Curve Wars Part 3: The Final Dagger

This article is for educational purposes only. Not investment advice.

Part one of the Curve Wars discussed Curve Finance and its perks to investors. Curve Wars Part 2 analyzed Convex Finance and Votium. This article will end the series, focusing on the higher level aspects of the flywheel.

[REDACTED] Cartel: Its Role 

[REDACTED] Cartel describes itself as the yield aggregator’s yield aggregator, built as an OHM fork and developing the rebasing technology through its governance token – BTRFLY. It is setting up an ecosystem that will sit pretty with innovations in the Curve Wars. As a DAO, it will release innovations that benefit members, who are holders of the governance token, with its effects being seen in the entire blockchain space.

Through its native token, [REDACTED] wants to achieve the roadmap of vote distribution that Convex had mentioned in the past, which benefits both the Curve flywheel, as well as other aspects of the blockchain space. It may evolve into an effective vote pricing machine, something that is only available in one’s imagination at the moment.  

Having Exposure To Curve Wars

For those that are clamouring to get in on the Curve Wars action, one thing that can be done is to buy CRV on Kucoin. Liquidity providers are usually the holders of this token because it is a farm token. At the moment, the CRV token has a deflationary characteristic, making it better than many cryptos from an investment perspective. 

Some crypto enthusiasts may want a minimum level of exposure to Convex and Curve. It is not surprising because many of us do not fancy the idea of locking our funds in one spot for a long time, when they can be put to good use somewhere else. 

Trying out Convex can be achieved in two different ways:

Stake the cvxCRV token

Staking the cvxCRV token comes with an APR that is dependent on different factors like the trading fees. Some decentralized exchanges like Sushiswap allow their users to trade the cvxCRV tokens. 

On the other hand, large volume traders may benefit from buying CRV and staking it on Curve because of its larger liquidity pool size. Doing this does not offer the user direct access to the bribe incentives.

Delegate to Votium

The second option is to purchase CVX and delegate it to Votium. Unlike its counterparts, the risk level is higher. Usually, the trader buys the CRV tokens and locks them for a period that spans through sixteen weeks. Gas fees and yields are unpredictable, though the returns may outweigh what is obtainable in the first option depending on the delegated amount. Apart from the aforementioned, managing it is more difficult. 

Analyzing the risks

At the moment, Curve is a highly sought-after protocol because of its safety track record. As a highly volatile space, Curve’s smart contracts which were deployed in 2020 seem to have stayed on the right side of history.

It has been under the watchful eyes of leaders in the space, where they audited its code. Though Curve is secure, it has an inherent smart contract risk like other platforms.  

Convex, on the other hand, was audited before launch by Mixbytes, and like its counterpart above, it deals with smart contract risks.  

Michael Egorov, a notable name in the DeFi space, co-founded Curve, as well as NuCypher. Convex was created by an anonymous team of developers, though Curve claims to be offering support to its counterpart in different ways.

Crypto enthusiasts are concerned about the liquidity issue of the cvxCRV token that is linked to the irreversible staking mechanism it utilizes. At the moment, no trading bot monitors the liquidity pools, meaning that if it ever becomes illiquid, it would do so quickly without people knowing in time to pull out their capital. 

Comparing Curve to UniSwap

UniSwap is a reputable decentralized exchange that is commonly used by traders. UniSwap v3 may not cut the list for those that are looking for a more linear price curve. During its release, the swapping platform came under attack by crypto enthusiasts because they felt that it was advanced, making it difficult for the average trader, especially new ones, to navigate through its user interface. 

In the future, the next versions of swapping platforms like Sushiswap or UniSwap may incorporate this feature. As most DeFi platforms do, Curve is working on its second and improved version, which will rival what UniSwap offers and even offer much more. 

It is expected that the new version will automate the liquidity concentration process via price oracles, thereby removing the need for liquidity providers to update their positions by themselves. Its competitor, UniSwap v3 has been unable to achieve the automation, as providers have to either use a bot or keep their positions manually. 

The potential new and improved Curve will automatically concentrate liquidity and improve capital efficiency without the intervention of a liquidity provider or a bot. If this is achieved, it will offer features that have been unseen in the Automated Market Maker space. 

With the features that Curve may release in the future, it may become a haven for high volume traders of top tokens, while its competitors, UniSwap may focus on newer tokens.

For Curve to attract more liquidity in its second version, it has to offer features that most centralized exchanges dare not offer like cost effectiveness of trading major coins. If this occurs, more holders of BTC will look at the idea of wrapping their BTC into renBTC and wBTC to enjoy a yield earning opportunity.

Curve is playing the long game. With other protocols like Convex, Votium, and [REDACTED] building added benefits, it is quickly becoming the King of DeFi.