Curve Finance has revised its fee distribution mechanism, transitioning from the 3crv token to its native stablecoin, crvUSD, to enhance the stablecoin’s utility within the Curve Finance ecosystem and incentivize users.
According to a press release shared with Cointelegraph, switching the fee distribution to crvUSD will create “an additional supply sink for the stablecoin,” primarily due to uncollected fees contributing to this “supply sink” and potentially boosting the total value locked (TVL) in the ecosystem.
Michael Egorov, founder of Curve Finance, discussed the switch’s impact on users with Cointelegraph:
“The transition to crvUSD means that users will now obtain fees in a dollar-denominated stablecoin.
“This shift simplifies the process significantly, as crvUSD doesn’t have to be converted to anything else to be utilized in Curve Finance products.”
The press release highlights that distributing fees in crvUSD will incentivize stablecoin usage, encouraging users to engage more with products and services that use it.
On community incentives through this transition, Egorov explained that Curve users could deposit crvUSD into the ecosystem using the fees earned.
“The value of 3crv, although generally increasing, has a variable conversion rate (currently around 1.03).
“This variability necessitated additional steps for users to convert 3crv into a more stable or usable form of currency for other activities.”
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Curve Finance acknowledges potential liquidity concerns and risks associated with the transition.
Egorov elaborated on the risks, mentioning operational risks and asset age:
“The 3crv token has been operational for over four years and has shown no issues. […] CrvUSD is just one year old and has yet to fully establish its reliability.
“It underwent multiple audits and has been deemed fit for deployment, but it is inherently less time-tested compared to 3crv.”
Egorov also addressed operational risks during the “preparation phase” for on-chain votes required for the change, stating that these risks have been mitigated since “all relevant votes” have passed.
Overall, the switch to crvUSD aims to streamline user experience and boost the stablecoin’s role within the Curve Finance ecosystem, despite some inherent risks and the need for further community adaptation.
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