A new version of a fundamental DeFi protocol seeks to combine two popular asset exchange models into a hybrid that can reshape the nature of the automated market maker (AMM) space: a primitive DeFi that currently represents more than $ 40 billion in value. total blocked, by DeFiLlama.
Earlier today, Curve Finance announced the launch of a new “algorithm for trading volatile assets.” The base functionality of Curve is designed to allow low-slip trades between similar assets, such as one type of stablecoin to another (USDC to DAI, etc.) by concentrating liquidity on a bond curve weighted towards a particular price.
When exchanging or depositing: treat it to be similar to typical crypto pools elsewhere except with a smaller slippage on average https://t.co/yrhzW35y1B
– Curve Finance (@CurveFinance) June 9, 2021
However, the new version will allow for low-slip trades between “volatile” assets, such as an ETH / WBTC pool, or between assets that have ever-changing prices. The new groups will achieve this with a combination of internal oracles that are based on exponential moving averages (EMAs), as well as a link curve model implemented by popular MMAs like Uniswap.
“This creates liquidity 5 to 10 times higher than Uniswap’s invariant, as well as higher profits for liquidity providers,” an accompanying whitepaper. read.
While the math and architecture can be difficult to understand, the bottom line is not: Curve is now taking on the broader AMM space with what it believes to be a more efficient product for both merchants and liquidity providers, using an automatic rebalancing fee (between. 04% and .4%) and pricing structures.
“The most common pairs will be added in the next few weeks before we go to a factory without permits where anyone can create their own metapool,” said Charlie, a member of the Curve team.
Curve sent concentrated liquidity that does not require manual rebalancing. Dynamic rates too. https://t.co/MsDtOSZl4y
– banteg (@bantg) June 9, 2021
The DeFi community has reacted with enthusiasm, with many calling the release “Curve v2”. Observers have been enthusiastic about the capital efficiency and liquidity optimizations that the new model offers.
“[Curve v2] extends Curve v1, instead of optimizing for the target price of ‘1’ to a dynamic price based on the group’s exponential moving average (EMA), which is a good indicator of the group’s current price, ”said the whitehat hacker and co-founder of DeFi Italia. Emiliano Bonassi, comparing the product with a version of Uniswap v3, but which concentrates all the liquidity at particular prices.
“Continuously rebalances (and concentrates) liquidity to [the EMA]. You can think of how (not equal) to rebalance a whole group of Uniswap v3 at once. “