosystems and strategies while prioritizing security, capital efficiency, and ease of use. This design enhances the user experience and unlocks new opportunities for yield maximization and enhanced financial flexibility.

Risk-Isolation Model

Curvance’s code architecture employs a novel, risk-isolated design of multiple markets derived from various DeFi ecosystems. This allows users to participate in markets that are comprised of underlying assets from protocols and ecosystems such as Aerodrome, Pendle, Eigenlayer LRTs, and Ethena. Users can select markets that align with their risk preference, creating a spectrum of options from conservative, low-risk exposure to more dynamic, higher-yield opportunities.

This model strikes a flexible balance between the traditional shared pool and fully isolated pool models utilized by incumbent protocols, improving capital efficiency and protocol security. Each market’s risk exposure is managed through dynamically adjustable collateral caps and bad debt socialization, effectively reducing protocol risk. This approach allows for the development of exotic markets, offering unique yield opportunities not present in traditional markets.

Composability

One of the most sought-after goals in DeFi is composability, which allows protocols and applications to interact seamlessly, improving user experience and maximizing capital efficiency.

The Curvance protocol delivers on the vision of composability by directly hooking up to applications and infrastructural technology. The protocol also optimizes DeFi participation for the benefit of users and builders alike due to its ability to natively route vault liquidity through all applicable reward layers.

• For users, this creates fundamentally new DeFi actions, such as using liquidity provided on a DEX as liquidity in Curvance's lending markets or the ability to borrow capital and bridge across networks in a single click.

• For builders, this fixes issues with token incentives by creating the ability to reward users for various actions from any chain on any chain. Full liquidity mining programs can be built permissionlessly on top of Curvance for any supported asset on any supported chain.

Example: A user deposits their USDC/AERO Aerodrome LP tokens into the Curvance protocol. Leveraging the ERC-4626 architecture, the protocol automatically routes the deposited LP tokens back to the Aerodrome platform and compounds the rewards, capturing both the underlying reward layers and Curvance’s native rewards.

This structure enables the user to collect all yield layers seamlessly within the Curvance platform and benefit from simplified position management while unlocking collateralization opportunities.

Dual Oracle System and Circuit Breaker Protection

To enhance security, the protocol primarily uses a Dual Oracle system, leveraging data from various sources such as Redstone, Chainsight, Pyth, Chainlink, API3, Chronicle, and more. While most assets utilize two independent oracle sources to ensure accurate pricing and protect against manipulation and volatility, the protocol can support assets with a single oracle when appropriate. For instance, assets like wstETH, which are redeemable for stETH, may not require a second oracle due to their inherent price stability and transparency.

How the Dual Oracle System Works

If the price data from both oracles diverges significantly—due to either manipulation or extreme market fluctuations— The Curvance protocol can pause borrowing and redemptions for that asset. Preset parameters trigger this pause, allowing time for Oracle prices to stabilize and converge.

• In the event of an abnormal pricing discrepancy between oracle feeds, typically seen during flash loan or oracle attacks, the creation of new debt and redemptions are halted while liquidations are still allowed to be processed.

• If an extreme discrepancy is detected, the creation of new debt, redemptions, and liquidations are all halted.

Together, these measures form the protocol's Circuit Breaker System, which safeguards users during market anomalies.

Lender Protection and Price Favorability

To provide additional security for lenders, the dual oracle system uses the most favorable oracle-reported price when calculating the final asset price in user liquidity checks, optimizing protection against bad debt.

Example:

• If one oracle reports an asset price of $100 while another reports $101, the collateral value is set at $100 for borrowing calculations, ensuring conservative collateral valuation and protecting borrowers from taking more debt than they should.

• If a user risks liquidation and stablecoin oracle prices differ, e.g., $1 and $1.01, the system will evaluate the position at the higher $1.01 price, providing added security for lenders.

Welcome to the official technical documentation for Curvance, a protocol designed to provide capital-efficient money market services with advanced risk management and MEV capture capabilities. This documentation serves as the comprehensive guide for developers, integrators, and auditors working with the Curvance smart contract system.

Documentation Structure

Unlike traditional contract-centric documentation, this documentation is organized by function rather than by individual contracts. This approach offers several advantages:

• Workflow-Based Navigation: Follow complete processes from start to finish.

• Contextual Understanding: See how functions interact across multiple contracts.

• Use-Case Orientation: Find solutions based on what you're trying to accomplish.

For example, instead of separate pages for CentralRegistry.sol or LiquidityManager.sol, you'll find integrated explanations of liquidation workflows that span multiple contracts.

What is Curvance? Curvance is a decentralized, multichain liquidity hub that empowers users to unlock the full potential of their digital assets.

Key Features:

• Secure, modular, and composable protocol supporting any ERC-20 token

• Chain-agnostic reward and utility layer for yield-bearing assets

• ERC-4626 vault technology for integration with third-party strategies and DeFi flywheels

• Multichain equivalence powered by Wormhole for access to opportunities across ecosystems

• Custom-built liquidation engine and cross-chain voting for an improved user experience

Benefits:

• Unlock liquidity and maximize yields across multiple chains

• Simplify DeFi with a seamless, trustless user experience

• Participate in a sustainable DAO model with decentralized governance

• Discover new yield-generating opportunities and innovative DeFi products

Join the Curvance Community: Learn more about Curvance and get involved in shaping the future of DeFi. Visit the website, X, Telegram, and Discord channels to stay updated and join the conversation.

Website:

X:

Telegram:

Discord:

Official Links

Ecosystem Links

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The Plugin System enables unparalleled interoperability and flexibility within the Curvance protocol, allowing users to authorize specific actions by external addresses on their behalf. This structure enhances the protocol’s composability and enables innovative use cases across DeFi, while maintaining user security and control.

How the Plugin System Works

The Plugin System combines elements of Uniswap V4’s hook system with the familiar ERC20 approval process but with advanced features that extend its functionality. Here’s how it works:

• Authorization for Specific Actions: Users can grant permissions to external addresses to perform specific actions on their behalf, such as borrowing, collateralizing, and claiming rewards within the protocol. This system enables flexible interactions without requiring centralized approval.

• Security-Centric Design: The plugin system was designed with security in mind. All approvals can be instantly revoked across smart contracts, and users can add an additional “lock” on new approvals for an extra layer of protection—essentially creating a two-factor authentication for approvals.

Benefits of the Plugin System

The Plugin System empowers users in several ways:

1. Enhanced DeFi Composability: By enabling external protocol logic to be built directly on Curvance, the plugin system supports diverse use cases, such as cross-chain money markets, DeFi strategy abstraction, and balance sheet management for DAOs and institutions.

2. Accelerated Innovation: Builders can leverage the full Curvance Protocol and its network effect to develop new solutions without needing to fork the protocol or compete for dominance. This allows for a unified DeFi ecosystem, with each new plugin amplifying the protocol's utility.

3. Integrated Monetization: Plugins can implement their own fee structures, creating a clear path for developers to monetize their innovations. This incentivizes further development and a robust ecosystem of interconnected solutions.

4. User Control and Security: Unlike the traditional ERC20 approval system, the plugin system prioritizes user control, allowing them to manage and revoke permissions easily. The added lock feature further enhances security by introducing an optional two-factor approval mechanism.

The Plugin System in the Curvance protocol unlocks powerful new use cases. It offers a secure, composable foundation for DeFi innovation, enabling the development of cross-chain applications and sophisticated strategies that benefit users, DAOs, and institutions alike.

1. Does Curvance expose users to bridge risk?

No, Curvance does not expose users to bridge risk in lending positions or vault strategies. Vault deposits and lending positions remain on their respective chains, and users are never forced to bridge assets. Bridging via Wormhole is utilized when a user uses a crosschain plugin to migrate liquidity across chains.

2. How does Curvance optimize yield compared to other DeFi protocols?

Curvance auto-compounds yield-bearing assets and routes liquidity through additional reward layers, ensuring maximum yield efficiency. Unlike traditional lending protocols, Curvance allows collateralized assets to continue earning while being used within DeFi strategies.

3. What makes Curvance’s lending markets unique?

Curvance features risk-isolated, intent-based lending markets, blending elements of shared pools and isolated markets. This enables flexible risk management, higher LTVs for safer assets, and innovative lending opportunities tailored to different DeFi strategies.

4. How does Universal Balance benefit protocols and users?

Universal Balance lets protocols passively earn a yield on idle assets without disrupting the user experience. Users benefit by earning passive rewards while retaining full control over their funds. While protocols can integrate native yield generation with minimal friction.

5. How does the Plugin System improve composability?

Curvance’s Plugin System allows developers to extend protocol functionality with custom integrations, automated strategies, and third-party applications. It enhances composability by enabling seamless yield routing, lending automation, and governance tools—all within Curvance.

6. What makes Curvance’s vote-escrow system different?

Curvance’s multichain vote-escrow system removes liquidity fragmentation present in all other traditional vote-escrow models. Allowing native token lockers to direct platform emissions to vaults on any supported chain. Protocol fees are distributed pro-rata across all chains, ensuring efficient capital flow.

7. Is Curvance non-custodial?

Yes. Curvance is fully non-custodial, meaning users always maintain control of their assets. Funds are never held by Curvance, and users interact with permissionless smart contracts for deposits, lending, and withdrawals.

8. How does Curvance handle liquidations?

Curvance leverages MEV-optimized liquidations to minimize costs for borrowers while ensuring market stability. With dynamic liquidation incentives and order flow auctions (OFAs), Curvance enhances efficiency and reduces slippage for liquidated positions.

9. What security measures are in place?

Curvance prioritizes security with:

• Dual-oracle protection to prevent price manipulation.

• Circuit breakers to halt abnormal market activity detected by the Dual Oracle system.

• Third-party audits from leading smart contract security firms such as: Spearbit, Cantina, Trail of Bits, Trust Security, and yAudit.

• Collateral caps and risk-adjusted lending pools to mitigate systemic risks.

10. What types of assets does Curvance support?

Curvance supports both yield-bearing and non-yield-bearing assets, including LSTs, LRTs, stablecoins, LP tokens, and popular assets like WETH and WBTC. Yield-bearing assets continue generating rewards even when used as collateral, while non-yielding assets benefit from enhanced capital efficiency through lending, borrowing, and liquidity incentives.

Token Approvals

Curvance offers a robust and user-friendly token approval system, ensuring users have full control over their assets while interacting with the platform. This system provides flexibility, security, and transparency, making it easier to manage token interactions and minimize risks.

Token Approval Options

1. 1/1 Approvals: Users can approve tokens for each individual transaction, providing maximum control and limiting risk.

2. Infinite Approvals: For convenience, users can approve tokens once for unlimited transactions with that asset, eliminating the need for repeated confirmations.

Approval Revocation

Curvance includes an Approval Revoke System that serves as a public good, which allows users to:

• View Current Approvals: Check all active approvals to monitor asset permissions.

• Revoke Specific Approvals: Remove approval for individual assets.

• Revoke All Approvals: Instantly cancel all token approvals for enhanced security.

This feature ensures users can stay updated on their approval exposure and revoke access to their assets across DeFi whenever necessary.

Asset Lockdown System

The Asset Lockdown System is an additional layer of security and control that complements the token approval mechanism. It is an opt-in feature with customizable settings to protect users' assets.

Features of the Cooldown System

• Opt-In Mechanism: Users can choose whether to activate the cooldown system based on their preferences and security needs.

• Customizable Cooldown Timers: Users can set specific unlock cooldown durations to limit the immediate transferability of deposited tokens or balances.

• Transfer Control:

  • On/Off Toggle: Users can enable or disable the ability to transfer deposited tokens and Universal Account Balance funds.

  • If the cooldown timer is decreased, it automatically applies a cooldown to transfers as an added safety precaution.

• Plugin System Integration: The cooldown system extends to the plugin system, with a separate on/off toggle for plugin interactions, ensuring comprehensive control across the platform.

Why It Matters

The token approval and cooldown systems in Curvance are designed to provide a balance between flexibility and security:

• Flexibility: Infinite approvals and plugin integration enable seamless and efficient DeFi interactions.

• Transparency: Users can easily monitor and manage approvals, ensuring clarity over asset permissions.

• Security: The cooldown system and approval revocation ensure users can limit risks associated with token interactions and unauthorized transfers.

By offering these features, Curvance empowers users to maintain full control over their assets while enjoying a streamlined and secure DeFi experience.

The Curvance protocol empowers a wide range of DeFi users, each with specific needs. By delivering tailored solutions to each customer type, the platform drives growth, capital efficiency, and revenue generation through diverse mechanisms.

Individual Users (Retail Investors)

Why They Use Curvance: Retail investors seek accessible, simplified ways to maximize yields and manage their assets across multiple chains.

How Curvance Benefits Them:

• Unified position management tooling for an easy, seamless DeFi experience.

• Access to optimized yield strategies, enhancing yield on deposits.

• Collateralized loans and one-click leverage that improves financial flexibility.

• Visibility into top opportunities across chains, supporting well-informed investment decisions.

Token Issuers / Treasury Managers

Why They Use Curvance: Token issuers and Treasury Managers seek to maximize treasury performance, liquidity management efficiency, and liquidity depth for their tokens.

How Curvance Benefits Them:

• Auto-compounding of LP tokens to optimize yields on protocol-owned assets and flywheel bribing.

• Increased ROI via the CVE Gauge System, stacking on top of yield from underlying strategies.

• Access to collateralized loans to enhance treasury efficiency.

• Flexible veCVE tokens adaptable to existing flywheels, providing additional flexibility when expanding to new networks.

Institutional Investors (Liquid Funds)

Why They Use Curvance: Institutional investors can use the Curvance platform for custom-built strategies, capital efficiency for their existing liquidity provisioning deals, and peace of mind with permissioned pools, which align with their overall compliance requirements.

How Curvance Benefits Them:

• Access to customized structured products tailored to institutional needs.

• Compliance infrastructure integrations ensure that strategies align with regulatory standards.

• Access to spot leverage maximizing investment power and potential returns.

• Enhanced capital efficiency via optimized strategies designed for high liquidity.

Chains / Networks

Why They Use Curvance: Chains and networks can leverage the platform to drive ecosystem growth, increase TVL (total value locked), and foster a vibrant DeFi environment.

How Curvance Benefits Them:

• Predictable, measurable TVL inflows, bolstering network activity and liquidity.

• Enhanced transaction volumes, promoting sequencer revenue.

• Marketing and ecosystem exposure, amplifying their reach and user base.

• A multichain vote-escrow system enables networks to "siphon" liquidity from other chains.

How Are New Assets Integrated into Curvance?

There is a structured process for integrating new assets, ensuring each addition is carefully evaluated, secure, and beneficial to the ecosystem. This multi-step approach involves collaboration with asset teams and Curvance DAO contributors, due diligence on infrastructure, and rigorous testing, leading to seamless integration within the protocol.

1. Initial Conversation

The integration process begins with an initial conversation, typically initiated through business development efforts or inbound requests from teams looking to have their assets supported on Curvance. These discussions aim to understand the asset’s potential and explore collaborative opportunities.

2. Infrastructure and Compatibility Assessment

Both the assigned Curvance development team and the asset's team verify the availability of critical infrastructure, such as price oracles and other relevant data feeds. This assessment helps determine the type of integration possible, factoring in considerations such as:

• Total available liquidity for the asset

• Whether other lending protocols support the same asset

• The quality and reliability of infrastructure components

3. Strategy Vault Development

Based on the information gathered, the teams decide on the optimal type of integration for the asset. This decision balances factors such as liquidity, support within the broader DeFi ecosystem, and the asset's potential for yield generation and capital efficiency within the Curvance platform.

The Curvance DAO's assigned engineering team develops a strategy vault tailored for the new asset. This vault is designed to integrate with the existing protocol infrastructure while maximizing yield and liquidity opportunities specific to the asset.

4. Security Audits and Validation

The newly developed strategy undergoes rigorous third-party security audits to ensure protocol stability and user safety. This step is crucial for maintaining trust in the protocol's security standards and protecting the broader DeFi community.

5. Asset Integration and Deployment

Once the strategy passes the security audit, the new asset is integrated into the Curvance protocol. From this point, users can access and interact with the asset throughout the platform, leveraging its unique yield opportunities, lending capabilities, and liquidity options.

This structured approach ensures that each new asset added to Curvance meets rigorous security, liquidity, and usability standards, creating a seamless user experience and maintaining the protocol’s integrity.

Strategic Advantages for Protocols

The Curvance platform enables other protocols to run incentive campaigns tailored to their specific objectives. By utilizing Curvance, protocols can enhance existing liquidity mining and product growth strategies while introducing new utility and maximizing yield opportunities for their users. This is accomplished by:

• Optimization of DEX Liquidity Mining: The Curvance protocol optimizes DEX liquidity mining for other protocols by creating vaults that support their DEX liquidity pool tokens. These vaults natively auto-compound underlying emissions and incentives back into LP tokens. This leads to deeper, continually growing DEX liquidity for protocols and higher yields for liquidity providers on Curvance.

• Multichain Incentivization: Traditional vote escrow models require protocols to lock their tokens and commit to a specific blockchain ecosystem for long periods. With the Multichain Gauge System, protocols can leverage veCVE to create a sustainable incentivization strategy that spans multiple chains and DEXs, providing enhanced flexibility and enabling cross-chain growth.

• Ease of Incentivization: Protocols can seamlessly stream any whitelisted ERC-20 token through the Partner Gauge System. This includes ecosystem grants and the protocol's native token, offering a flexible approach to incentivization.

• Asset Looping and Leveraging: Protocols can incentivize users to leverage their positions through one-click asset looping. This allows users to leverage basic yield-bearing assets and long-tail exotic assets, such as Decentralized Exchange LP tokens and Perpetual Exchange LP tokens, unlocking a new market of liquidity providers for protocols to capitalize on.

Security at Curvance

The Curvance protocol is engineered with security as its number one priority. In this space, where people transact valuable assets, safety is crucial, especially in the case of Curvance, which deals with sophisticated and complex assets.

DeFi can be intimidating; in 2023 alone, close to $2 billion has been exploited through smart contract vulnerabilities. The industry is prone to various attack vectors, and Curvance has worked extremely hard to minimize these risks.

During the creation of the platform, Curvance maintained a strict policy on code review, testing, and security by working with reputable auditors and security experts.

Audit reports will be posted publicly when available.

Auditors

To ensure the highest level of security, Curvance has partnered with several of the leading Web3 security firms and organizations. Each brings their own merit and strengths to the table.

TrustSec ()

TrustSec serves as the primary security partner, addressing concerns related to potential bugs, exploit vulnerabilities, and overall functionality. They have significantly contributed to the majority of hours invested in code auditing over the past five months. Auditors include Trust, Zach Obront, MiloTruck, and Bernd.

yAudit ()

From the yAcademy hosted by Yearn Finance, it spawned yAudit, a team of Web3 hackers and engineers. The team assisted in test expansion and helped with nuanced intricacies, such as external integrations through 4626 vaults.

Trail of Bits ()

Trail of Bits played an important role in creating a highly sophisticated test suite for the complex and extensive code base for the cross-chain money market. ToB helped employ stateful fuzzing and systematically tested code through various actions and states.

Public Audit

A public audit has been conducted through , a groundbreaking marketplace for web3 security. The platform aims to simplify audits and provide tailored experiences with varied pricing.

Cantina connects organizations with security needs to expert auditors (teams and individuals) through Guilds, emphasizing accessibility and credibility. The platform ensures transparency, addressing the challenges faced by solo auditors and smaller audit teams.

Curvance strategically chose Cantina for its audit, recognizing the valuable advantages offered by Cantina's broad audit community and its connection to Spearbit DAO. By tapping into this diverse pool of auditors, Curvance ensures a thorough evaluation of its security protocols, benefitting from varied expertise and specialized knowledge.

This approach aligns with Curvance's commitment to a comprehensive security assessment, leveraging the efficiency and timeliness inherent in a larger audit community.

An RPC (Remote Procedure Call) allows users to interact with a blockchain by sending requests to remote servers (nodes) for actions like checking account balances, submitting transactions, or querying blockchain data. It simplifies blockchain interactions by enabling commands to be executed on external servers without requiring direct access to the blockchain infrastructure. This functionality powers wallets, decentralized applications, and other blockchain services, ensuring a seamless user experience.

However, testnet networks are often less stable than their mainnet counterparts. As a result, users may experience issues with certain RPC endpoints. To address these issues, refer to the attached guide for detailed steps on how to update your RPC endpoint and restore functionality.

Liquidations in Curvance

Liquidations play a vital role in maintaining the stability and integrity of the Curvance protocol by protecting lenders from potential losses. Liquidations are triggered when the value of a borrower’s collateral falls below a defined threshold, known as the Health Factor.

Understanding the Health Factor

The Health Factor measures an account’s stability and capacity to cover borrowed funds. Calculated as:

• A Health Factor above 1 signifies sufficient collateral value and a safe position.

• A Health Factor below 1 indicates insufficient collateral value, triggering Curvance’s liquidation processes.

The liquidation engine is proactive and designed to protect borrowers from hard liquidations by implementing a linear scale between "soft" and "hard" liquidation levels. The severity of liquidations is continuous as collateral runs out and travels along a linear curve from soft liquidation to hard liquidation. The severity of a liquidation is calculated from a user's lFactor or liquidation factor. A liquidation factor of 0 indicates that no liquidation is possible, whereas a liquidation factor of 1 indicates a full hard liquidation.

• Soft Liquidation: A partial liquidation occurs with a small penalty, preserving more of the user's collateral, making Curvance more forgiving during times of low volatility.

• Hard Liquidation: Full liquidation with a high penalty if the Health Factor is critically low, meaning Curvance can shed risk faster than other lending protocols in times of high volatility.

Recommendation: Maintaining a Health Factor above 1, ideally at 1.5 or higher during market volatility, is advised to reduce liquidation risk.

Liquidations in Other Protocols

Most lending protocols set single-point liquidation levels, creating a trade-off:

• Overly Conservative Liquidation Levels: This can lead to premature liquidations, making the user experience less favorable.

• Overly Generous Liquidation Levels: This may increase the risk of bad debt within the protocol.

Other lending protocols also tend to only look at three different factors to determine liquidations:

• Collateralization Ratio: Determines the maximum borrowing threshold for each asset.

• Liquidation Threshold: Equivalent to the Curvance protocol's Hard Liquidation Threshold, this looks at when a position should be liquidated by half or in full.

• Liquidation Fee: A fee on the user's collateral value during a liquidation that goes back to the protocol in the form of revenue.

Curvance’s Dynamic Liquidation Engine

The Dynamic Liquidation Engine allows for more flexibility in determining liquidation thresholds, how much of a position gets liquidated, the fee associated with that liquidation, and the incentives for liquidators in each scenario. This is done using the following configurable values:

• Collateralization Ratio: Determines the maximum borrowing amount per $1 of collateral for each asset.

• Soft Collateral Requirement: The premium of excess collateral required to avoid triggering a soft liquidation.

• Hard Collateral Requirement: The premium of excess collateral required to avoid triggering a hard liquidation.

• Soft Liquidation Incentive: The base incentive to liquidate a user position.

• Hard Liquidation Incentive: The maximum incentive to liquidate a user position.

• Liquidation Fee: The fee the protocol takes from a user's collateral during a liquidation.

• Base Close Factor: The % of outstanding user debt that can be closed for a user position.

This approach balances the user experience and protocol stability, minimizing the risk of sudden liquidations for borrowers while protecting the protocol and lenders against bad debt.

Overview

The Curvance Plugin Architecture is a modular system that enables authorized third-party contracts or addresses to perform actions on behalf of users. This architecture enhances capital efficiency and user experience by enabling the development of automation tools, complex trading strategies, and cross-chain operations, all without requiring direct user interaction at each step.

Core Components

The Plugin Architecture is built around three primary components:

1. ActionRegistry: Base library that manages user configuration for delegation and transfer permissions.

2. PluginDelegable: Abstract contract that implements delegate approval functionality.

3. Central Registry: Core hub that inherits from ActionRegistry and serves as the source of truth.

Data Flow & State Management

User Configuration State Machine

Each user has a configuration record in the ActionRegistry that tracks:

UserConfig {
    uint208 lockCooldown;               // Duration of transfer/delegation cooldown
    uint40 transferEnabledTimestamp;    // When transfers become enabled
    bool transferDisabled;              // Transfer lock status
    uint208 approvalIndex;              // Approval index for delegate revocation
    uint40 delegationEnabledTimestamp;  // When delegations become enabled  
    bool delegationDisabled;            // Delegation status
}

This state record facilitates two key security mechanisms:

1. Transfer locking: Controls whether a user's tokens can be transferred.

2. Delegation control: Controls whether a user can approve new delegates.

Delegation Approval System

Delegations are tracked in a nested mapping structure:

owner => approvalIndex => delegate => isApproved

This design creates a three-dimensional relationship:

• The token/rights owner.

• Their current approval index (a security counter).

• Each delegate address.

• Whether that delegate is approved to act on behalf of the owner.

Security State Transitions

Approval Index Mechanism

The approval index serves as a master revocation system. When a user increments their approval index:

1. All previously approved delegates are instantly revoked..

2. New delegations must be established at the new index

Transfer & Delegation Cooldown

The system implements protective cooldown periods:

1. Disabled → Enabled: When a user re-enables transfers or delegation capability, a cooldown period applies before the action takes effect.

2. Cooldown Reduction: If a user decreases their cooldown period, the system automatically enforces the previous cooldown period.

This prevents attackers from social engineering users to rapidly disable protections.

Integration Points

Contracts that integrate with the Plugin Architecture:

1. Inherit from PluginDelegable.

2. Implement permission checks using _checkDelegate() for delegate-initiated operations.

3. Reference the Central Registry for user configuration state.

The architecture is utilized by core protocol components including cToken contracts and position management systems, allowing for complex operations like automated liquidation protection, cross-chain rebalancing, and advanced trading strategies.

Overview

The Transfer Lock Mechanism is a critical security component of Curvance's protection system, allowing users to control the transferability of their tokens. Operating as an optional "2FA" layer, this mechanism helps defend against phishing attempts by giving users the ability to temporarily or indefinitely disable token transfers until explicitly re-enabled.

The transfer lock system introduces a security cooldown period when transitioning from a locked to an unlocked state, adding an important time buffer that can prevent attackers from quickly gaining control of assets after compromising an account.

Core Functions

setCooldown()

Description: Sets the duration that transfers will remain restricted after a user disables their transfer lock. This forms the core of the time-delay protection mechanism.

If a user decreases their cooldown, the previous (longer) cooldown will be automatically applied to any pending transfer unlock to prevent a phishing attack where an attacker forces a cooldown reduction.

Contract: CentralRegistry

Function signature:

function setCooldown(uint256 cooldown) external

Events:

// Defined in ActionRegistry.sol
event CooldownSet(address indexed user, uint256 userLockCooldown);

checkTransfersDisabled()

Description: Determines whether a specific user has transfers enabled or disabled. This can be called by any contract or external account to verify a user's transfer permission status.

Contract: CentralRegistry

Function signature:

function checkTransfersDisabled(address user) external view returns (bool)

Return data:

setTransferLockStatus()

Description: Enables or disables token transferability for the caller. When disabling the lock (enabling transfers), the caller's configured cooldown period will be applied.

• A user must explicitly flip their transfer lock status (can't set to the same value it already has).

• When enabling transfers, the cooldown period starts immediately.

Contract: CentralRegistry

Function signature:

function setTransferLockStatus(bool transferDisabled) external

Events:

// Defined in ActionRegistry.sol
event LockStatusChanged(
    address indexed user,
    bool isLocked,
    uint256 transferEnabledTimestamp
);

Market Design Principles

Curvance markets are built with a focus on risk management, liquidity efficiency, and economic security. The protocol employs a novel market architecture that enables both capital efficiency and strong risk management.

Thesis-Driven Markets

Curvance creates thesis-driven micro-ecosystems. Each Market Manager focuses on a specific financial thesis:

• Interest-bearing stablecoins.

• Bluechip long market exposure.

• Volatile LP tokens for a particular DEX or perpetual platform.

• Other specialized asset categories.

This targeted approach allows for customized risk parameters appropriate for each asset class, rather than forcing disparate assets to share the same risk model.

Systemic Risk Reduction

By segregating markets by thesis, Curvance minimizes the contagion risk between asset classes. A volatility event in one market doesn't propagate to unrelated markets, protecting the overall protocol health. Isolated Market Managers are designed to contain risk within their boundaries. If extreme market conditions impact one Isolated Market Manager, other Market Managers remain unaffected, ensuring protocol stability.

Core Market Components

Curvance Token System

Curvance Tokens (cTokens): Interest-bearing tokens representing user deposits that can serve dual purposes:

• Collateral: When configured as collateral, cTokens secure borrowing positions.

• Borrowable Assets: When configured as borrowable, the underlying assets can be borrowed against collateral.

Each cToken wraps an underlying asset and maintains an exchange rate that appreciates over time as interest accrues. The isBorrowable() function determines whether a specific cToken can be borrowed, while collateral status is managed at the account level.

This unified approach simplifies the token architecture while maintaining the flexibility for assets to serve different roles within the lending protocol.

Market Manager

The Market Manager is the central contract that:

• Manages risk parameters for all tokens in its market.

• Handles collateral posting and borrowing interactions.

• Coordinates liquidation processes.

• Enforces position health requirements.

• Monitors and applies interest rate models.

Position Lifecycle

1. Deposit: User deposits underlying assets and receives cTokens representing their share of the pool.

2. Collateral Posting: User activates their cTokens as collateral to secure borrowing capacity.

3. Borrowing: User borrows underlying assets from borrowable cToken markets against their collateral.

4. Repayment: User repays borrowed assets plus accrued interest to reduce debt obligations

5. Withdrawal: User redeems cTokens for underlying assets after ensuring adequate collateralization or full debt repayment.

Asset Management

Collateral and Debt Management System

The asset management has several key components:

• Collateral Caps: Each cToken has a maximum amount of shares that can be posted as collateral, limiting exogenous risk exposure.

• Debt Caps: Each cToken has a maximum amount of underlying assets that can be borrowed, providing additional risk management for lending exposure.

• Collateral Posting: Assets are posted as shares, allowing caps to grow proportionally with any yield-generating strategies.

• Cap Management: Both collateral and debt caps can be decreased even if current utilization is above the new cap, which prevents new risk while not forcing position unwinding.

• Dual-Cap Risk Control: The combination of collateral caps (limiting how much can be deposited) and debt caps (limiting how much can be borrowed) provides comprehensive risk management across boths ides of the lending market.

Dynamic Liquidation Engine (DLE)

The Dynamic Liquidation Engine enables more nuanced position management:

Liquidation State Machine:

1. Healthy Position: Collateral value exceeds required thresholds.

2. Soft Liquidation Threshold: When collateral/debt ratio falls below soft threshold, partial liquidations begin with base penalties.

3. Hard Liquidation Threshold: When ratio falls below hard threshold, complete liquidation is permitted with higher penalties.

4. Bad Debt Threshold: When debt exceeds collateral value, socialized bad debt handling begins.

OEV Liquidation Auctions

Curvance features a next-generation liquidation auction system, OEV (Optimal Extractable Value) that maximizes MEV capture:

1. High-Performance Batch Processing:

   1. Enables concurrent processing of multiple liquidations within a single transaction.

   2. Dramatically reduces latency and gas costs while maximizing throughput efficiency.

   3. Ensures rapid position resolution during market stress.

2. Off-chain Auction Architecture:

   1. Conducts competitive bidding in a gas-efficient off-chain environment.

   2. Sophisticated bidding algorithms rank each proposal based on multiple parameters including close factor and penalty fees.

   3. Enables optimal price discovery while minimizing on-chain footprint.

3. MEV capture:

   1. Transforms traditional MEV extraction into protocol-captured value.

   2. Eliminates wasteful gas wars through structured auction mechanisms.

   3. Provides a more efficient and equitable liquidation process.

Risk Modeling

Curvance enhances risk modeling through:

1. Asset-Specific Risk Parameters: Each asset has customized collateralization requirements.

2. Three-Tier Liquidation System: Soft, hard, and bad debt thresholds for graduated liquidation responses.

3. Volatility-Responsive Liquidations: Aggressive liquidations in volatile periods, gentler in stable periods.

4. Bad Debt Socialization: When a user's debt exceeds collateral, lenders share any shortfall.

The overall architecture provides a powerful framework for managing diverse asset classes while maintaining protocol solvency and capital efficiency.

Overview

Bad Debt Socialization is a critical risk management mechanism in the Curvance Protocol that handles scenarios where a borrower's collateral value falls below their outstanding debt. Rather than leaving the protocol with uncovered losses, this mechanism distributes the shortfall equitably among all lenders in the affected market, preserving system solvency while minimizing individual impact.

Key Components

System Actors

• Liquidators: External agents who repay a portion of defaulted debt in exchange for collateral.

• Borrowers: Users with debt positions that may become undercollateralized.

• Lenders: eToken holders who collectively absorb any shortfall from liquidations.

• Market Manager: Orchestrates the liquidation and bad debt socialization process.

Process Flow

1. Bad Debt Detection

The system identifies positions where collateral value is insufficient to cover debt:

2. Asset-Specific Liquidation

When bad debt is detected:

• Each collateral asset is evaluated individually for liquidation.

• Liquidations occur on a per-asset basis rather than requiring full account liquidation.

• Multiple liquidations can be processed efficiently in a single transaction.

3. Socialization Execution

When a liquidator executes the bad debt liquidation:

1. The system calculates total debt to be closed for the specific asset.

2. Determines how much can be repaid via the liquidator's token transfer.

3. Calculates the remainder as bad debt to be socialized.

4. The shortfall is distributed proportionally across all lenders of that asset.

For example, if a borrower has $900 in debt with $850 in collateral during a liquidation with 5% liquidation incentive, lenders collectively absorb $95 (900 * 1.05 - 850 = 945 - 850 = 95) of the debt as a loss. If the borrower is liquidated across two liquidations, 25% initially then the remaining 75%, borrowers would recognize $23.75 and then $71.25 as bad debt across the liquidations.

4. State Transitions

The process follows these state transitions:

• Normal Operation → Bad Debt Detection: When collateral falls below debt.

• Bad Debt Detection → Asset Liquidation: Individual asset liquidation is triggered.

• Asset Liquidation → Socialization: Execution of liquidation with partial repayment.

• Socialization → Normal Operation: System returns to normal state with debt cleared.

Technical Implementation

The socialization mechanism operates through a coordinated interaction between:

1. Debt Calculation: For each liquidation, the system:

   1. Calculates the total debt to be closed.

   2. Determines how much can be repaid through liquidation transfers.

   3. Subtracts this from total debt to find the bad debt amount.

2. Efficient Processing:

   1. Multiple liquidations can be batched in a single transaction.

   2. Gas optimization by consolidating repayments and bad debt calculations.

3. eToken Integration:

   1. The eToken contract recognizes unpaid debt by adjusting totalBorrows .

   2. This maintains the exchange rate mechanism while distributing losses.

4. Atlas Integration:

   1. Atlas prioritizes liquidations to minimize bad debt through efficient market mechanisms.

   2. Buffer system ensures Atlas gets priority for executing liquidations.

   3. Dynamic penalty system incentivizes liquidators appropriately based on market conditions.

Security Considerations

• Gas Efficiency: Optimized implementation handles thousands of liquidations efficiently, even during market stress.

• Edge Cases: System handles rounding issues with conservative approaches that favor protocol solvency.

• Transparent Tracking: Bad debt events are fully transparent with on-chain events.

This streamlined mechanism ensures the protocol remains solvent even in extreme market conditions while distributing any unavoidable losses fairly among participants, with minimal gas costs and maximum transparency.

Overview

Curvance's position management system offers sophisticated leveraging and deleveraging capabilities across various asset types and DeFi protocols. This document explains the process of unwinding (deleveraging) a position.

Key Components

The deleveraging system consists of several interconnected components:

• Position Management Base: Core contract defining the leverage/deleverage interface.

• Protocol-Specific Implementations: Extensions for specific DeFi protocols (Pendle, Velodrome, etc.).

• Market Manager: Tracks account positions and validates liquidity status.

• cTokens: Manage borrowing and collateral positions.

Deleverage Process Flow

The position unwinding flow follows these key steps:

Data Flow

1. Initiation: User calls deleverage() with parameters defining:

2. Position Token Withdrawal:

   1. The system calls withdrawByPositionManagement() on the collateralized cToken.

   2. This withdraws the specified collateral amount and triggers callback for specialized handling.

3. Collateral Conversion:

   1. If collateral and debt tokens differ, swapping occurs.

   2. Protocol-specific implementations define unique swapping logic.

   3. Different adapters handle various protocols (Pendle, Velodrome, Simple swaps).

4. Debt Repayment:

   1. The converted collateral is used to repay the user's debt.

   2. The system calls repay() on the borrow token.

5. Asset Return:

   1. Any remaining collateral underlying is transferred back to user.

   2. Any swap dust from intermediate tokens is also returned.

State Transitions

When unwinding a leveraged position, the account's state transitions through:

The system validates that:

• Position is valid for deleveraging.

• Repayment amount is within bounds.

• Final position remains solvent.

• User has permission to execute the operation.

Protocol-Specific Implementations

Curvance supports several protocol-specific position management implementations:

• PositionManagementSimple: Basic token swap deleveraging.

• PositionManagementVelodrome: For Velodrome/Aerodrome LP positions.

• PositionManagementPendlePT: For Pendle Principal Tokens.

• PositionManagementPendleLP: For Pendle LP token positions.

Each implementation provides specialized logic for handling the unique characteristics of its respective protocol when exiting positions.

Access Control and Delegation

Position unwinding operations can be initiated by:

• The position owner directly.

• A delegated address with approved permissions.

• The liquidation system (for under-collateralized positions).

Slippage Protection

To prevent excessive slippage during the unwinding process:

• Users specify acceptable slippage parameters.

• The system performs pre and post execution checks.

• Transactions revert if slippage exceeds user-defined limits.

Example Flow

A typical deleveraging flow:

1. User has a leveraged ETH position against USDC debt.

2. User calls deleverage to unwind part of this position.

3. System withdraws ETH collateral from the collateralized cToken.

4. ETH is swapped to USDC according to swap parameters.

5. USDC debt is repaid to the BorrowableCToken contract.

6. Any remaining ETH and swap dust is returned to the user.

7. Token approvals are cleaned up.

This mechanism allows for precise management of leveraged positions while minimizing execution risk.

User Interaction Functions

deleverage()

Description: Deleverages an existing Curvance position to decrease both collateral and debt. Includes slippage protection through the checkSlippage modifier.

Contract: PositionManagement

Function signature:

function deleverage(
        DeleverageAction calldata action,
        uint256 slippage
) external;

Events:

// In BorrowableCToken.sol
event Repay(address payer, address account, uint256 amount);
event Transfer(address indexed from, address indexed to, uint256 value);

// In MarketManager.sol
event CollateralUpdated(uint256 shares, bool increased, address account);
// Only emitted if the positionis being completely closed
event PositionUpdated(address cToken, address account, bool open);

deleverageFor()

Description: Deleverages an existing Curvance position on behalf of another account via delegation. Includes slippage protection through the checkSlippage modifier. Requires delegation approval from the account being deleveraged for.

Contract: PositionManagement

Function signature:

function deleverageFor(
        DeleverageAction calldata action,
        address account,
        uint256 slippage
) external;

Events:

// In BorrowableCToken.sol
event Repay(address payer, address account, uint256 amount);
event Transfer(address indexed from, address indexed to, uint256 value);

// In MarketManager
event CollateralUpdated(uint256 shares, bool increased, address account);
// Only emitted if the positionis being completely closed
event PositionUpdated(address cToken, address account, bool open);

Overview

The Position Management system is a core component of Curvance's lending protocol, enabling advanced leverage and deleverage operations for user positions. It provides a structured way for users to manage complex DeFi positions across multiple asset types while maintaining protocol safety.

Architecture Design

Core Components

PositionManagementBase

The abstract base contract provides the core functionality for all position management implementations. It includes:

• Common state variables and constants.

• Core leverage/deleverage logic.

• Safety checks and fee calculations.

• Market status queries and calculations.

• Standard integration points with other protocol components.

Specialized Implementations

Each implementation extends the base functionality to support specific asset types:

• PositionManagementSimple: Basic implementation for standard tokens with simple swap requirements.

• PositionManagementPendlePT: Specialized for Pendle Principal Tokens, handling their unique yield token mechanics.

• PositionManagementPendleLP: Manages positions for Pendle liquidity provider tokens.

• PositionManagementVelodrome: Handles Velodrome AMM-specific operations..

• PositionManagementAerodrome: Extends Velodrome implementation for Aerodrome protocol

Key Data Structures

LeverageStruct

struct LeverageAction {
    IBorrowableCToken borrowableCToken;
    uint256 borrowAssets;
    ICToken cToken;
    SwapperLib.Swap swapAction;
    bytes auxData;
}

Encapsulates all data needed for a leverage operation, including which token to borrow, how much to borrow, and which position token to leverage against.

DeleverageStruct

struct DeleverageStruct {
    ICToken cToken;
    uint256 collateralAssets;
    IBorrowableCToken borrowableCToken;
    uint256 repayAssets;
    SwapperLib.Swap[] swapAction;
    bytes auxData;
}

Contains data for deleverage operations, specifying which collateral to liquidate and how to route funds to repay debt.

Integration Points

The Position Management system interacts with multiple components of the Curvance ecosystem:

• MarketManager: For checking account status, debt limits, and collateral values.

• CentralRegistry: For protocol-wide configuration and permissions.

• CTokens: Position tokens that serve as collateral.

• BorrowableCTokens: Debt tokens that users borrow from.

• SwapperLib: For executing token swaps during leverage/deleverage operations.

• External Protocols: Direct integrations with Pendle, Velodrome, and other DeFi protocols.

Security Features

The Position Management architecture implements several security features:

• Slippage Protection: Ensures executed trades don't lose value beyond user-specified thresholds.

• Sanity Checks: Validates all operations against user account status and market constraints.

• Maximum Leverage Limits: Prevents users from taking on excessive risk.

• Fee Calculations: Ensures protocol takes appropriate fees for providing leverage services.

• Reentrancy Protection: Guards against reentrancy attacks during complex operations.

Protocol Interactions

During position management operations, the system follows these general steps:

• Validation: Check that the requested operation is valid for the user's account.

• Calculation: Determine limits, risks, and required amounts.

• Execution: Perform necessary token transfers, borrows, or repayments.

• Swapping: Convert between token types as needed using appropriate swap routes.

• Position Update: Update the user's collateral and debt positions.

• Fee Handling: Calculate and collect protocol fees.

This architecture enables Curvance to support complex leverage strategies across diverse asset types while maintaining protocol security and risk parameters.

Overview

The Dynamic Liquidation Engine (DLE) is a sophisticated liquidation management system implemented in the Curvance Protocol. Facilitating market collateral liquidations through a buffer-based approach with Atlas integration for OEV (OracleExtractable Value) capture.

Technical Architecture

OEV Integration with Atlas

The contract integrates OEV (Oracle Extractable Value) capture:

• OEV Auction Mechanism: When price updates make positions liquidatable, an off-chain auction (running ~300ms) allows liquidators to bid for execution rights.

• Atomic Execution: Winning bids are executed immediately in the same block as an oracle update.

• Bid Distribution: Successful liquidation bids are distributed to Curvance Protocol through the account abstraction operation.

• Collateral Targeting: Each auction targets a specific collateral type, enforced through transient storage during transaction execution.

Auction Buffer System

The contract implements a liquidation buffer that gives auction transactions priority access to liquidations:

• Buffer Mechanism: A 10 basis point (0.1%) buffer gives auction transactions priority for liquidations.

• Implementation: When MEV-boosted liquidations are detected via transient storage, liquidation health checks apply the buffer as a discount to collateral value.

• Benefits:

  • Captures liquidations from non-oracle based changes as interest accrual or LST (Liquid Staking Token) yield distribution.

  • Compensates for execution latency.

Transient Storage Risk Parameters

Dynamic liquidation parameters are managed through transient storage:

• Liquidation Penalty: Configurable within min/max bounds set by governance.

• Close Factor: Determines what percentage of debt can be liquidated.

• Transient Nature: Parameters exist only for the duration of a transaction.

• Validation: All parameters undergo boundary validation before being applied.

Liquidation Types

The contract supports token-specific liquidations:

• Token-Specific Liquidations:

  • Targets individual collateral positions within an account.

  • Uses the unlockAuctionForMarket() combined with _setTransientLiquidationConfig() mechanism to specify which token can be liquidated.

  • Ideal for soft liquidations where only specific assets need adjustment.

Multi-Liquidation Support

The system is designed to efficiently process liquidations:

• Batch Processing: Can handle multiple liquidations in a single transaction.

• Cached Pricing: Retrieves asset prices once per transaction rather than per liquidation.

• Gas Optimization: Significantly reduces gas costs during liquidation cascades.

• Debt Repayment Rollup: Combines debt repayment and bad debt recognition into a single action (1,000 liquidations requires 1 debt token transfer, not 1,000 transfers).

Dual-Oracle Architecture

Curvance's pricing system is designed with risk mitigation as its primary focus through a dual-oracle approach that enhances reliability and security.

For each supported asset, Curvance can simultaneously integrate with two independent oracle providers. This creates redundancy and provides additional verification of asset prices, with the following benefits:

• Enhanced security: Mitigates risk from oracle failures or manipulation.

• Continuous operation: Ensures liquidations can proceed even in volatile markets.

• Safety Buffer: Creates a safety buffer when valuing collateral during distressed situations.

Price Selection Logic

When determining an asset's price, Curvance employs the "most safe" selection algorithm:

1. Each oracle reports its price for the asset.

2. The system applies sanity checks to both reported prices:

   1. Deviation from previous price must not exceed configured limits.

   2. Price must be above minimum threshold (non-zero).

   3. Oracle must have reported within the maximum allowable reporting window.

3. For borrowable assets, the system selects the higher of the two valid prices.

4. For collateral assets, the system selects the lower of the two valid prices.

This approach ensures that in liquidation scenarios, the protocol always errors on the side of protecting itself from bad debt, while giving borrowers the benefit of the most favorable valid price.

Validation Process

Liquidation attempts undergo multiple validation checks.

For example, we check if collateral is unlocked for auction transactions:

Risk Mitigation

The system incorporates several safeguards:

• Transient Storage: Ensures parameters reset after each transaction.

• Permission Checks: Restricts access to orderflow auction functions to authorized addresses.

• Collateral Locking: Prevents liquidation of unauthorized collateral during Atlas transactions.

Protocol Benefits

• Value Capture: Extracts MEV from liquidations that would otherwise go to third parties.

• Liquidation Efficiency: Ensures timely liquidations even during high volatility.

• Gas Optimization: Uses efficient code combined with transient storage for parameter management.

• Graceful Degradation: Protocol remains secure even if OEV auctions fail.

By implementing this sophisticated liquidation system, Curvance balances the needs of protocol security, liquidator incentives, and value capture, creating a powerful framework for position management across diverse market conditions.

User Interaction Functions

statusOf()

Description: Determine account's current status between collateral, debt, and additional liquidity.

Contract: MarketManager

Function signature:

Return data:

canLiquidate()

Description: Validates and processes batch liquidations for multiple accounts, calculating collateral seizure amounts, debt repayment, and bad debt based on account health and market parameters.

Contract: MarketManager

Function signature:

Return data:

Overview

Delegable Actions allow third-party contracts (plugins) to perform specific operations on behalf of users within the Curvance ecosystem. This delegation system offers a more flexible and powerful alternative to standard ERC20 approvals, enabling opportunities for automation, complex strategies, and improved user experiences.

Any Curvance contract that inherits from PluginDelegable can support delegate-triggered operations through functions that typically end with a for postfix (e.g., borrowFor, withdrawFor, leverageFor). This pattern ensures consistent delegate authorization checks across the protocol.

The delegation system provides several security advantages over traditional approaches:

• Granular control: Users can grant and revoke specific action permissions to different addresses

• Emergency revocation: Users can revoke all delegations at once by incrementing their approval index

• Time-lock protection: Optional delegation lockdown with a cooldown period

Delegations exist across all Curvance contracts simultaneously, using the Central Registry to track and validate delegation permissions throughout the protocol.

User Interaction Functions

Delegation in PluginDelegable.sol

isDelegate()

Description: Determines whether a delegate address has permission to act on behalf of a specified user.

Contract: CentralRegistry

Function signature:

function isDelegate(address user, address delegate) public view returns (bool)

Return data:

setDelegateApproval()

Description: Approves or restricts a delegate's authority to operate on the caller's behalf. This is the primary method for users to control their delegation permissions.

Contract: CentralRegistry

Function signature:

function setDelegateApproval(address delegate, bool isApproved) external

Events:

event DelegateApproval(
    address indexed owner,
    address indexed delegate,
    uint256 approvalIndex,
    bool isApproved
);

getUserApprovalIndex()

Description: Retrieves a user's current approval index from the Central Registry. This index is incremented when a user wants to revoke all delegations.

Contract: CentralRegistry

Function signature:

function getUserApprovalIndex(address user) public view returns (uint256)

Return data:

checkDelegationDisabled()

Description: Checks whether delegation is temporarily or permanently disabled for a specified user.

Contract: CentralRegistry

Function signature:

function checkDelegationDisabled(address user) public view returns (bool)

Return data:

Delegable Actions in ActionRegistry.sol

getUserApprovalIndex()

Description: Returns a user's approval index, which is used to authorize delegates across the entire protocol.

Contract: CentralRegistry

Function signature:

function getUserApprovalIndex(address user) external view returns (uint256)

Return data:

incrementApprovalIndex()

Description: Increments a caller's approval index, immediately revoking all delegate permissions across all Curvance contracts.

Contract: CentralRegistry

Function signature:

function incrementApprovalIndex() external

Events:

event ApprovalIndexIncremented(address indexed user, uint256 newIndex);

checkDelegationDisabled()

Description: Determines whether a user has delegation disabled, either intentionally or due to a cooldown period.

Function signature:

function checkDelegationDisabled(address user) external view returns (bool)

Return data:

setDelegable()

Description: Sets a caller's status for whether to allow new delegations or not. When re-enabling delegation, the user's configured cooldown period applies.

Function signature:

function setDelegable(bool delegationDisabled) external

Parameters:

Events:

event DelegableStatusChanged(
    address indexed user,
    bool delegable,
    uint256 delegationEnabledTimestamp
);

Overview

Leveraged positions in Curvance allow users to increase their exposure to certain assets by borrowing additional capital against their collateral. This documentation explains the core mechanics, data flows, and components involved in creating leveraged positions.

Core Concepts

Position Types

Curvance supports leveraged positions across various asset types:

• Simple Tokens: Standard ERC20 tokens.

• Pendle LP Tokens: Liquidity provider tokens from Pendle.

• Pendle PT Tokens: Principal tokens from Pendle.

• Velodrome/Aerodrome LP Tokens: Liquidity provider tokens from Velodrome and Aerodrome.

• Liquid Staking Tokens: stETH, shMON

• ERC4626 Yield Vaults: sFRAX, sUSDe, sUSDS

Key Components

The leverage system involves several interconnected components:

• Position Management: Base contract that handles the core leverage logic.

• Market Manager: Manages risk parameters and validates leverage actions.

• Swapper: Executes token swaps to convert borrowed tokens to collateral.

• cTokens: Manage borrowing and collateral positions.

Leverage Flow

1. Initial Deposit

Users first deposit assets into a cToken contract, which represents their initial collateral position.

2. Leverage Request

A leverage request is initiated through one of the following methods:

• leverage(): Direct leverage of an existing position.

• depositAndLeverage(): Deposit new collateral and leverage in a single transaction..

• leverageFor(): Leverage on behalf of another user (requires delegation)

3. Validation & Maximum Borrowing

The system checks how much the user can borrow based on:

• Current collateral value.

• Collateralization ratio of the collateralized cToken.

• Existing debt.

• Available liquidity in the BorrowableCToken market.

maxBorrowAmount = _maxRemainingLeverageOf(account, borrowToken)

4. Token Borrowing

The system borrows tokens from the specified BorrowableCToken through a callback pattern:

borrowToken.borrowForPositionManagement(account, borrowAmount, leverageData)

5. Asset Conversion

Depending on the token type, different specialized swapping mechanisms are used:

• Simple Tokens: Direct swaps through external DEXs.

• Pendle LP Tokens: Tokens are swapped and then added to Pendle liquidity pools.

• Velodrome/Aerodrome LP: Tokens are swapped and then added to the appropriate DEX pools.

Each implementation handles the specific logic required for that token type.

Asset-Specific Flows

Simple Token Leverage

For standard ERC20 tokens, the process is straightforward:

• Borrow the underlying token from an BorrowableCToken.

• Swap the borrowed asset for the collateral cToken's underlying.

• Deposit the resulting tokens as additional collateral.

Pendle LP Token Leverage

For Pendle LP tokens, the process involves:

• Borrow the underlying token from a BorrowableCToken.

• If necessary, swap the borrowed token to a valid Pendle input token.

• Use the Pendle Router to add liquidity and mint LP tokens.

• Deposit the resulting LP tokens as additional collateral.

Velodrome/Aerodrome LP Token Leverage

For Velodrome or Aerodrome LP tokens:

• Borrow the underlying token from an eToken.

• If the borrowed token isn't part of the LP pair, swap it.

• Balance the amounts for optimal LP provision.

• Use the appropriate router to add liquidity.

• Deposit the resulting LP tokens as additional collateral.

Protocol Fees

When leveraging positions, users pay a protocol fee, which is calculated as:

fee = FixedPointMathLib.mulDivUp(amount, getProtocolLeverageFee(), WAD)

The fee is taken from the borrowed amount before swapping.

Slippage Protection

To protect users from unexpected price movements during the leverage process:

• Users specify a maximum acceptable slippage parameter.

• The system monitors the pre/post value of the user's position.

• If the value loss exceeds the specified slippage, the transaction reverts.

This protection is implemented through the checkSlippage modifier.

Security Considerations

Position Monitoring

Leveraged positions increase risk exposure and should be monitored closely for:

• Price movements that could trigger liquidations.

• Changes in market conditions affecting collateral value.

• Available liquidity for potential deleveraging.

Permission Management

Delegation of leverage actions requires careful permission management:

• Only approved delegates can perform leverageFor operations.

• Users can revoke permissions through the Central Registry.

• The system verifies delegation status before each operation.

Integration Points

When integrating with the leverage system, consider:

• Providing clear slippage parameters to protect users.

• Understanding the specific asset type and its leverage implementation.

• Ensuring sufficient collateral to avoid immediate liquidation risk.

• Monitoring gas costs, which vary based on the complexity of the leverage operation.

By understanding these core mechanics, developers can effectively integrate with and extend Curvance's leveraged position capabilities.

User Interaction Functions

Leverage Functions

depositAndLeverage()

Description: Deposits assets into a Curvance position and then leverages the position to increase both collateral and debt. Includes slippage protection through the checkSlippage modifier. The caller must have approved this contract to have delegated actions on the position token.

Contract: PositionManagement

Function signature:

function depositAndLeverage(
    uint256 assets,
    LeverageAction calldata action,
    uint256 slippage
) external;

Events:

// In cToken
event Transfer(address indexed from, address indexed to, uint256 value);
/// @dev `keccak256(bytes("Deposit(address,address,uint256,uint256)"))`.
uint256 internal constant _DEPOSIT_EVENT_SIGNATURE = 0xdcbc1c05240f31ff3ad067ef1ee35ce4997762752e3a095284754544f4c709d7;

// In CToken
event Transfer(address indexed from, address indexed to, uint256 value);
event Borrow(address account, uint256 amount);

// In BaseCToken
event CollateralUpdated(uint256 shares, bool increased, address account);
// Only emitted if this is the user's first position in the specific token
event PositionUpdated(address cToken, address account, bool open);

leverage()

Description: Leverages an existing Curvance position to increase both collateral and debt. Includes slippage protection through the checkSlippage modifier.

Contract: PositionManagement

Function signature:

function leverage(
    LeverageStruct calldata leverageData,
    uint256 slippage
) external checkSlippage(msg.sender, slippage) nonReentrant

Events:

// In CToken.sol
event Transfer(address indexed from, address indexed to, uint256 value);
event Borrow(address account, uint256 amount);

// Only emitted if this is the user's first position in the specific token
event PositionUpdated(address cToken, address account);

leverageFor()

Description: Leverages an existing Curvance position on behalf of another account via delegation. Includes slippage protection through the checkSlippage modifier. Requires delegation approval from the account being leveraged for.

Contract: PositionManagement

Function signature:

function leverageFor(
    LeverageStruct calldata leverageData,
    address account,
    uint256 slippage
) external checkSlippage(account, slippage) nonReentrant

Events:

// In CToken.sol
event Transfer(address indexed from, address indexed to, uint256 value);
event Borrow(address account, uint256 amount);

// In BaseCToken.sol
event CollateralUpdated(uint256 shares, bool increased, address account);

Application Specific Sequencing in Curvance

The Curvance protocol introduces an oracle-agnostic, MEV-optimized system for handling liquidations, developed in partnership with Atlas. This system integrates orderflow auctions, allowing liquidators to bid for the right to liquidate collateral in the Curvance lending markets. This makes the Curvance platform one of the first to leverage this advanced approach in DeFi.

Liquidation Characteristics

Through app-specific sequencing, the protocol captures Maximum Extractable Value (MEV) by organizing liquidation events to maximize efficiency and value for the protocol. Here’s a simple breakdown of how it works:

1. Orderflow Auctions: When a liquidation event is triggered, liquidators participate in an auction, bidding for the right to execute the liquidation. This competitive bidding process allows the protocol to receive the transaction validation bid rather than the block builder.

2. Rapid Execution: The entire auction process takes just 300 milliseconds (3/10ths of a second), ensuring liquidations occur quickly and with minimal delay.

3. Fail-Safe Permissionless Liquidation: If no winning bid is determined or the winning liquidator fails to execute, a permissionless liquidation immediately takes place to protect the protocol’s stability and assets.

Incentive Capture

Over the last four years, traditional platforms like Compound and Aave have left a combined $180 million in liquidation incentives to MEV searchers. Historically, 95 - 98% of all incentives are given as incentives to block builders to validate their liquidation first. Curvance’s MEV-optimized system is designed to recover as many incentives as possible through auction revenue, significantly reducing the opportunity cost of liquidations while increasing protocol revenue potential.

Competitive Edge

With the built-in fallback mechanism, the protocol remains competitive with other DeFi platforms (Lending Protocols, Perpetual Exchanges, Collateralized Debt Positions Protocols, etc.), which may need to liquidate user assets. Curvance can capture MEV without needing an appchain, minimizing costs, enhancing protocol sustainability, and providing a unique advantage for users and liquidators.

Overview

BorrowableCTokens are Curvance's lending market tokens that enable users to earn interest on deposited assets while simultaneously creating borrowing liquidity for the protocol. These tokens extend the base cToken functionality with comprehensive lending market features, including borrowing, interest accrual, liquidations, and flash loans. Users who deposit underlying assets receive BorrowableCTokens representing their share of the lending pool, which increase in value as borrowers pay interest.

Core Architecture

BorrowableCTokens build upon the cToken foundation by extending BaseCTokenWithYield.

• BaseCTokenWithYield: Provides the core vault functionality with yield distribution mechanisms.

• BorrowableCToken: Adds lending market functionality including:

  • Borrow against collateral

  • Interest rate management

  • Debt tracking and liquidations

  • Flash loan capabilities

  • Protocol fee collection

Key Integrations

BorrowableCTokens operate within a sophisticated network of contracts:

• MarketManager: Manages risk parameters, collateral requirements, borrowing authorization, and liquidation processes.

• DynamicIRM (Interest Rate Model): Determines borrowing and lending rates based on market utilization and other factors.

• CentralRegistry: Provides protocol-wide configuration, permissions, and fee settings.

• Oracle System: Supplies accurate asset pricing for collateral valuation and liquidation triggers.

• Position Managers: Enable complex leveraged positions and automated strategies.

State Management

BorrowableCTokens maintain sophisticated state tracking for lending operations:

IDynamicIRM public IRM;

uint240 public marketOutstandingDebt;

uint16 public interestFee;

/// @notice Active debt information associated with an account.
mapping(address => uint256) internal _debtOf;

uint256 internal _vestingData;

Interest Rate Mechanism

BorrowableCTokens employ a dynamic interest rate system that responds to market conditions:

• Utilization-Based rates: Interest rates adjust based on the ratio of borrowed assets to total supplied assets.

• Dynamic Adjustments: The DynamicIRM continuously monitors market conditions and adjusts rates at regular intervals.

• Dual Rate System:

  • Borrow Rate:

  • Supply Rate:

Data Flow

Lending (Deposit) Flow

1. User calls deposit() or mint() with underlying assets.

2. Contract accrues any pending interest.

3. Contract calculates shares based on current exchange rate.

4. Underlying tokens are transferred from the user to the contract.

5. User's share of the lending pool increases.

6. Tokens begin earning interest from borrower payments.

Borrowing Flow

1. User must first have collateral posted in compatible CTokens

2. User calls borrow() specifying desired amounts.

3. Contract accrues pending interest and updates rates.

4. MarketManager validates borrowing capacity against collateral.

5. Debt is recorded with current debt index for interest calculations.

6. Underlying assets are transferred to the borrower.

7. User's redemption ability is paused for 20 minutes (anti-flash loan protection).

Repayment Flow

1. User calls repay() or repayFor() with repayment amount.

2. Contract accrues pending interest to capture latest debt amount.

3. Interest is calculated based on time elapsed and current rates.

4. Underlying tokens are transferred from the user to the contract.

5. Assets are transferred to repay debt.

6. User's debt position is updated or closed.

7. MarketManager is notified of debt reduction.

Interest Accrual Flow

1. _accrueIfNeeded() is called before most operations.

2. Time elapsed since last accrual is calculated.

3. Interest rates are fetched from the DynamicIRM.

4. Interest is applied to all outstanding debt.

5. Interest increases the value of BorrowableCTokens.

6. Debt indices are updated for accurate individual debt tracking.

Liquidation Flow

1. Liquidator identifies underwater positions.

2. Calls liquidateExact() or liquidate() functions

3. Contract accrues pending interest to get current debt values.

4. MarketManager calculates liquidation amounts and collateral seizure.

5. Liquidator repays portion of debt.

6. Collateral is seized from borrower and transferred to liquidator.

7. Any bad debt is recognized and removed from total assets.

Debt Index System

BorrowableCTokens use a sophisticated debt index system for accurate interest calculations:

• Market Debt Index: Global index that increases as interest accrues, stored in the upper bits of _vestingData.

• Account Debt Index: Personal index recorded when debt is created or modified, stored with each user's debt amount.

• Interest Calculation: User's accrued interest = (current market index / user's debt index - 1) * principal debt.

This system ensures accurate interest calculations regardless of when users borrow or repay.

Liquidation Mechanics

BorrowableCTokens support comprehensive liquidation capabilities:

• Health Factor Monitoring: Continuous monitoring of borrower collateral ratios through oracle price feeds.

• Liquidation Triggers: Positions become liquidatable when collateral value falls below required thresholds.

• Partial Liquidations: Liquidators can repay specific amounts for bad debt when collateral is insufficient.

• Incentive Structure: Liquidators receive collateral bonuses for maintaining market health.

Flash Loan Functionality

BorrowableCTokens provide flash loan capabilities for advanced users:

• Uncollateralized Borrowing: Temporary loans without collateral requirements.

• Atomic Transactions: Borrowed funds must be returned within the same transaction.

• Fee Structure: 0.04% fee (4 basis points) on borrowed amounts.

• Callback Integration: Implements IFlashLoan interface for custom logic execution.

• Use Cases: Arbitrage, liquidations, collateral swapping, and other DeFi strategies.

Position Manager Integration

BorrowableCTokens integrate with Position Managers for sophisticated strategies:

• Leveraged Positions: Automated borrowing and collateral posting for leverage.

• Cross-Market Operations: Coordinated actions across multiple markets.

• Slippage Protection: Built-in protection for complex multi-step operations.

• Callback Mechanisms: Position Managers can execute custom logic during borrow operations.

Security Features

BorrowableCTokens implement multiple security layers:

1. Debt-Collateral Separation: Users cannot post BorrowableCTokens as collateral if they have outstanding debt in the same market.

2. Pause Mechanisms: Independent pausing of borrowing, lending, and liquidation functions.

3. Reentrancy Protection: Comprehensive guards against reentrancy attacks.

4. Interest Rate Limits: Maximum bounds on interest rates to prevent exploitation.

5. Oracle Integration: Multiple price feed validation for liquidation accuracy.

6. Flash Loan Protection: 20-minute withdrawal delays after borrowing to prevent flash loan attacks.

Protocol Revenue

BorrowableCTokens generate protocol revenue through multiple mechanisms:

• Interest Fees: Configurable percentage of borrower interest payments.

• Flash Loan Fees: 0.04% fee on all flash loan amounts.

• Liquidation Fees: Portion of liquidation bonuses directed to protocol reserves.

• Fee Distribution: Protocol fees are accumulate and can be withdrawn by governance.

Risk Management

Debt Caps: Maximum borrowing limits per market to control protocol exposure.

Collateral Factors: Loan-to-value ratios based on asset risk profiles.

Liquidation Thresholds: Dynamic thresholds that trigger liquidations before insolvency.

Oracle Safeguards: Multiple price feeds and staleness protection.

Interest Rate Bounds: Maximum and minimum rate limits to prevent extreme scenarios.

Integration Considerations

State Updates: Always call functions that update interest before relying on debt or balance information.

Market Conditions: Interest rates and liquidation thresholds can change based on market utilization.

User Interaction Functions

Borrow Functions

borrow()

Contract: BorrowableCToken.sol

Description: Borrows underlying tokens from lenders, based on collateral posted inside this market.

Function signature:

function borrow(uint256 amount) external

Event:

// From cToken
event Borrow(address account, uint256 amount);
// Emitted from cToken and underlying ERC20 asset.
event Transfer(address indexed from, address indexed to, uint256 value);

// Potentially emitted multiple times, if this is the first time borrowing this cToken,
// and for any positions that need to be closed after borrowing.
event PositionUpdated(address cToken, address account, bool open);

borrowFor()

Contract: BorrowableCToken.sol

Description: Used by a delegated user to borrow underlying tokens from lenders, based on collateral posted inside this market by account

Function signature:

function borrowFor(
        address account,
        address recipient,
        uint256 amount
    ) external nonReentrant

Event:

// From BorrowableCToken.sol
event Borrow(address account, uint256 amount);
// Emitted from cToken and underlying ERC20 asset.
event Transfer(address indexed from, address indexed to, uint256 value);

// Potentially emitted multiple times, if this is the first time borrowing this eToken,
// and for any positions that need to be closed after borrowing.
event PositionUpdated(address cToken, address account, bool open);

Repay Functions

repay()

Contract: BorrowableCToken.sol

Description: Repays underlying tokens to lenders, freeing up their collateral posted inside this market and updates interest before executing the repayment.

Function signature:

function repay(uint256 amount) external nonReentrant

Event:

// From BorrowableCToken.sol
event Repay(address payer, address account, uint256 amount);
// Emitted from underlying ERC20 asset transfer.
event Transfer(address indexed from, address indexed to, uint256 value);

// From MarketManager
// Potentially emitted if a position is fully closed.
event PositionUpdated(address cToken, address account, bool open);

repayFor()

Contract: BorrowableCToken.sol

Description: Repays underlying tokens to lenders, on behalf of account, freeing up their collateral posted inside this market.

Function signature:

function repayFor(address account, uint256 amount) external nonReentrant

Event:

// From BorrowableCToken.sol
event Repay(address payer, address account, uint256 amount);
// Only emitted if interest needs to be accrued.
// Emitted from underlying ERC20 asset transfer.
event Transfer(address indexed from, address indexed to, uint256 value);

// From MarketManager
// Potentially emitted if a position is fully closed.
event PositionUpdated(address cToken, address account, bool open);

Debt Tracking

debtBalance()

Contract: BorrowableCToken.sol

Description: Returns the current debt balance for a given account without accruing interest. This is a view function that uses the cached exchange rate.

Function signature:

    function debtBalance(
        address account
    ) external nonReentrant returns (uint256 result)

Return data:

debtBalanceUpdated()

Contract: BorrowableCToken.sol

Description: Returns the current outstanding debt balance of an account with pending interest applied via _accrueIfNeeded().

Function signature:

    function debtBalanceUpdated(
        address account
    ) external nonReentrant returns (uint256 result)

Return data:

Overview

The Market Manager is a core component of the Curvance protocol, responsible for risk management and orchestrating interactions between various protocol modules. Market Managers are designed as thesis-driven micro-ecosystems, each focusing on specific asset types (e.g., interest-bearing stablecoins, bluechip assets, volatile LP tokens), which helps minimize systemic risk across the protocol.

Architecture

• Market Manager: Orchestrates listing, pausing, liquidation logic (including auctions), collateral/debt caps, and permissions for a single-ecosystem market.

• Liquidity Manager: Computes account liquidity, status, and hypothetical actions: enforces minimum active loan size and hold period protections.

• Dynamic Interest Rate Model: External IRM module that updates borrow/supply rates based on utilization and configured parameters.

• Oracle Manager: Manages asset pricing through multiple oracle resources with built-in safety mechanisms and price divergence circuit breakers.

• cTokens: ERC4626-like market tokens. Per-token toggles control whether the cToken is borrowable and/or allowed as collateral.

Market Tokens

cTokens (Curvance tokens): One listed per asset in a market.

• Collateralization: Per-token switch to allow posting as collateral.

• Borrowable: Per-token switch to allow borrowing of the underlying asset.

Data Flow

Collateral Flow

1. Users deposit into a cToken to receive shares.

2. Users may post those cToken shares as collateral (subject to caps and pauses).

3. Posted collateral increases borrowing capacity, tracked in the Market Manager and cToken.

Liquidation (auction-aware) flow

1. The Market Manager supports auction-based liquidations using transient, per-tx config set by authorized auction callers.

2. Authorized callers set a temporary liquidation incentive and close factor; auctions receive an additional AUCTION_BUFFER priority on thresholds.

3. If no transient config is present, standard liquidations apply.

Risk Management

Dynamic Liquidation Engine (DLE)

1. The Market Manager implements a three-tiered configuration per cToken:

   1. Collateralization ratio (collRatio): Base borrowing power while healthy.

   2. Soft Liquidation Threshold (collReqSoft)

      1. Initiates partial liquidations with base incentives.

      2. Minimal disruption to user positions.

   3. Hard Liquidation Threshold (collReqHard)

      1. Permits complete position liquidation.

      2. Maximum liquidation incentives within configured bounds.

Bad debt socialization

If a user's collateral value cannot cover their debt even at a full seizure, the shortfall is recognized as bad debt and socialized to lenders in that market. The manager computes and exposes this bad debt during liquidation evaluation.

Caps

• Collateral Caps: Per-cToken maximum posted collateral, measured in shares. Scales naturally with auto-compounding strategies.

• Debt Caps: Per-cToken maximum outstanding borrow, measured in underlying assets.

• Caps can be lowered without forcing immediate unwinds; posting/borrowing operations enforce caps at the time of action.

Position Cooldown (20 minutes)

• A minimum hold period applies to sensitive actions to mitigate flash loan and short-term oracle manipulation:

  • Posting collateral

  • Borrowing

  • Repayment and any redemption.

• The cooldown timestamp is updated on these actions; attempts before expiry will revert.

The state transition looks like:

Minimum active loan size

• Each isolated market sets a minimum active loan size in USD terms at deployment (WAD), constrained within $10-100.

• Hypothetical and real borrow paths enforce this to avoid uncloseable dust loans.

Pausing and Permissions

Global market toggles: liquidationPaused, transferPaused, seizePaused

Per-token action toggles: mintPaused, collateralizationPaused, borrowPaused (all queried via a consolidated actionsPaused() view function in the MarketManager.

Listing: Tokens must be listed a manager to be used for collateralization, borrowing, or liquidation.

Auction permissions: Only addresses with auction permissions set in the CentralRegistry may set/reset transient auction liquidation config. Misconfigured or unauthorized auction attempts will revert.

Position Managers: The manager maintains an isPositionManager whitelist for advanced/leveraged workflows that require elevated privileges.

State and Invariants

• Collateral posted (per-account): Tracked at the cToken layer. Query via ICToken.collateralPosted(account). Market-wide posted collateral is available via ICToken.marketCollateralPosted().

• Collateral Caps: collateralCaps[cToken] in shares.

• Debt Caps: debtCaps[cToken] in assets.

• Per-token actions paused: Visible via the manager's aggregate actionsPaused(cToken) view function.

• Listing: Manager-maintained listing state per cToken; operations revert if token is not listed.

Cross-Contract Interactions

The Market Manager interacts with multiple other components:

• Central Registry: Role/permission checks (market manager, auction permissions, timelock-controlled updates).

• Oracle Manager: Price feeds for risk checks and liquidation.

• cTokens: Accounting for balances, shares, collateral posted, borrowing, seizures, and redemptions.

• External auction controller: Sets transient liquidation parameters per transaction when conducting auction liquidations.

Security Measures

• 20-minute minimum hold period across sensitive actions.

• Auction-only privileges for transient liquidation overrides.

• Bad debt socialization to protect market solvency.

• Extensive pausing controls at market and token granularity.

User Interaction Functions

Core Data Query Functions

isListed()

Contract: MarketManager

Description: Checks if a cToken is listed in the lending market.

Function signature:

function isListed(address cToken) external view returns (bool)

Return data:

queryTokensListed()

Contract: MarketManager

Description: Returns a list of all tokens inside this market for offchain querying.

Function signature:

function queryTokensListed() external view returns (address[] memory)

Return Data:

assetsOf()

Contract: MarketManager

Description: Returns all assets that an account has entered.

Function signature:

function assetsOf(address account) external view returns (address[] memory)

Return data:

Status and Liquidity

statusOf()

Contract: MarketManager

Description: Determine the account's current status between collateral and additional liquidity in USD.

Function signature:

function statusOf(address account) external view returns (uint256, uint256, uint256)

Return data:

Permission and Validation

canMint()

Contract: MarketManager

Description: Checks if an account is allowed to mint tokens in the specified market, validating system parameters and account state. Transaction succeeds if true, reverts if false. Used by cTokens to check if minting is paused.

Function signature:

function canMint(
    address cToken) external view

canRedeem()

Contract: MarketManagerIsolated

Description: Checks if an account is allowed to redeem their tokens in the given market. Verifies that redeeming is not paused, and transfers aren't disabled in the CentralRegistry. Transaction succeeds if true, reverts if false. Used by cTokens to check if redeeming is paused.

Function signature:

function canRedeem(
    address cToken,
    address account, 
    uint256 amount) external view returns (uint256, bool[] memory)

canRepay()

Contract: MarketManager

Description: Checks if a loan repayment is allowed for an account in the given market. Reverts if false, succeeds if true.

Function signature:

function canRepay(address cToken, address account) external view

Paused States

actionsPaused()

Contract: MarketManager

Description: Checks whether minting, collateralization, borrowing of cToken is paused.

function actionsPaused(
    address cToken
) external view returns (bool, bool, bool);

Inputs:

Return data:

Market Invariants

Contract: MarketManager

Description: Returns the amount of cTokens that has been posted as collateral in shares.

mapping(address => uint256) public collateralPosted;

Inputs:

Return data:

collateralCaps()

Contract: MarketManager

Description: Returns the amount of cToken that can be posted of collateral, in shares.

mapping(address => uint256) public collateralCaps;

Inputs:

Return data:

debtCaps()

Contract: MarketManager

Description: Returns the amount of cToken that can be borrowed, in underlying assets.

mapping(address => uint256) public debtCaps;

Inputs:

Return data:

Overview

ProtocolReader is a comprehensive auxiliary contract designed for efficiently querying data from the Curvance ecosystem. It serves as the primary interface for data aggregators, frontends, and external systems to retrieve protocol information with minimal RPC calls.

Key Features

• Data Consolidation: Consolidates multiple variable fetches into single view functions, significantly reducing the number of EVM calls needed for comprehensive protocol queries.

• Pure View Interface: Contains no active storage values beyond immutable configuration and consists entirely of view functions, making it seamlessly upgradeable to support new data formats or query requirements.

• Comprehensive Data Access: Provides three main categories of data:

  • Static Market Data: Token configurations, collateral requirements, liquidation parameters.

  • Dynamic Market Data: Real-time prices, interest rates, utilization rates, liquidity levels.

  • User Data: Individual positions, collateral balances, debt positions, and veCVE locks.

User Interaction Functions

Data Aggregation

getAllDynamicState()

Description: Returns both real-time market data across all markets and comprehensive user position data in a single call. It combines getDynamicMarketData() (current prices, interest rates, liquidity) with getUserData() (user's positions, collateral, debt, veCVE locks) to minimize RPC calls for frontend dashboards.

Function signature:

function getAllDynamicState(
    address account
) public view returns (
    DynamicMarketData[] memory market,
UserData memory user
 );

Return data:

getStaticMarketData()

Description: Returns immutable configuration data for all markets including token details, collateral requirements, debt caps, liquidation parameters, and oracle adapter types.

Function signature:

function getStaticMarketData() public view returns (StaticMarketData[] memory data);

Return data:

getDynamicMarketData()

Description: Returns real-time data for all markets

Function signature:

function getDynamicMarketData() public view returns (DynamicMarketData[] memory data)

Return data:

getUserData()

Description: Returns the current outstanding borrows across all Curvance markets.

Function signature:

function getUserData(address account) public view returns (UserData memory data)

Return data:

Price Oracle

getPrice()

Description:

Function signature:

function getPrice(
    address asset, 
    bool inUSD, 
    bool getLower) 
    public view returns(
    uint256 price, 
    uint256 errorCode
);