E2M Research: Steven (July 2024)

Daily Discussion

  • think

    After Curve was stolen at the end of July last year, various OGs, institutions and VCs all helped. Wu Jihan, co-founder of Bitmain and Matrixport, posted on social media: "CRV is one of the most important infrastructures in the upcoming RWA wave. I have bought it at the bottom, which does not constitute financial advice."

    Huang Licheng confirmed on social media that he purchased 3.75 million CRV from the founder of Curve through OTC and pledged them in the Curve protocol. The next day, Sun Yuchen's related address also transferred 2 million USDT to Egorov's address and received 5 million CRV.

    Then projects such as Yearn Finance, Stake DAO, and a number of institutions and VCs such as DWF joined in the firefighting operation of CRV.

  • I am very confused about what is the point of these groups standing up for Curve and why they want to save it.

  • The rate of return is a matter of horizontal comparison of web3, and is no longer a specific segment track.

  • CM: Will it have any impact if the founder of Curve sells his stake and has nothing to do with Curve? No problem. There is no need to develop the infrastructure layer protocol after a certain stage. It is mature enough. Putting aside the market level, not developing it will not affect its use. Many people who are saving the market are aware of this point, so they have this motivation.

  • DEX

  • Llama Stablecoin Algorithm + Lending Market

  • VE Model

  • Bribery and Liquidity Systems

  • Curve has several models, all of which can allow VeCrv holders to govern themselves. As for the existing institutions, parameters and configurations can be fully self-operating, which is in line with the original intention of decentralized applications, and the authority is completely reduced to the community.

  • As for how the market performs, that is another matter. It is basically certain that the fundamentals are worse than the last time. There will not be a particularly outstanding performance compared to the past, but there will still be demand for liquidity mining as the cycle lengthens. If you think that the chain is in a state of flourishing, Curve still has a chance, and Uni cannot solve the problem. Curve provides a complete framework, and the chips have completed a decentralization. The prospect of cross-cycle plans will be better, provided that it is believed that the chain needs incentives in the future.

  • There are many project parties that buy. Liquidity mining was the core way to get started in the last cycle. In the early stages of a project, liquidity was rented. Crv solves the problem that a project party does not need to inflate its own economic model in the early stages of its launch. Instead, it uses the liquidity of rented Crv, thereby solving the problem of token inflation and using the tokens for other utilities. At the same time, the tokens are still meaningful after being unlocked. Crv can also support transactions of non-stable currencies, similar to Uniswap. At the time of purchase, those that could not be purchased in the queue were given priority to the project party. The project will not die and will not be cannibalized by Uniswap in a short time.

1. Curve Events

Time point 1

Arkham published a post stating that Curve founder Michael Egorov currently has lent out $95.7 million in stablecoins (mainly crvUSD) on 5 accounts in 5 protocols with $140 million in CRV as collateral. Among them, Michael has $50 million in crvUSD borrowed on Llamalend, and Egorov's 3 accounts have accounted for more than 90% of the crvUSD borrowed on the protocol.

Arkham pointed out that if the price of CRV fell by about 10%, these positions might begin to be liquidated. Subsequently, the decline of CRV continued to expand, once falling below $0.26, reaching a new historical low, and the CRV lending positions on Michael's multiple addresses gradually fell below the liquidation threshold.

Time point 2

Time point 3 Current situation

Data source: https://platform.arkhamintelligence.com/explorer/entity/michael-egorov

Investors are facing disaster.

On the one hand, the price drop triggered liquidations on other lending platforms, and Fraxlend’s lenders suffered millions of dollars in liquidations. According to Lookonchain monitoring, some users had 10.58 million CRV (US$3.3 million) liquidated on Fraxlend.

2. Curve data comparison

20240616 

Volume 3 pool ($12.3m), steth ($6.7m), fraxUSDC ($756.8m)

TVL compared to last year’s top three: fraxusdc ($15.8m), steth ($249.7m), 3 pool ($178.3m)

Frax TVL is too low so I took a screenshot

202307 ——Refer to the research report at that time

Among the top ten TVL pools, fraxusdc ($0.6b), steth ($0.58b), and 3 pool ($296.65m) rank first.

Data source: https://curve.fi/#/ethereum/pools (TVL sorting)

The top three in trading volume are 3pool ($47.86M), steth ($18.64M), and fraxUSDC ($17.96M). In 3pool, the TVL is only 1/2 of the top two, but the trading volume is more than 2.5 times.

Data source: https://curve.fi/#/ethereum/pools (Sort by daily transaction volume)

  • Compare Uni

Income comparison

The left side is new, the right side is at that time.

Uniswap trades local assets in a bull market and mainstream assets in a bear market.

3. Some problems revealed by this Curve incident

Ve model head effect causes poor liquidity

The essence of CurveWar is to compete for Curve's liquidity. After winning the liquidity, Boost is used to improve the pool that provides liquidity as an LP. However, the higher the liquidity, the better it is for the project. The way different projects purchase CRV voting rights has triggered the so-called "war", which may lead to market instability and manipulation.

When we first discussed Curve, we thought Curve might be like a traffic platform, where new projects would buy voting rights to boost their own pools in order to gain a certain amount of attention (such as Frax at the time). After nearly a year, this effect was not achieved at all, and the yield was not as good as the points display or Pendle, so it was basically abandoned.

Loan liquidation

Collateral with large price fluctuations, such as Crv, Aave, Comp, etc., may not be suitable as collateral. In the future, the crypto world should still be able to grow with usdt/usdc/dai+BTC+ETH.

The risks of lending are complex. The volatility of the price of the collateral itself and the leverage and bubbles caused by Lego dolls make it difficult for Web3 lending to achieve economies of scale.

About E2M Research

From the Earth to the Moon E 2 M Research focuses on research and learning in the fields of investment and digital currency.

Article collection: https://mirror.xyz/0x80894DE3D9110De7fd55885C83DeB3622503D13B

Follow us on Twitter: https://twitter.com/E2mR esearch ️

Audio podcast: https://e2m-research.castos.com/

Xiaoyuzhou link: https://www.xiaoyuzhoufm.com/podcast/6499969a932f350aae20ec6d

DC link: https://discord.gg/WSQBFmP772