KEY TAKEAWAYS
- Curve and YieldBasis have partnered to address impermanent loss in AMMs, boosting Curve’s TVL and trading volumes.
- YieldBasis employs a 2x leverage mechanism, significantly increasing Curve’s TVL from $6 million to $300 million.
- Future developments include Proposal #1238 to enhance crvUSD liquidity through strategic YB token emissions.
The partnership between Curve and YieldBasis has commenced on a positive note, demonstrating mutual benefits for both protocols despite recent market fluctuations. YieldBasis, a protocol built on Curve’s liquidity infrastructure, aims to address the challenge of impermanent loss (IL) in automated market makers (AMMs). It allows users to provide liquidity using various Bitcoin wrappers, such as cbBTC, tBTC, and WBTC, without exposure to IL while still earning trading fees.
YieldBasis employs a mechanism that maintains a 2x compounding leverage on deposited BTC by matching it with an equal value of crvUSD. This innovative approach has been detailed in the YieldBasis Documentation.
Impact on Curve’s Metrics
Since its launch, YieldBasis has positively impacted Curve by boosting total value locked (TVL), trading volumes, and DAO revenue. For every dollar of BTC deposited into YieldBasis, Curve’s TVL increases by two dollars due to the 2x leverage through crvUSD. This has resulted in significant jumps in Curve’s TVL, from $6 million to $60 million, and then to $300 million.
YieldBasis has also influenced Curve’s trading volume and fee generation. Data from October 21 indicates that every $1 of volume on YieldBasis pools generated $1.32 of adjacent volume on other Curve pools, primarily crvUSD/USDC and crvUSD/USDT. This adjacent trading activity has generated approximately $33.6K in total revenue for Curve, split evenly between liquidity providers (LPs) and the DAO.
Additionally, PegKeepers, which help stabilize the crvUSD peg, have generated roughly $35K in profit. These mechanisms create profit opportunities while supporting the peg, particularly during periods of BTC price volatility.
Future Developments and Proposals
To mitigate short-term crvUSD volatility, YieldBasis has incentivized the pyUSD/crvUSD pool with 200,000 YB tokens, valued at approximately $90K, for one week. The YB/crvUSD liquidity pool, serving as the main trading venue for the $YB token, currently holds $1.4 million in TVL and has generated over $30K in revenue since its launch.
In total, YieldBasis has generated approximately $188K in revenue for LPs and the DAO combined. However, for Curve to extend additional credit lines to YieldBasis and raise pool caps further, crvUSD liquidity must deepen significantly. Current liquidity levels are only sufficient to support the existing $300 million in YieldBasis pools.
The next major step involves Proposal #1238, which aims to redirect the $YB vesting emissions to a dedicated DepositPlatformDivider contract. This contract will use the vested $YB tokens as vote incentives on platforms like Votium and VoteMarket to attract gauge weights for crvUSD pools. This strategy is intended to enhance crvUSD liquidity by making liquidity provision in crvUSD pairs more appealing for LPs.
The start of YB emissions has already activated the vesting of 75 million YB tokens to the Curve DAO, creating a continuous stream of incentives that can be strategically redirected to strengthen crvUSD liquidity. Michael Egorov, founder of Curve and YieldBasis, has introduced a broader proposal package to scale YieldBasis responsibly, with relevant votes currently underway.
Why This Matters: Impact, Industry Trends & Expert Insights
The partnership between Curve and YieldBasis has commenced on a positive note, demonstrating mutual benefits for both protocols despite recent market fluctuations. YieldBasis, a protocol built on Curve’s liquidity infrastructure, aims to address the challenge of impermanent loss (IL) in automated market makers (AMMs).
Recent industry reports indicate that Automated Market Makers (AMMs) are increasingly integrating with Artificial Intelligence (AI) to optimize liquidity provisioning and reduce impermanent loss. This aligns with YieldBasis’s innovative approach to mitigate IL using Curve’s infrastructure.
As per insights from Blockworks, Curve’s partnership with YieldBasis underscores a deep synergy between the two projects, leveraging YieldBasis’s innovative approach to mitigate impermanent loss in liquidity provision using Curve’s crvUSD stablecoin and a 2x leverage mechanism. This supports the impact of the partnership on Curve’s metrics, including increased total value locked and trading volumes.
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