A new version of a basic DeFi protocol aims to combine two popular asset swap models into a hybrid that could reshape the nature of the automated market maker (AMM) space – a DeFi primitive that currently has a total value of well over 40 billion US dollars per DeFiLama.
Curve Finance today announced the launch of a new “Volatile Asset Exchange Algorithm”. The basic functionality of Curve is designed to enable slippage swaps between similar assets, such as: B. one type of stablecoin to another – USDC to DAI etc – by concentrating liquidity on a bonding curve that is weighted at a certain price.
When trading or depositing: Treat it similarly to typical crypto pools elsewhere, except with lower average slippage https://t.co/yrhzW35y1B
– Curve Finance (@CurveFinance) June 9, 2021
However, the new version will allow for low-slip swaps between “volatile” assets such as an ETH / WBTC pool or between assets with constantly changing prices. The new pools will accomplish this with a combination of internal oracles based on exponential moving averages (EMAs), as well as a binding curve model used by popular AMMs like Uniswap.
“This creates five to ten times higher liquidity than the Uniswap invariant and higher profits for liquidity providers,” says an accompanying white paper.
While the math and architecture may be difficult to understand, the bottom line is not: Curve is now taking over the broader AMM space with what it believes is a more efficient product for both traders and liquidity providers, with an automatic rebalancing fee (between .04% and .4%) and price structures.
“Most of the popular pairs will be added in the coming weeks before we move to a completely permit-free factory where anyone can build their own metapool,” said Charlie, a member of the Curve team.
Curve delivered concentrated liquidity that did not require manual rebalancing. Dynamic fees too. https://t.co/MsDtOSZl4y
– banteg (@bantg) June 9, 2021
The DeFi community has responded enthusiastically and many have named the release “Curve v2”. Observers rave about the capital efficiency and liquidity optimizations that the new model offers.
“[Curve v2] Instead of optimizing for the target price of ‘1’, Curve v1 expands to a dynamic price based on the pool’s exponential moving average (EMA), which is a good indicator of the current pool price, ”said Whitehat-Hacker and co-founder of DeFi Italy Emiliano Bonassi, who compares the product with a version of Uniswap v3, but which concentrates all liquidity at certain prices.
“It continuously balances (and concentrates) liquidity [the EMA]. You can think of (not immediately) to rebalance an entire Uniswap v3 pool at once. “