Curve Finance is coming to ZebPay! Curve DAO’s governance token CRV has been a standout performer in 2021, hitting a high on Jan 17, before settling at ₹143. Rather than directly compete in the DeFi market maker space, Curve’s stablecoin-driven model helps it build a niche for itself.
Much like Uniswap, Curve Finance is a decentralized exchange or DEX, powered by an automated market-maker. So, you can use Curve the same way you use ZebPay – as a platform to exchange different crypto.
However, instead of placing the responsibility of running this platform with any individual organisation – Curve has algorithms running the exchange.
These algorithms are especially useful to exchange tokens which are priced similarly. You could swap two different Bitcoin tokens very easily using Curve, say WBTC for sBTC.
As of June 2021, there are 39 active pools available for swapping between stablecoins and assets on the platform. These pools work in the same way ZebPay offers crypto-INR trading pairs. Curve supports DAI, USDC, USDT, TUSD, BUSD and sUSD, as well as BTC pairs.
So, what makes Curve special?
The Curve AMM model has four main components:
- Liquidity providers who deposit tokens with Curve, for a fixed return.
- Liquidity pools, which are the collection of all deposited tokens
- Traders who actually use the platform to exchange one token for another
- Trading algorithms, which efficiently price the tokens in the liquidity pool according to various factors
Unlike most DEXes, Curve has chosen to optimize its trading algorithm for exchanging stablecoins. This choice, to operate as a crypto-forex market means that it offers unique benefits to traders and liquidity providers.
- Low trading fees — Curve offers traders far lower trading fees for stablecoin trades than Uniswap.
- Minimized slippage — Whale traders and high-volume trading pairs are subject to slippage, but Curve’s similar asset pools minimize this.
- No impermanent loss — Liquidity providers on Curve supply stablecoin pairs that nearly eliminate impermanent loss.
A large part of these benefits comes from the fact that Curve can directly swap one stablecoin for another.
Uniswap always trades against ETH, so to accomplish as direct (and cheap) a trade as possible, you need to trade using ETH or for ETH.
Let’s say you wanted to exchange 10 USDT to 10 DAI. Uniswap would first convert your USDT to ETH, and charge a trading fee. It would then charge another trading fee to convert the ETH to DAI. Your swap will require two trades, making it more expensive to carry out.
With Curve, you’d only need one trade – and one trading fee.
Let’s make a quick model to show how this works. Every trade on Uniswap requires a 0.3% trading fee per trade, versus 0.04% on Curve:
|Trade #1||USDT – ETH||USDT – DAI|
|Trade #2||ETH – DAI||NA|
|Total Fees to be Paid (USDT)||0.06||0.00|
|Total Fees to be Paid (₹)||4.48||0.30|
A difference of 0.056 USDT may not seem much. After all, that’s only ₹4! Do keep in mind though, that as you trade in greater volumes, that difference begins to add up very quickly.
A quick last word
May I reminisce for a moment? When I was a kid, I used to play Pokemon Simulator on PC. Simulator didn’t bother with the animations or graphics aspects of the Pokemon games – just the battling. It threw out the most detailed statistics for crits, special attacks and same-type attack bonus. Years later, I discovered that Simulator was used by the pros; competitive Pokemon gamers to test out new strategies.
Why am I telling you this story? Because visiting Curve’s website took me all the way back to playing Simulator.
Much like Simulator, Curve also offers unique benefits which suit high-level traders’ needs.