Curve Deploys crvUSD Stablecoin On Ethereum

crvUSD, the highly anticipated stablecoin from Curve Finance, is now live on Ethereum.

The contracts were deployed on Wednesday, inspiring DeFi degens to deposit $2M into the protocol within a couple of hours, despite no user interface being live.

Curve is a stablecoin-focused decentralized exchange, offering low-fee swaps and boasting nearly $5B in total value locked. Its CRV governance token is up nearly 7% in the past 24 hours.

crvUSD is one of a new generation of forthcoming decentralized stablecoins native to popular DeFi protocols that promise to disrupt the sector. Curve users will be able to mint crvUSD against collateral assets deposited in the protocol, allowing users to access liquidity while simultaneously earning yield on their deposits.

The launch came one day after Curve launched crvUSD on the Sepolia testnet. A GitHub repository described the testnet deployment as intended to test whether Etherscan, a popular block explorer, would verify the token. Curve first deployed the contract for crvUSD on Sepolia on April 25.

LLAMMA Liquidations

crvUSD’s white paper says the stablecoin will introduce a novel lending-liquidating AMM algorithm, or LLAMMA, to ease the effects of liquidations on borrowers.

As the value of Ether collateral backing crvUSD approaches its liquidation price, the protocol will gradually convert it to stablecoins. Then, as the price of ETH rises, the assets are converted back to ETH.

“This transforms liquidations from a jagged, all-at-once, all-or-nothing affair with huge slippage losses into a smooth transitioning that could even earn the collateral holder swap fees if they weather the volatility,” said foobar, a web3 developer.

Aave GHO

Aave, the top DeFi money market protocol, has passed a governance proposal outlining initial parameters for GHO, its upcoming native stablecoin that will likely compete with crvUSD.

Aave users will similarly be able to mint GHO against collateral assets deposited to Aave for yield generation. The initial parameters include a 1.5% interest rate for borrowers of 1.5%, a 30% fee rebate for AAVE stakers, and a debt ceiling of 100M GHO.

Renewed Emphasis On Decentralization

The milestones for crvUSD and GHO come as interest in decentralized stablecoins is at an all-time high.

The 2022 bear market was marked by the failure of several major CeFi firms, including the popular FTX exchange and crypto lenders Voyager and Celsius, leaving many investors wary of custodial counterparty risk and igniting demand for decentralized alternatives.

However, few decentralized stablecoins have gained meaningful adoption, giving cautious traders scant alternatives to centralized stable tokens.

MakerDAO’s overcollateralized DAI stablecoin is the top decentralized stablecoin with a $5B market capitalization.

But DAI has been criticized for being heavily backed by centralized assets, predominantly Circle’s USDC token, in recent years. The critics appeared to be validated in March when the price of DAI slumped below $0.90 amid fears over USDC’s solvency. The protocol is now aiming to limit DAI’s exposure to centralized assets per its Endgame roadmap.

FRAX has held steady second place with a $1B capitalization since December.

Liquity’s LUSD captured significant market share to emerge as the third-ranked decentralized stablecoin this year, growing from $175M to $278M since late January.