What is Curve DAO (CRV)?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 6 min
In short
Curve is a decentralised exchange launched in 2020 that specialises in swapping assets expected to trade at near-identical prices. It uses a formula that keeps slippage low for pairs such as two stablecoins. CRV is its governance token, and locking it for longer periods increases both voting power and influence over where rewards are directed.
Key points
- Uses a formula (StableSwap) optimised for swaps between closely priced assets
- Locking CRV yields veCRV, increasing voting power and influence over reward allocation
- Several protocols competed to accumulate that voting power over reward gauges
- In 2023 a compiler-level flaw was exploited, draining funds from some pools
Definition
An automated market maker specialised in swaps between closely priced assets such as stablecoins, governed through a system where lock duration determines voting power.
The standard AMM formula assumes a pair whose prices move substantially. For assets that should be near-equivalent, such as two stablecoins, that formula produces unnecessarily large slippage. Curve addressed this with a different curve that keeps prices flat near parity.
As a result it became widely used for swapping dollar stablecoins against each other and ETH against its staking receipt tokens, and other DeFi protocols route swaps through it.
Its governance design is distinctive. Locking CRV for a period yields veCRV, with longer locks granting more voting power. veCRV holders vote on gauge weights, deciding which liquidity pools receive more CRV emissions. Protocols wanting emissions directed to their own pool competed to accumulate that voting power, a contest nicknamed the Curve wars.
The protocol later added a collateral-backed stablecoin of its own. In 2023, however, a flaw in the reentrancy guard of certain versions of the Vyper contract language was exploited and funds were drained from several pools — a reminder that the compiler beneath the contract code is also part of the attack surface.
Watch out for
- · A CRV lock cannot be undone during its term, so funds stay locked regardless of price moves
- · If one side of a pair depegs, the pool skews and liquidity providers end up holding the weaker asset
- · The 2023 exploit originated in the contract language itself, showing that audited code can still rest on broken assumptions
Frequently asked questions
Are stablecoin swaps free of loss?
Slippage is small while both hold their peg, but if one stablecoin loses its value the pool fills up with it, leaving liquidity providers holding mostly the broken asset.