What is Curve DAO Token? CRV Explained

Inside Curve DAO Token

The Curve finance protocol is known as a decentralised finance (DeFi) platform that takes advantage of an automated market maker (AMM) to deal with liquidity.  

An AMM is a protocol that provides cryptocurrency trading without the need for an intermediary by using liquidity pools. If you want to gain more insight, check out this article: ‘AMM Explained: Automated Market Makers & How They Work’. 

Furthermore, Curve is a decentralised exchange that mainly focuses on stablecoins. It supports a variety of stablecoins, and enables users to trade between pairs efficiently and rapidly. 

Liquidity pools are one of DeFi’s core innovations. The Curve platform provided an effective manner of exchanging tokens by maintaining low slippage rates. The platform itself brings users together to trade at these rates. 

Basically, technology is Curve's main upper-hand. This DeFi project brought to the DeFi table liquidity pools built on smart contracts that operate as AMMs, instead of relying on order books as electronic documents of conducted trades. 

To achieve this system of finding best routes for users’ requests, including low slippage and fees, Curve utilises these liquidity pools that are backed with liquidity tokens.

How is Curve DAO Token governed?

The Curve protocol started off with introducing decentralised governance through a Decentralised Autonomous Organization (DAO). If you are a newcomer to the DeFi space, we suggest reading this article to learn more: ‘What’s a DAO?’ 

Therefore, this decentralised exchange (DEX) has been governed by a community of CRV token holders through the CurveDAO. While the core team handles development and maintenance, the community is responsible for the overall decision-making process

In 2023, Michael Egorov, took over more than two thirds of the voting power as an overreaction to Yearn.Finance obtaining close to 58% of the voting power. The Russian scientist apologised afterwards.

Brief history of CurveDAO

Back in 2020, Michael Egorov introduced the Curve platform, followed by a whitepaper released the year before. The founder had a bunch of past experience working with crypto companies. Besides Curve, Egorov is the co-founder of NuCypher and LoanCoin.  

Egorov took some time to explore liquid staking which led to the creation of an algorithm for constructing deep markets for crypto assets with similar prices. The whole Curve project was built on this algorithm. 

Curve managed to obtain a lot of strategic partnerships along the way. For example, in 2020 Curve announced its partnership with RenVM to enable smooth conversions between BTC and WBTC with low slippage rates. 

A bit later Curve launched integrations with DEX aggregators such as ParaSwap and 1inch. In 2021 Curve integrated with the money market platform Equilibrium; a year later it managed to integrate with Aurora, a layer of the Near Protocol.

What makes Curve DAO unique?

Curve is a relatively new project on the crypto market whose utility has already been demonstrated. The project witnessed a significant expansion in the end of 2020, and became well-known for providing liquidity, low fees and slippages for the purpose of exchanging ERC-20 tokens and stablecoins.

Its value derives from the creation of liquidity pools through smart contracts which act as AMMs; customers can find the most efficient exchange routes, and trade in cryptocurrencies, including stablecoins.

In simple terms, Curve created an AMM software for digital assets that encompass similar pricing properties, including stablecoin Bitcoin tokens. Such a design system is able to minimise impermanent loss, reduce fees and minimise slippage. Unlike other exchanges whose liquidity pools are made up of cryptocurrencies such as Bitcoin or Ethereum, Curve's liquidity pool consists of stablecoins.

Curve's share of affairs

In August 2022, the Curve protocol was hacked. Perpetrators managed to steal approximately $570,000 from Curve Finance. The team communicated with users through social media such as Twitter and Telegram. Finally, they have stated that the root cause of the issue was identified. Allegedly, the hackers manipulated the domain name system (DNS) entry for the Curve protocol, redirecting users to a clone and gaining approval for a malicious contract. 

One of the most common issues within the crypto realm is exploitation; CurveDAO was a victim multiple times. The protocol itself has, on multiple occasions, halted rewards to liquidity pools that it believed weren’t acting in the best interest of the Curve protocol.  

Governance attacks have severe effects on protocols, especially those that deal with liquidity. Many users lost their trust in the protocol. As a consequence, the total value locked (TVL) metric shrank; the TVL of a DeFi protocol typically serves as a parameter of the community’s trust in the project. Basically, it is a sign that users trust the protocol enough to invest their funds.  

The protocol has a TVL of more than $25 billion which shrunk to a bit more than $6 billion. Keep in mind that there are many factors that affect the TVL, and that the users’ trust in the project cannot be solely responsible for such a downtrend. However, it still presents an indication that at some point in time, end-users valued the project less than before. 

This is not all – In June 2023, Curve’s founder Michael Egorov was sued by three DeFi venture capital companies: ParaFi Capital, 1kx, and Framework Ventures. Egorov was sued before the Superior Court of California for allegedly misappropriated trade secrets belonging to these three companies, along with defrauding them for approximately $1 million. The proceedings are still ongoing.

The 2023 Curve hack

This summer Curve DAO token experienced another controversy. On July 30, several DeFi protocols on Curve Finance were hit; this attack resulted in stealing $62 million worth of cryptocurrencies. The big hit was connected to a pain point in Curve’s liquidity pools and Vyper, an alternative programming language for Ethereum-based smart contracts.

Basically, vulnerabilities spotted in particular Vyper versions enabled malicious actors to execute multiple calls in a single function and manipulate smart contracts into calculating inaccurate balances. 

Then someone came to rescue; a day after the hit, an ethical hacker known as ‘c0ffeebabe.eth’ managed to recover around $5.4 million worth of crypto assets and give it back to the protocol. In the meanwhile, fake Curve accounts on Twitter promoted a fake refund scheme.

Curve has been silent till the mid of August when the company announced its aim to compensate users that have been affected by the hack and the fake refund scheme.

Unfortunately, scams and threats are happening frequently within the crypto space. You probably wonder what happens with your funds after a DeFi protocol has been exploited. To learn more, we suggest reading this article: 'Can I recover my hacked DeFi funds?'.

How does Curve DAO work?

The Curve platform is powered by the Curve DAO token. The platform itself assumed the role of an exchange, including an automated market maker (AMM) used to manage liquidity and provide a divergent model of permissionless trading. Simply put, trading is conducted through liquidity pools automatically. 

Liquidity providers on the Curve platform are incentivised to create these pools and deposit tokens. Each liquidity pool encompasses particular token parts. To minimise impermanent loss, liquidity pools contain similar crypto assets. 

Here we can differentiate Curve V1 and V2 pools. Curve V1 pools consist of stable crypto assets. When a pool is balanced within a particular range, slippage is optimised to assure an equal swap. This amounts to approximately 100 times less slippage. 

On the other hand, Curve V2 pools hold crypto assets with divergent prices. This model is similar to Uniswap V2 as it concentrates liquidity around current prices with the purpose of obtaining higher efficiency. When trades happen, the pool itself re-adjusts internal prices to the highest liquidity region to reduce slippage. 

How is liquidity provided on Curve?

When liquidity providers handle liquidity on the platform, they earn yield through trading fees paid by swap users. Basically, they get 50% of all trading fees. In addition to trading fees, some pools provide interest from lending protocols by generating higher yield for liquidity provides, along with bringing to the table more risks.  

Liquidity providers on the Curve network receive the native CRV token for providing liquidity. This ensures the offering of low fees and significantly low slippage. As a governance token, the Curve DAO token (CRV) is used to incentivize liquidity providers and engage more users in the protocol's governance.

Additionally, Curve implemented a mathematical formula to automatically concentrate the liquidity contributed by liquidity providers around the current market price. The main purpose is to reduce slippage and enable the exchange of substantial amounts of crypto by end-users without causing any disruptions to the cryptocurrency market

Curve Tokenomics

Curve DAO token (CRV) is an ERC-20 governance token created to incentivise liquidity providers on the Curve platform. Aside from governance, CRV tokens are used for value accrual as well. 

A governance token is used by token holders to vote within the DAO. If CRV token holders want to vote within the CurveDAO, they must lock up their CRV tokens and obtain veCRV tokens.

What is veCRV?

The term veCRV token is merely a representation of Curve DAO tokens that have been vote-locked to participate in governance and earn rewards. Curve DAO tokens can be locked up to 4 years, and the amount of veCRV tokens returned is proportional to that period of time.  

When users become veCRV holders they receive half of the trading fees from the Curve protocol. Further incentives include boosting rewards for providing liquidity and voting to direct gauge rewards.

Curve DAO token total supply, circulating supply and market cap

The circulating supply of Curve DAO tokens equals 867,993,443 out of a total supply of 3,303,030,399 tokens. Similar to Bitcoin, Curve DAO Token includes a limited supply. This is not unusual because crypto assets frequently limit the total supply of tokens to counter inflation. 

Since Curve’s governance is decentralised, participants might be able to propose changes of the max supply in the future.  

As for the market cap currently, it equals $383,614,523, while the fully diluted valuation amounts to $1,459,787,366. A fully diluted valuation refers to a maximum market capitalization, assuming the maximum number of 3.3 billion CRV tokens are in circulation at the time of writing.

When it comes to the Curve DAO token price, it is currently underperforming the global cryptocurrency market. Keep in mind that this is a constantly changing metric.  The Curve DAO token price fluctuates like any other cryptocurrency as it is based on supply and demand.

The price of any cryptocurrency is subject to frequent changes due to the volatility in the crypto market and a great number of specific factors that influence their prices. For example, CRV tokens are affected by market sentiment, the flow of assets on exchanges, and the economy in general.

What gives the Curve DAO token value?

The value of CRV tokens derives directly from Curve’s technology, popularity among the crypto community and use cases. Therefore, its intrinsic value is measured by the used technology, utility and features that enable traders to obtain promised benefits – low slippage and reduced trading fees. That is how the Curve DAO token obtained its real-life value. 

The token is also affected by a bunch of other factors such as events within the DeFi ecosystem, developments, user base, upgrades and others. All of these affect the token’s value and define its price on the crypto market. 

As mentioned above, a token’s intrinsic value may vary from its market counterpart. As any other crypto asset, it is subjected to changes; therefore, the price can vary or change significantly in a short period of time.

The utility of Curve DAO tokens

CurveDAO gets its utility from all the features that make the Curve system stand out within the DeFi space. The platform gained popularity due to the technology used; as an exchange, it doesn’t rely on order books, yet forms liquidity pools run by smart contracts that assume the role of AMMs.  

Since the technology is about finding the best trading route, it soon became a platform cherished by traders. CRV tokens lie in the heart of the platform not only for being a governance token and real-world application, but also for their ability to be traded for a profit by arbitrage and swing traders. 

How to buy Curve DAO tokens?

Curve DAO tokens are circulating in a bunch of centralised and decentralised exchanges. Popular exchanges that provide CRV tokens are, for example, Binance, Coinbase, KuCoin and many others. 

Once you buy CRV tokens on an exchange, you can transfer it to your crypto wallet, either software or hardware, for an extra layer of security. It is important to choose a CRV compatible wallet to access the protocol. 

Buying crypto isn't complicated, but it may be confusing for beginners. You can start your crypto journey by checking out our guide: 'How to buy crypto'.

Choosing a Curve DAO Token wallet

Since ERC-20 tokens can be stored within any crypto wallet that supports Ethereum, the type of wallet you choose depends mostly on how much you need to store and how you want to use it. 

Hardware wallets, also known as cold wallets, are considered as a safe option for storing crypto assets. Having offline storage and back-up presents a high degree of security, yet it requires a bit more technical knowledge. 

Therefore, cold wallets are a good choice for experienced crypto users that need to store broad amounts of CRV tokens. 

On the other hand, software wallets are a beginner-friendly option. Since they are easy to download as a mobile or desktop application, they are more suitable for newcomers. 

Keep in mind that digital wallets can be either custodial or non-custodial, depending on who manages the private keys. 

Even though they are more convenient and easy to use, these wallets are considered less secure than cold storage. Therefore, they are more suited for novice users and for storing smaller amounts of CRV tokens.