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Curve DAO Token (CRV)

Curve DAO (CRV) is the native ERC-20 governance token of Curve.fi, an Ethereum-based decentralized exchange developed by a team of anonymous developers, and launched in January 2020. The DeFi protocol utilizes Automated Market Maker (AMM) and facilitates the exchange of stablecoins (e.g. DAI, USDD, and USDC) and other ERC-20 tokens. 

The decentralized autonomous organization (Curve DAO) controls the DeFi protocol, with its utility and governance token CRV. CRV is used to reward liquidity providers and allow its holders to participate in the decision-making process, giving the community a real voice and a way to make decisions as a group at large.

About Ethereum 

The Curve protocol envisioned a decentralized exchange, where the community has a real voice, and Ethereum’s decentralized and vastly diverse community aligned with Curve’s mission. In addition to that, Ethereum’s EVM provides a robust infrastructure for building complex decentralized applications, making it easier for developers to build and deploy on its mainnet. 

Ethereum’s well-established DeFi ecosystem also enables Curve to interconnect with other DeFi protocols and provide liquidity across multiple protocols. As Curve is growing and is planning to be on several chains, it still claims that Ethereum will stay as its primary chain. 

CRV Token Use Cases

The Curve DAO(CRV) has the following important uses in the DeFi protocol’s ecosystem:

Reward (Liquidity Providers): The CRV token is utilized in paying rewards to the liquidity providers who lend their tokens to the DeFi protocol’s liquidity pools. The rewards are paid in CRV and 0.04% of trading fees. 

The Curve DeFi is internally designed to promote long participation in its liquidity system, meaning rewards are based on how much and how long a user provides liquidity. 

Participation in Governance: Curve is a decentralized finance protocol, which means it has a decentralized governance system. Governance in Curve is accomplished by the Curve DAO (Decentralized Autonomous Organization), there is no hierarchy or management team in the DAO, and decisions are made by voting. 

Users are required to lock their CRV tokens in a fixed period between one week and four years, to participate and make proposals. Users receive a voting token called veCRV (Vote Escrowed CRV) equal to the amount and the duration of time of CRV tokens they locked. The more veCRV a user holds, the more value its vote has.

Voters get to decide on decisions such as reward schedules, trading fees, and bringing new yielding liquidity pools, letting the community decide the future of the protocol. After the voting is finished, the changes are implemented through Curve DAO’s smart contracts.

Economic value

CRV has a total supply of 3,303,030,299 CRV, out of which 1,073,711,150 CRV are currently in circulation. CRV has a total supply of 3,303,030,299 CRV, out of which 1,073,711,150 CRV are currently in circulation. The DAO has reserved 5% of the project out of the total supply, 3% of the supply has been reserved for employees in Curve Exchange and 30% for the employees in Curve DeFi protocol. Almost the remaining tokens are reserved for CRV future alongside the existing liquidity providers. 

The Curve DAO ensures the daily distribution of almost 766,00 CRV tokens with an annual reduction of 2.25% in the distribution. This process of issuing the remaining CRV tokens with the existing rate might extend for 300 years. 

Challenges

The Curve.fi currently is built on the Ethereum blockchain, which is well known for its high transaction fees and low transaction processing. Curve also faced a multi-million dollar security breach on July 30, 2023, leading to approximately $70 million stolen from its several liquidity pools. The native token  CRV has a very limited utilization in its ecosystem, whereas there are many well-established tokens with multiple utilities.