Curvance deep dive: omnichain lending, omnichain gauge and CVE tokenomics
Thread2,188 words
Thesis that Curvance can become a blue-chip DeFi protocol: a lending protocol for Curve ecosystem LPs with an omnichain gauge and vote escrow built on LayerZero, 'sell the shovels' in a liquidity war. Includes CVE distribution with 420,000,069 max supply and 59.25% gauge emissions.
Key claims
CVE max supply 420,000,069 with about 69.8M circulating at release
59.25% of supply goes to gauge emissions over at least 12 years
Fees from all chains distribute to veCVE lockers on any chain
My Biggest DeFi Play for this Cycle: Omnichain Lending & Boosted Flywheel Rewards
Everyone is looking for the next big blue-chip DeFi protocol that will do 100x. 💎🔍 👀
Identifying it early might make you wife… ehmm life-changing gains! 🥂
Luckily for you, I have already found it. 👀
Believe me, this will be worth billions in the bull! 🚀
💰 Uniswap: USD 5.5B FDV
💰 Lido: USD 2.2B FDV
💰 Aave: USD 1.6B FDV
💰 MakerDAO: USD 1.3B FDV
💰 Synthetix: USD 880M FDV
💰 Compound: USD 543M FDV
Those are the bear market valuations! In the bull, Aave was once worth USD 7.6B (circulating mcap!) while Uniswap was at USD 22.5B circulating mcap! 🚀
So imagine if you catch the next blue-chip at 25m, 50m or 100m market cap! 💸
Or even better, before it even launches! 👀
Let me introduce you to my main DeFi bet for the coming cycle: @curvance 💾
This will be a deep dive! I will cover:
🔍 Introduction
💾 Background & Vision
💸 Omnichain Lending & Boosted Flywheel Rewards
🌐 Omnichain CVE Token
⚙️ Protocol Mechanics
🪬 Conclusion
Let’s dive in! 👇
🔍 Introduction 🔍
Curvance is a decentralized stablecoin lending protocol that primarily focuses on LPs from the Curve, Convex, Aura, and Frax ecosystems. Its main objective is to provide users with the opportunity to earn optimized yields while maximizing capital efficiency through peer-to-peer lending. Assets like cvxCRV, auraBAL, and yCRV have the potential to generate similar or higher APR compared to their original platforms.
Additionally, users can use their deposits as collateral to obtain secure stablecoin loans. The interest rates for these loans are determined by various factors, including pool APR, price volatility, token liquidity, and loan-to-value ratios.
Curvance is leveraging familiar concepts in innovative ways to deliver exceptional value to its users:
🏦 Decentralized Lending: A peer-to-peer lending contract enables users to provide liquidity and allows collateral depositors to borrow stablecoins at fair market value rates.
🗳 Token Governance: The CVE governance token facilitates participation in DAO voting. The DAO will oversee various aspects such as pool gauge weights, collateral eligibility, lending assets, and platform fee rates/distribution.
💧 Liquidity Routing: Collateral deposits on the Curvance platform will be directed to the underlying contracts that generate yield. For example, cvxCRV deposits will be routed back to Convex Finance, ensuring that users' interest rates remain unaffected while utilizing loan services.
💾 Background & Vision 💾
The vision for Curvance was formulated during the intense competition of the Curve Wars. As the development of the Curvance protocol progressed and attracted top builders, the vision broadened.
The successful implementation of the Shanghai Fork and the emergence of new flywheels across Ethereum/Rollups made it clear that Curvance had the potential to become a critical infrastructure component for users.
The DeFi landscape has witnessed various "Wars" and as L2 solutions expand, there is increased competition for liquidity and users among projects, ecosystem flywheels, and rollups.
This competition could extend to liquid staking derivatives and restaked assets on EigenLayer, leading to a significant battle for liquidity control. While speculative, examining the history and current trajectory of the DeFi landscape suggests that the stage is set for these developments.
💸 Omnichain Lending & Boosted Flywheel Rewards 💸
Curvance is designed to be highly modular, making it easy to provide user support and integrate with other protocols. By using the ERC-4626 vault standard, Curvance enables auto-compounding and collateralized loans, maximizing yield while keeping loans active. This feature allows users to achieve exceptional capital efficiency.
The CVE Gauge Emissions of Curvance, which last a minimum of twelve years, reward strategic LPs. The entire protocol is built with an omnichain future in mind, allowing every flywheel to take advantage of Curvance for a competitive edge.
Both the gauge system and the vote escrow system in Curvance are omnichain, supporting unified liquidity positions when locking on chains outside of Ethereum Mainnet or receiving protocol reward distributions on rollups.
In the event of a Flywheel War, Curvance positions itself as a key protocol. It has innovated a novel design for a unified vote escrow system called the Omnichain Gauge. By leveraging LayerZero's cross-chain messaging and Stargate Finance, a communication layer between Ethereum and an unlimited number of "child" chains has been established. This enables users to lock CVE as veCVE on any chain and vote for any pool on any chain.
This is an important piece of my thesis here! In a gold rush (a.k.a. battle for liquidity control) don’t look for gold, sell the shovels (Omnichain Gauge)!!!
Furthermore, Curvance's design ensures that instead of having separate reward systems for each chain, all protocol fees are evenly distributed across all chains. This system allows users to lock tokens on rollups and receive a share of the fees generated on the Ethereum Mainnet, resulting in significant savings on gas costs, while maintaining deep liquidity and fee generation on Ethereum Mainnet.
Curvance’s unique design also permits protocols to utilize their tokens and expand their liquidity across any supported network.
For example, if a protocol has significant liquidity on Ethereum and wants to enhance its liquidity on Arbitrum, it can utilize the Omnichain gauge system to vote for its token pair on Arbitrum by utilizing tokens locked on Ethereum. This approach encourages users to generate and deposit liquidity on Arbitrum without the need to transfer any assets.
The voting system in Curvance utilizes Snapshot's gasless voting system to calculate a user's votes across all chains. At the end of a voting epoch, the votes are transferred on-chain using LayerZero’s generic message passing protocol and processed by a matching engine on Ethereum. This engine determines the distribution of emissions to each chain.
Subsequently, these emissions are bridged through a cross-messaging system to each child gauge system. The child gauge system then distributes the emissions to each pool for the upcoming epoch. The communication system for the omnichain gauge is visualized below.
Similarly, the CVE locker system in Curvance operates omnichain, with Ethereum serving as the canonical chain. In each epoch, every child chain reports its veCVE-locked token state back to Ethereum, along with the accumulated fees for that period. This allows the Ethereum gauge to calculate WETH and CVE rewards for the epoch based on the veCVE locked. The rewards are then distributed in a manner similar to the gauge emissions.
Rewards from Ethereum are immediately available, and cross messages are sent to each cross-chain with the corresponding ETH and CVE rewards for each child chain. This is visualized below.
With this system, Curvance can scale to almost unlimited chains with minimal maintenance and state bloat.
🌐 Omnichain CVE Token 🌐
Similar to the Omnichain Gauge and token lockers, CVE itself is also omnichain (LayerZero OFT). This allows users to transfer their tokens across chains without the need for a liquidity pool, which reduces slippage, improves capital efficiency, and results in significantly faster validation times compared to typical bridge setups.
The token allows users to lock tokens for a set period, granting access to DAO voting rights, gauge emission voting rights, and platform fee redistribution.
The token distribution looks as follows:
🏦 Treasury: 14.5% (60,900,010 tokens)
25% will be vote-locked at the Token Generation Event (TGE), stored in the CVE locker.
👨💻 Team: 13.5% (56,700,009.32 tokens)
Vested over 4 years with monthly releases. 25% will be vote-locked at TGE, in the CVE locker.
💰 Seed Raise: 6% (25,200,004.14 tokens)
Vote-locked at TGE, in the CVE locker for a vesting period of 1 year.
🤝 Early Backers Raise: 1% (4,200,000.69 tokens)
Vote-locked at TGE, in the CVE locker for a vesting period of 1 year.
💸 Gauge Emissions, Boosted Lock Rewards: 59.25% (248,850,040.88 tokens)
Extended over a minimum of 12 years.
💧 Initial Pool Liquidity: 2% (8,400,001.38 tokens)
To be used for Liquidity Bootstrapping Pool (LBP) at beta launch conclusion. LBP funds will be paired with treasury tokens as protocol-owned liquidity.
🪂 Early Backer/Incentivized Testnet Airdrop: 1% (4,200,000.69 tokens)
Distributed from TGE as call options.
🚀 Beta Boosted Emissions: 2.75% (11,550,001.90 tokens)
Available from TGE, emitted as call options via child gauges.
📊 Key Metrics:
👉 Circulating Supply at Official Release: 69,825,011.47 tokens
👉 Max Supply: 420,000,069 tokens
⚙️ Protocol Mechanics⚙️
Initially, Curvance plans to utilize a modified version of Compound Finance to create risk-isolated lending markets. The protocol adopts a multi-pool lending market model, where stable coin depositors can choose their risk tolerance based on the supported long-tail assets in each pool.
This model strikes a balance between the shared pool model of AAVE V2 and Compound V2, and the isolated pool model of Compound V3. This decision was made because fully isolated pools have reduced capital efficiency, while a single pool offers maximum capital efficiency but introduces greater systemic risk.
This structure ensures that risks and flaws found in other pools do not compromise Curvance's lending markets. When a deposit is made, Curvance's smart contracts redirect the supplied assets back into their respective protocols to earn yield, while also allowing borrowing against them.
For example, cvxCRV will be staked on Convex, and vAMM-VELO/USDC on Velodrome. Lenders receive a cToken minted from the Curvance protocol, representing their pool share. When borrowers utilize their unlocked collateral, these tokens are used to redeem their supplied collateral after repaying the borrowed tokens.
The interest rate in the protocol is primarily determined by the offerings on the underlying protocol of the collateral deposits used to earn yield. When supplying assets to the pools, the interest rates are based on pool-specific interest rate curves and pool utilization.
Pool utilization is calculated as the ratio of borrowing to the supply of an asset. For instance, if 1,000,000 FRAX is supplied to a pool and 800,000 FRAX is borrowed, the pool utilization is 80%.
Interest curves can vary across assets and their respective pools, often increasing rapidly after a certain percentage of utilization. This helps safeguard suppliers from being unable to withdraw their positions due to insufficient remaining liquidity.
Curvance applies a fee to all collateral deposit assets on its platform. This fee helps strengthen the protocol reward flywheel by distributing it to veCVE token lockers.
Once users have deposited assets into Curvance, they can borrow stablecoins using their deposited assets as collateral. Curvance offers a solution for users who have locked their capital and want to earn and boost yields on platforms like Curve, Yearn, or Convex. It allows users to unlock a portion of their deposited positions, creating capital efficiency and leverage opportunities.
There are several reasons why users may choose this option:
👉 Use unlocked capital to reinvest and earn additional yield, further enhancing their rewards.
👉 Take out loans to spend without selling their appreciating, yield-bearing assets or
👉 Reinvest the borrowed capital to buy more staked assets and redeposit them back into the protocol, effectively leveraging their position.
Regardless of the use case, Curvance offers a wide range of possibilities and strategies for users to explore.
Finally, Curvance will employ a dual oracle design to enhance protocol security. The oracles used will include Chainlink, Curve, UniV3, Velodrome, Pyth Network, and others. When calculating the price of an asset, the protocol will always use the most favorable price to maximize protection for stablecoin lenders.
🪬 Conclusion
I'm convinced that Curvance will be big. Projects that move first and/or that sell shovels in a goldrush are what I go for. It's why I like infrastructure investments so much.
There is a hype around rollups? Buy ETH. Invest in novel infrastructure like DA solutions and RaaS providers. Buy the native execution layer tokens. That's where network effects are, where ecosystems emerge and where a lot of value potentially accrues. If you bet right, you can win big.
Curvance is such an opportunity in DeFi. The trend to a multi-chain (or rather rollup) future is evident. Liquidity and users will be increasingly fragmented. This will lead to a battle for liquidity control, which in turn will create massive financial opportunity.
With omnichain lending & an omnichain gauge and boosted flywheel rewards, Curvance positions itself at the forefront of cross-chain DeFi innovation and provides novel, scalable infrastructure that any flywheel can plug into. This will drive adoption and accrues massive value to Curvance and CVE.
With a clear value proposition to users and protocols, I see a strong product-market fit and there are sound revenue generation models in place that will make the platform sustainable in the long-term. The team has been grinding hard and there is a strong focus on security (incl. multiple audits), pushing my bullishness to max level.
I will revisit this post at the same time next year and everyone will know Curvance and recognize it as a household name in DeFi by then.
Want to bet? 👀
@curvance (Loading...) 💾
@Curvance @0xMai Tagging some DeFi & L2 chads to follow! 🫡👇
@splinter0n
@Louround_
@thesaint_
@0xSalazar
@poopmandefi
@ShivanshuMadan
@jinglingcookies
@CJCJCJCJ_
@wajahat
@MTorygreen
@wacy_time1
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@splinter0n
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@Curvance @0xMai @splinter0n @Louround_ @thesaint_ @0xSalazar @poopmandefi @ShivanshuMadan @jinglingcookies @CJCJCJCJ_ @wajahat @MTorygreen @wacy_time1 @hmalviya9 @Slappjakke @kunalgoel @WinterSoldierxz And some more 🫡👇
@andrewmoh
@thesaint_
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@DOLAK1NG
@andyyy
@wist_defi
@francescoweb3
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@DeRonin_
@andrewmoh
@0xTindorr
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@Pansophichad
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