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On Wednesday afternoon, the decentralized finance (DeFi) protocol Curve Finance successfully launched its much-awaited native stablecoin, crvUSD, on the Ethereum mainnet.
According to data on Etherscan's blockchain, a contract has generated a total of $20 million worth of crvUSD tokens in just five transactions over the span of five minutes. Following the initial token minting, a cryptocurrency wallet identified as "Curve.Fi Team" by the blockchain intelligence firm Arkham Intelligence proceeded to take out a $1 million loan denominated in crvUSD, utilizing $1.8 million worth of frxETH - an Ethereum derivative token issued by the DeFi protocol, Frax Finance.
Later in the afternoon, Curve officially announced the deployment on their Twitter account.
Upon the successful launch of crvUSD on the Ethereum mainnet, the governance token of Curve Finance, CRV, experienced a significant boost in value, jumping to 97 cents and recording a 7% increase for the day, according to the data provided by CoinDesk.
The deployment of Curve's long-awaited stablecoin to the public signifies a significant milestone. Curve, which is one of the largest decentralized marketplaces specializing in stablecoins with approximately $5 billion in assets on its protocol, had announced its plans to develop its own dollar-pegged stablecoin last year.
Curve's stablecoin is expected to encounter significant competition as numerous DeFi protocols are either already issuing or actively developing their own native stablecoins. This competition is aimed at enticing users and boosting activity within the crypto trading and lending sphere, which has been experiencing a slump recently.
In February, Aave, a massive DeFi protocol with approximately $7 billion in locked assets, launched its native stablecoin GHO on the testnet. MakerDAO, a lending protocol, currently issues the largest decentralized stablecoin, DAI, which has a market capitalization of $5 billion.
The crvUSD stablecoin is currently unavailable to the general public as it has not been integrated into Curve's user interface yet. According to an administrator in the protocol's official Telegram channel, the stablecoin's public release is pending the completion of the front-end integration, which is expected to happen soon.
How Curve’s crvUSD work
As per the whitepaper published by Curve in November, crvUSD is a stablecoin that is fully collateralized by crypto assets. The token's value is pegged to the US dollar at a rate of 1:1, meaning its price remains stable at $1.
Curve's supply of crvUSD will be managed through a mint-and-burn system similar to MakerDAO's DAI or Aave's upcoming GHO. Investors can generate crvUSD by creating a collateralized debt position (CDP) and depositing digital assets as collateral into Curve's smart contract. When the borrower closes their debt position to reclaim their collateral, Curve will destroy (burn) the corresponding amount of crvUSD.
The crvUSD sets itself apart from its rivals by utilizing a groundbreaking lending-liquidating mechanism dubbed LLAMA, as outlined in the whitepaper. This algorithm continuously adjusts users' collateral holdings in response to fluctuations in cryptocurrency prices.
Suppose the value of the cryptocurrency used as collateral drops below the liquidation threshold. In that case, the protocol will execute a gradual conversion of the assets into crvUSD and later reverse the process (de-liquidation) as the asset's price recovers.
The mechanism provides a more seamless and gradual liquidation procedure compared to a sudden and severe event that can result in turmoil and significant losses on lending platforms during cryptocurrency market downturns.
