Curve Finance (CRV) — also known as Curve.fi — is a decentralized exchange (DEX) that operates according to a similar pattern as a well-known UniSwap agent. But Curve doesn’t focus on token-to-token trading but relies on stablecoins as an exchange basis.
As a result of a DeFi hype, the Curve concept enjoyed great popularity rather quickly. But how does Curve work in practice and what role does a CRV token play? Today we’ll try to find out!
How Does Curve Finance Work?
The Curve decentralized exchange platform is designed for a fast and cheap exchange of currency pairs. The platform mainly supports stablecoins and BTC trading pairs. Supported stablecoins include DAI, USDC, USDT, TUSD, BUSD, and sUSD. Curve Finance is considered to be a DEX with the cheapest fees (0.04%) among all decentralized exchanges.
So, how does it work? The digital currency is always exchanged directly into a stablecoin. This enables particularly low fees of just 0.04 percent. In order to be able to keep this low rate, Curve uses several liquidity pools in the background. An algorithm then always selects the pool with the cheapest rate.
These pools are in turn based on smart contracts that are filled by liquidity providers. In return, they derive income from distributions of trading fees incurred. Curve Finance aims to keep these pools always in balance. This is primarily achieved via financial incentives.
The CRV Token: What Is It?
Curve Finance is a decentralized autonomous organization (DAO) with its own CRV token. The token entitles a holder to participate in a system-wide vote. Liquidity providers receive the tokens paid out depending on the amount of liquidity provided.
There was no initial issue in the form of an Initial Coin Offering (ICO). Instead, there was an initial issue of 2 million CRV per day. In total, the developers distribute 3 billion CRV, which are divided according to a key. Around 61 percent go to liquidity providers, for example, while 3 percent remain with developers. The token can be traded at Binance, UniSwap, Kraken, and OKEx.
What do you guys think about Curve Finance? Just share your opinion in the comments. Have a great weekend!