Curve DAO Token

What is Curve DAO Token (CRV)?

CRV is the native token of the Curve DAO, the decentralized autonomous organization that governs the decentralized finance (DeFi) mainstay, Curve Finance.

Curve Finance is a decentralized application (dApp) deployed on the blockchain that users can interact with. Curve can be described as a decentralized exchange (DEX) that allows users to exchange various cryptocurrencies in a permissionless manner.

Curve uses an Automated Market Maker (AMM) to manage liquidity. This allows users to trade on its platform without connecting individual buyers to sellers as traditional order books do.

The CRV token is a governance token of the platform and a utility token on the Curve Finance platform for users to earn yield.

What is a DEX?

A decentralized exchange, or DEX, allows users to exchange tokens or currencies without trusted third parties. These often include centralized trading facilitators, brokers, market makers, or clearing houses.

Trading traditional assets, such as stocks, typically involves many third parties. All of them must be trusted to carry out their contractual obligations.

Trading cryptocurrency tokens can also involve centralized entities. This often includes a cryptocurrency exchange that plays some or all of the roles required, such as the provision of liquidity.

However, users who do not trust centralized entities may use a DEX instead. DEXs rely on code and smart contracts that are open-source and can be publicly audited.

Decentralized exchanges also use innovative solutions such as liquidity pools to provide users with liquidity. For example, U.S. stock market broker-dealers often turn to naked short selling to create liquidity when there isn’t any on the order book. In the U.S., naked short selling is legal thanks to an exception to the regulations made specifically for these bona fide market makers. Still, it artificially inflates the supply of a stock and therefore distorts the supply/demand equilibrium.

In contrast, decentralized exchanges conduct all of their operations publicly. If, for example, the liquidity of a token starts to decrease, buyers simply have to make better offers.

When Was Curve DAO Token Launched?

Curve Finance began as a decentralized exchange purely for stablecoins called StableSwap. It allowed users to swap between USDC, DAI, and USDT with very low slippage.

Curve launched in January 2020, seeing significant growth in the following months as DeFi fever took over the cryptocurrency industry. It was one of the top DeFi protocols that gained significant popularity and launched its own token in August 2020.

The CRV token came hand-in-hand with the Curve DAO, launched as a governance medium for the DAO.

Who are the Founders of Curve DAO Token?

Curve was founded by Michael Egorov, a Russian scientist. Besides starting Curve, Egorov also co-founded privacy-focused NuCypher and worked at it as its CTO. He also founded a decentralized lender, LoanCoin.

Egorov won the bronze medal in the 2013 International Physics Olympiad and graduated from the Moscow Institute of Physics and Technology.

However, Egorov was embroiled in some controversy during 2020’s “Curve Wars.” CRV was not being used by many DeFi traders for governance as intended. Because of this, the Curve protocol came under threat of being governed by a competing protocol which held a number of CRV tokens.

In response, Egorov made certain changes that he saw as being a deciding vote in governance. He has since said that he had “overreacted” during the incident.

How Does Curve DAO Token Work?

Curve Finance is one of the primary decentralized finance dApps on Ethereum. It utilizes the Automated Market Maker (AMM) model for decentralized trading rather than deploying a more traditional order book-based approach.

However, traders need liquidity. Order books match buyers with sellers, but AMMs use an innovation called a liquidity pool. Liquidity pools are essentially smart contracts into which users deposit tokens. These tokens are the liquidity, and traders perform their trades against the pool as a whole.

Prices of tokens in a pool are determined by a mathematical formula and refined by arbitrage. Different AMMs have different formulae, but arbitrage traders are the same. If they find places where tokens are priced slightly differently, they buy low and sell high, earning via sheer volume.

Meanwhile, users get rewarded for providing liquidity to the pools with a share of the fees from trading and the liquidity pool tokens they can earn from.

Of course, providing liquidity to a pool can be risky. One of the main risks faced by liquidity pool users is impermanent loss.

What is Impermanent Loss?

Impermanent loss is one of the major risks contributors to a liquidity pool face.

When contributing to an LP, assets are provided in a certain ratio. However, many assets, especially crypto assets, are volatile.

When one of the paired assets’ values changes on an external venue (such as a centralized exchange), arbitrage traders take advantage. They do this by buying up the same asset from the pool until its price equals what the exchange is offering.

As this shift occurs, the protocol adjusts the liquidity provider’s assets to maintain the original provision ratio. That means the provider has experienced a notional loss by missing out on the asset’s rally. Instead, they could’ve simply held the asset.

However, this loss is not realized until and unless the provider exits the protocol and withdraws liquidity. If they keep providing liquidity, volatility on the other side could see the losses recouped, with even appreciation of both assets in the perfect scenario.

One of the key decisions when considering becoming a liquidity provider is whether the fees earned by providing liquidity outweigh the risk of impermanent loss.

Liquidity providers must determine whether simply holding an asset might be more worthwhile.

What Makes Curve DAO Token Unique?

Curve is unique in that it represents a top DeFi platform and a great way for traders to earn significantly in many ways. As described above, holders of various cryptocurrency tokens, including CRV, can provide these tokens to liquidity pools and earn a passive income.

Additionally, the provision of liquidity is further incentivized by yield farming. Getting an LP token and staking it to earn yet another form of passive income is seen as a great deal by many.

Given the popularity and profitability of DeFi, there are many platforms to choose from. Still, Curve is very much a blue chip in this particular segment.

How is the Curve DAO Token Network Secured?

The Curve DAO Token is an ERC-20 token deployed on Ethereum and relies on Ethereum and its layer 2 scaling protocols for consensus on blockchain state.

Both Ethereum and these layer 2s use proof-of-stake (PoS) consensus. PoS relies on economic incentives and disincentives to ensure validating nodes behave according to the network protocol.

Ethereum requires node operators to stake a minimum of 32 ETH to become validators. The amount staked is directly proportional to the reward validators can receive for doing their job. Validators who misbehave risk losing their stake.

What is the Use of CRV?

CRV is the governance token of the Curve Finance platform and the Curve DAO. Holders of this token can take part in on-chain governance of the platform and are part of the DAO. CRV is also used to reward liquidity providers.

Who Controls Curve DAO Token?

The CRV token, and indeed the entire Curve Finance platform, is controlled by the Curve DAO. As such, CRV is controlled by its holders as a whole since CRV holders make up Curve DAO. CRV holders vote on proposals to upgrade and improve the platform.

How Much Is CRV In Circulation?

The CRV token has a circulating supply of over 530 million CRV, with a defined total supply of just over 3 billion CRV.

Of this total supply, 62% was distributed to liquidity providers, 30% to investors, 3% to employees, and 5% to a community reserve. Both the investor and team allocations are vested.

How Do You Buy CRV?

You can buy Curve DAO Tokens on various platforms. As a native DeFi token, decentralized exchanges, including Curve Finance itself, are often the best place to buy CRV tokens.

You can also find plenty of liquidity for CRV tokens on centralized exchanges. It’s also possible to buy CRV using various stablecoins, such as USDC and USDT, as well as major cryptocurrencies and fiat money.

Is It Possible to Buy Curve DAO Token Instantly?

If you want to buy CRV instantly, centralized exchanges are often your best bet. Decentralized exchanges settle transactions on-chain, and Ethereum can take a few minutes if it’s particularly congested at the time. However, layer 2 scaling solutions do exist to make things faster.

If you want to take custody of your CRV tokens yourself or actually use them as intended, a centralized exchange may be the slowest option. CEX platforms often have to carry out KYC or AML measures before green-lighting withdrawals, and that could take a while.

How Do You Store CRV?

As mentioned, you can use centralized exchange platforms for storing CRV tokens. However, you can’t take part in Curve DAO governance or use CRV in DeFi from an exchange account.

To do that sort of thing, you’ll need a wallet. Since CRV is an ERC-20 wallet, any Ethereum-compatible wallet will get the job done.

There are various wallets out there, and they come in two broad categories:

• Cold wallets. These keep your key offline for additional security. Referring to cold storage, cold wallets are considered one of the best ways to store crypto.
• Hot wallets. These keep keys online and connect to the internet. While perhaps not as secure as an offline wallet, they are quite convenient and can connect to platforms like Curve Finance with just a couple of clicks.

Curve DAO Token Energy Consumption

The CRV token is an ERC-20 token, meaning that it exists on the Ethereum blockchain. Ethereum used to be proof-of-work but switched to proof-of-stake consensus in September 2022.

Proof-of-stake is far more energy-efficient than proof-of-work. Estimates suggest that Ethereum’s energy consumption has been down by 99.95% since the “merge.”

Given that CRV is one of the hundreds of ERC-20 tokens transacting on the new-look Ethereum blockchain, it’s hard to suggest that it consumes much energy.

Is CRV a Good Investment?

Curve Finance was one of the leading DeFi platforms on Ethereum, and it held a good share of the responsibility for the DeFi boom of 2020.

Some view decentralized finance with skepticism, while others simply struggle to understand it. Nevertheless, DeFi provides crypto traders with a way to earn yields on their assets in ways that are usually subject to extreme gatekeeping.

In the U.S., for example, you need to be an accredited investor to get involved with certain financial products. According to the SEC, only those with a net worth of over $1 million and an income of over $200,000 qualify.

Banks and brokers can impose even more restrictions on the various financial products they offer. While the majority of these products are fraught with risk, this prevention of access is why DeFi exists.

In DeFi, as long as you have an Ethereum wallet with some tokens in it, you can connect to different platforms, including Curve.

This philosophy gives platforms like Curve value, and by holding the CRV token, you can be part of plotting its future.