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Understand How Curve Finance Uses Stablecoins To Power Its DEX [Explained]

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Unknown Speaker  0:01  

Welcome to the New To Crypto podcast designed to guide you through the crypto landscape with pinpoint accuracy created for the new and intermediate crypto investor. Join your host Crypto Travels Michael as he takes you through the different facets of getting started and succeeding in your crypto journey. New to crypto podcast brings you new episodes daily Monday through Friday with surprise bonus episodes sometimes on the weekend. Let me ask you, are you new to crypto don’t know where to start? Are you more experienced but have questions? Then you’re in the right place. This podcast is designed for you, coming at you from the training center in the lifestyle design studio. Here’s your host Crypto Travels Michael.

 

Michael  0:52  

Today’s show. I’m excited to have you here today is all about Curve Finance and Curve finance is a decentralized exchange or Dex dedicated to offering stable coin exchanges. Simply put it trades like UniSwap does only Curve focuses on assets with one to one parody with fiat currencies. So the features have made Curve a favorite among traders and stable coin liquidity providers looking for minimal slippage to minimize their losses. So just a little background on what slippage is when we talk about slippage we refer to the difference between the expected price of a trade and the price at which the trade is executed. This is a reoccurring source of losses on a lot of trades for traders like other decks protocols within Ethereum, Curve finance bases its operation on an automated market maker system. It differs from projects like UniSwap or SushiSwap by basing its trades on a weighted system of curves prices and dynamic slippage. This is to offer the best price the lowest losses and the lowest possible exchange rates. 

 

So let’s unpack some of the benefits. One of the main advantage of Curve is that its coin exchange mechanism is extremely simple. Its smart contract is far from being very complex, and its main advantage is that its maintenance and security improvement is very high. In fact, it has a very active security research team Curve offers a simple interface and some of the most secure smart contracts in the entire DeFi ecosystem. This together with a wide support of stable coins and among them, some of them are DAI, USDT (tether) TUSD, BUSD, USDC, Packs SUSD as well as BTC pairs. So they basically allow trading with all of them quickly in a noncustodial process in a decentralized way. So let’s break down what Curve pools are stable liquidity pools right Curve’s liquidity pools are similar to the UniSwap ones. In fact, Curve is known as the Uniswap of stable coins in some circles. Remember that a liquidity pool is simply a space controlled by a smart contract where large amounts of an asset are a masked and injected or invested by liquidity providers also known as LPs, these users inject liquidity in order to earn profits from the loans or swaps that will be made using these assets. 

 

Thus, each loan or trade made carries a small fee or interest if you will, which when added together ends up feeding the profits of liquidity providers, liquidity providers can inject their IADS or USDT’s into Curve’s pools which this protocol will use to offer trades in exchange for a small fee that will ultimately feed the liquidity providers profits. The exchange ratio within these pools is handled by smart contracts. This is what allows the system to be classified as an AMM. On an AMM exchange such as UniSwap you can earn fees whenever a trade is made, on Curve trading fees are lower than they are on UniSwap, But you can also earn rewards from outside of Curve with interoperable tokens. Curve integrates with other platforms providing another means of secondary exchange in order to earn higher profits. This is why we see liquidity pools in projects such as urine finance, UniSwap and compound each designed to take advantage of the liquidity contained in Curve by using those assets and other protocols Curve and its pools are intended not only to serve as an exchange, but also to provide liquidity to other protocols. So let’s go over the low fees for a moment. 

 

So another point is that it tends to offer exchanges for significantly lower commissions than others. other platforms for example, during the last Ethereum gas price spike a trade on Curve average $33 while on UniSwap, it was well over $55 It was between 55 to $80. So trading tokens on Curve is fairly low risk trades consist of a single transaction with a minimal attack surface. Additionally, risks of impermanent losses are rare to see within Curve. This is thanks to the fact that this protocol makes use of stable coin. So what is the origin of Curve? Curve finance is relatively recent project and the DeFi world in fact, its whitepaper was presented on November 10 2019 by Michael Egorov. 

 

The platform originally named StableSwap was intended to provide DeFi services for stable coins within an AMM, so Michael Egorova is known to be the founder and CEO of Curve, he was also the co founder and CTO of NewCypher and encryption company. And the token is CRV so, the CRV token is an ERC 20 governance token designed to incentivize liquidity providers on the platform as well as to get as many users as possible involved in the governance of the protocol. Currently, the CRV token has three main uses: voting, staking, and momentum these three things require voting within the Curve’s DAO if any user wishes to vote that they must lock their CRV tokens and acquire veCRV token, veCRV stands for escrowed voting CRV. It is simply CRV tokens locked for a period of time and the longer you lock your CRV tokens, the more veCRV you will receive the CRV token can be bought as well as earned through yield farming when you deposit it assets into liquidity pools and earn tokens as a reward like all ERC 20 tokens, it can be stored in any wallet that is capable of supporting this standard so users can store it securely at all time.

 

I hope that today’s episode about Curve Finance has been informative to you and has helped paint a better picture for you as to what Curve is definitely like and subscribe the podcast and I thank you for chiming in here and I’ll definitely meet you here tomorrow for another new episode. If you would like to reach out to me, you can email me at show@newtocrypto.io Until tomorrow, make it a great day.

 

Unknown Speaker  7:36  

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By: cryptotravelsmichael
0

Table of Contents

What Is Curve? 

Curve is an AMM platform that looks a lot like Uniswap and Balancer. Still, it differs in that it only accepts liquidity pools formed up of similar-behaving assets like stablecoins or wrapped versions of comparable assets like wBTC and tBTC. 

Curve may employ more efficient algorithms, have the lowest costs, slippage, and temporary loss of any decentralized exchange (DEX) on Ethereum, thanks to this technique.

What Makes Curve Different? 

Curve was founded in 2020 with the goal of producing a low-fee AMM exchange while also offering liquidity providers with an optimized fiat savings account. 

Curve allows investors to dodge more unstable crypto assets while still earning high-interest rates via lending procedures by focusing on stablecoins. 

The Curve model is more conservative than other AMM platforms in that it minimizes volatility and speculation in lieu of stability.

The pool is attempting to restore its previous status by selling DAI at a discount. Trading between assets in the Curve pool creates low volatility opposed to other AMM liquidity pools because their prices are constant. 

Curve decreases impermanent loss, an AMM phenomenon wherein liquidity providers lose token value compared to the market value of that token due to volatility in a liquidity pool by restricting the pools and the sorts of assets in each pool.

Curve draws liquidity providers through DeFi composability, which trades off the high risk — and occasionally great profit — component of volatility. 

This suggests you can earn incentives elsewhere in the DeFi ecosystem with the money you’ve put into the Curve platform.

Curve makes no attempt to maintain the values of different assets equal or balanced. Curve can now concentrate liquidity towards the ideal price for similarly valued assets, ensuring that liquidity is available when it is most needed. 

As a result, Curve can obtain a considerably higher liquidity utilization with such assets than would otherwise be achievable.

Curve’s liquidity pools also include tokenized variants of bitcoin, including wBTC and renBTC. 

Bitcoin is incredibly volatile when compared to a stablecoin. However, the Curve technique still works since tokens in Curve pools don’t have to be steady themselves – they have to be stable in comparison to other tokens in the same pool.

It differs from projects like Uniswap or Sushiswap by basing its trades on a weighted system of ‘curves’ prices and dynamic slippage. This is to offer the best price, the lowest losses and the lowest possible exchange rates.

- Crypto Travels Michael

Here's What We Discussed in Detail in This Interview

[00:01 – 02:00] Opening Segment

  • Welcome to another incredible episode
  • An intro to Curve Finance 
    • DEX dedicated to stablecoin exchanges
    • Trades similar to Uniswap
      • Difference is that it focuses on one to one parodies with Fiats
    • Provides LPs with minimal slippage on investments
      • Expected price of a trade vs. the price the trade is executed on
    • Based on a weighted system of curves

 

[02:01 – 05:31] Understand How Curve Finance Uses Stablecoins To Power Its DEX

  •  Advantages of Curve
    • Extremely simple 
    • High maintenance and security improvement
    • One of the most secure Smart Contracts
    • Trade with a non custodial process
  • I break down Curve Pools 
    • ‘The Uniswap of Stablecoins’
    • LPs inject liquidity to receive profits
    • Exchange ratio handled by smart contracts
    • Earn rewards from outside of Curve as well
  • How it handles low fees
    • Trades average $33
    • Low risk, minimal attack surface 
    • The use of stablecoins 

 

[05:32 – 08:15] Background of Curve and Its Native Token CRV

  • The origin of Curve
    • Recent project from DeFi
    • Presented by Michael Egorov
    • Originally names StableSwap
    • More on the founder
  • The Curve native token CRV 
    • ERC20 governance token 
    • Incentivized LPs to participate
    • Three uses
      • Voting 
      • Staking
      • Momentum 
    • Must lock CRV to obtain VECRV
    • Can be bought or earned through farming 
  • Final words

Killer Resources

HOW TO REACH TO CRYPTO TRAVELS MICHAEL

Final Thoughts

Curve is a well-known automated market maker (AMM) platform that provides a very efficient means to exchange tokens while keeping cheap fees and little slippage by only accepting liquidity pools made up of assets that behave similarly.

Curve incentivizes their involvement by integrating with other DeFi protocols and offering benefits in the form of CRV tokens and interest. At the same time, this strategy leads to lower fees for the liquidity providers who provide the pools with tokens.

Since it prioritizes stability and composability above volatility and speculation, Curve is one of the most effective DeFi platforms.

Its modular components make it an interconnected center of the DeFi ecosystem, and it is a fully decentralized organization that is owned by its users, thanks to the CRV token as a governance system.

The New to Crypto Podcast is designed to guide you through the crypto landscape with pinpoint accuracy. New episodes are added daily. Be sure to subscribe to the podcast and listen to all of the episodes to help you in your cryptocurrency journey.

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