What is Curve Finance?
So, what exactly is Curve Finance? Well, unlike other decentralized exchanges, the Curve Finance protocol focuses much of its attention on assets that are very similar in price. Think stablecoins for a moment. Crypto assets like USDC, DAI, and USDT are all constantly attempting to stabilize at the $1.00 USD range. Additionally, assets like BTC, renBTC, and wBTC are assumed to have stable or bound values. In other words, assets that are assumed to remain relatively constant in price no matter what happens in the greater crypto market.
And how does Curve benefit its users? Well, the protocol specifically focuses on these swaps to create a market environment with very little slippage. Other protocols like Uniswap and Sushi Swap are not meant to do this. As a result, you can lose funds unnecessarily if you choose to perform swaps of this type on exchanges other than Curve.
For example, swapping 10,000 $DAI for $USDC on Curve would net us a total of 9,996 USDC. However, performing the same action on Uniswap would leave us with only 9,939 USDC. That's an unnecessary loss of approximately $55 USD. Furthermore, you would also be on the hook for a liquidity provider fee of an additional $30 or so. That's a total loss of nearly $100. Again, the reason you can save more using the Curve Finance protocol is that it was specifically designed to handle asses swaps of this type. Therefore, it's a much better choice should you want to make transactions like this.
What Else Can You Do on Curve?
Swapping like assets isn't the only thing Curve is good for. You can also become a liquidity provider and earn some really great returns. Like many other liquidity pools, you simply need to decide which one is right for you and which assets you'd like to contribute. Also, take note that you'll be earning both an estimated "Base" APY as well as a "Rewards" APY for your investment in the pool. The Curve protocol rewards you with its native CRV tokens.
After selecting the pool we want to contribute to, the first thing we need to do is go to Deposits and choose which assets you'd like to deposit as an LP. After determining which of the related assets you'd like to deposit into the pool, you'll need to "stake in the gauge" to qualify for all your bonus rewards. Just remember, doing so will initiate multiple signing transactions and swaps. Therefore, it's best to do this when gas prices are low or you could end up paying quite a bit. From here, you'll begin earning your CRV. You can claim it later but again, watch out for those gas fees and do so at a time or with a quantity that makes financial sense.
Finally, if you want to earn the max value on your deposited assets, next we need to lock CRV as veCRV (Curve's governance token). Doing so will allow you to do three things - receive a boost, vote, and earn protocol fees. This action can be performed in the DOA. Now, you'll calculate exactly how much you need to lock and for what timeframe in order to earn your full boost. This can be done using the Calculator. You can also earn additional protocol fees by locking veCRV.
Remember one of the best parts of investing on Curve is that their pools have little to no slippage and nearly no chance of suffering from impermanent loss. However, should one of the underlying assets go under, the entire pool could fall to $0. This is not likely to happen, but it's important to keep in mind. Just like any investment, never play with more than you're willing to lose.
Until Next Time
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