SECTION 1: APPLICANT INFORMATION
Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process.
Applicant Name:
Llama Consulting Ltd.
Project Name:
Curve Finance
Project Description:
Curve is a multichain AMM exchange that specializes in low slippage stablecoin swaps and concentrated liquidity provision. Curve distinguishes itself as the primary liquidity hub for some of the most exciting DeFi innovations, including stablecoins, Liquid Staking Tokens, and Real World Assets. More recently, it has launched its own stablecoin, crvUSD, creating new opportunities for DeFi integrations.
Project Links:
- Website - https://www.curve.fi/
- Twitter - https://twitter.com/CurveFinance
- Telegram - http://t.me/curvefi
- Github - Curve · GitHub
- Documentation - Procotol Overview — Curve 1.0.0 documentation
Team Members and Qualifications:
WormholeOracle and Svetlin Konsulov
Llama Consulting Ltd. is the legal entity governing Llama Risk, an independent risk consulting non-profit organization funded by the Curve DAO. It has been operating since 2021 with management by its founding member and Director of Llama Consulting Ltd., WormholeOracle. Svetlin is the legal counsel for Llama Risk and the sole shareholder of Llama Consulting Ltd. Although an independent org, the group, and its members have a history of working closely with the Curve team and community and have represented the DAO in the past to pursue grants for Curve (see our approved proposal for an Optimism Grant)
Contact Information:
- TG: @WormholeOracle
- Twitter: https://twitter.com/LlamaRisk
- Email: wormhole@llamarisk.com
Do You Acknowledge That Your Team Will Be Subject to a KYC Requirement?:
Yes
SECTION 2: GRANT INFORMATION
Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.
Requested Grant Size:
1.6M ARB = 100,000 ARB per week for 16 weeks
Grant Breakdown:
Curve has been deployed on Arbitrum since September 2021 and has been incentivizing certain pools with its own CRV emissions since inception. A quick breakdown of Arbitrum Curve pools that have undergone DAO votes to receive CRV emissions and are currently active:
| Pool | Gauge Active Since |
|---|---|
| USDC.e-USDT (2pool) | April 15th, 2022 |
| FRAX/USDC.e (FraxBP) | August 15th, 2022 |
| VST/FRAX | February 28th, 2022 |
| WBTC/tBTC | June 2nd, 2023 |
| EURS/2pool metapool | November 10th, 2021 |
| axlUSDC/FraxBP metapool | March 28th, 2023 |
| USD+/FraxBP | July 31st 2023 |
Curve is eager to begin allocating incentives toward a new strategy that will promote crvUSD migration to Arbitrum and will strengthen liquidity depth and trade volumes for both stablecoins and blue-chip crypto (BTC and ETH) on Arbitrum. The strategy involves the deployment of extremely low-fee stableswap pools paired with crvUSD (.01% swap fee) and a crvUSD-paired tricrypto pool (crvUSD/ETH/tBTC).
crvUSD is an overcollaterized stablecoin backed by a diverse set of collateral, including sfrxETH, wstETH, WBTC, WETH, and tBTC. The stablecoin was deployed in March 2023 and has reached a market cap of >$100m since inception. Its primary innovations are the LLAMMA AMM which gradually liquidates positions, and a dynamic monetary policy that adjusts interest rates based on market dynamics. Supporting the growth of crvUSD on Arbitrum will help Arbitrum become a hub for the adoption of decentralized stablecoins and enable the creation of new DeFi markets as deep crvUSD liquidity becomes available through Curve.
This grant will be used exclusively to incentivize liquidity in Arbitrum Curve pools. We intend to handle the distro with the following strategy:
- Allocate 100k ARB per week for 16 weeks as liquidity incentives
- 20k ARB each to 3 stableswap pools paired with crvUSD (e.g. crvUSD/USDT, crvUSD/USDC, crvUSD/FRAX)
- 40k ARB to the tricrypto pool paired with crvUSD (e.g. crvUSD/ETH/tBTC)
Pending the availability of a vote incentives market, the ARB may be either deployed as vote incentives to veCRV voters that allocate CRV gauge emissions to the target pools or, in the absence of an acceptable vote market, the ARB will be deployed to the pool rewards as a direct LP incentive.
As we are submitting this proposal on behalf of Curve DAO, we request that the grant funds be sent to the Curve DAO-controlled Treasury on Arbitrum. The custody of funds is entirely decentralized, governed by veCRV voters and on-chain votes initiated on Ethereum mainnet. There is a relayer that executes commands on Arbitrum, which you can see was tested successfully on May 4th with a transfer of 1 ARB out of the treasury address.
Once funds have been received, we will work with the Curve core team to deploy the grant. This will involve creating a contract to handle the distro logic and initiating an on-chain vote to approve the distro strategy as it has been outlined above.
Distribution will begin shortly after the necessary pools and distro contract have been deployed. On-chain votes take 7 days to execute, after which the incentives can begin. The program will allocate ARB every week until all ARB is distributed after 16 weeks.
Funding Address:
The Curve DAO-controlled Treasury on Arbitrum: Vyper_contract | Address 0x25877b9413Cc7832A6d142891b50bd53935feF82 | Arbiscan
Funding Address Characteristics:
Curve x-gov is Curve’s system for cross-chain governance involving its implementation of Aragon on-chain DAO on Ethereum mainnet, an L1 broadcaster/L2 relayer, the Arbitrum bridge, and the Arbitrum vault. This allows fully decentralized DAO control of funds held on Arbitrum.
SECTION 3: GRANT OBJECTIVES AND EXECUTION
Clearly outline the primary objectives of the project and the Key Performance Indicators (KPIs) used to measure success. This helps reviewers understand what the project aims to achieve and how progress will be assessed.
Objectives
Strengthening DeFi Bonds
Curve prides itself in its role as a liquidity hub for a multitude of protocols. Curve is not just a DEX; it is an extended network of DeFi protocols that have integrations and governance stakes in the protocol. Just about any DeFi protocol that issues a stablecoin, RWA, or LST has a significant presence on Curve as its core liquidity hub. This positions Curve as an essential component of a robust ecosystem that can withstand any and all market conditions.
Boosting Core Liquidity on Arbitrum
Curve’s stableswap AMM excels for pools involving like-kind assets. LPs are attracted to these pools as a way to earn real yield from swap fees while mitigating the risk of impermanent loss (as assets supplied to Curve pools are expected to be mean reverting). There is an expectation of increased stablecoin assets bridged to Arbitrum as LPs seek superior yield opportunities on Curve.
Streamlining Liquidity Costs for Ecosystem Projects
Deep liquidity is essential for the vitality and success of the overall DeFi ecosystem, particularly for applications like money markets, to facilitate protocol liquidations. We intend for this grant to contribute to readily accessible liquidity within the thriving Arbitrum DeFi ecosystem, encompassing major stablecoins and blue-chip crypto assets. By enhancing Curve pools on Arbitrum, we aim to reduce the liquidity cost for all projects on Arbitrum seeking a reliable liquidity solution.
Sustaining Incentives with CRV Emissions
A short-term incentive program runs the risk of seeing mass liquidity outflows after incentives end. Our goal is to jumpstart demand to Arbitrum that veCRV stakeholders will be motivated to continue allocating CRV emissions toward these pools even after the ARB incentives end. CRV’s emission schedule lasts hundreds of years, giving Curve the means to incentivize liquidity on Arbitrum for years to come.
Key Performance Indicators (KPIs):
To measure the success of this grant, we will use the following key performance indicators:
- crvUSD migration: The total value of crvUSD that migrates to Arbitrum.
- Curve pool TVL: The total value of Curve pool liquidity
- Liquidity utilization: Both overall pool volume and liquidity utilization in the incentivized pools.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?
Curve is the backbone of the burgeoning DeFi industry. It touches every piece of the stack and strengthens every integrated protocol. There is an opportunity for Arbitrum to leverage Curve’s foundational role to further support its vibrant ecosystem. Examples of how Curve spurs DeFi integration include:
- The stableswap algorithm, well known for enabling deep liquidity and low slippage swaps, has built a reputation for stabilizing pegs and enhancing stablecoin utility. (e.g. FRAX, 3CRV)
- Curve has a number of integrations with lending markets, yield-bearing derivatives, and real-world assets. Swap fees compound the interest generated from these activities. (e.g. Aave, stETH, STBT)
- Highly configurable V2 pools are unlocking new potential for FX markets and volatile crypto pairs. The concentrated liquidity algorithm offers advantages to LPs and traders, combining a composable AMM design with low-slippage swaps. (e.g. Tricrypto, eursusd)
Justification for the size of the grant:
Referencing the StakeDAO votemarket, tricrypto pools are being incentivized with around $32k worth of tokens per week. crvUSD pools are being incentivized around $21k worth of tokens per week. This proposal is targeting a comparable value for the Arbitrum incentivized pools. Given an ARB price ~$0.82, the proposed weekly incentives amount to around $32,800/week to the Arbitrum tricrypto pool and $16,400/week to each crvUSD stableswap pool.
The incentives will result in a significant influx of crvUSD to Arbitrum, enabling new markets for other applications to integrate. The grant will pay dividends in terms of future potential integrations and does not contribute to any direct selling pressure of the ARB token.
Execution Strategy:
Our execution plan includes the following steps:
- Pool Deployment: The stableswap-ng pool implementation will be used to deploy the stableswap pools. A crvUSD tricrypto pool will also be deployed
- ARB Distro Handle Contract: A distribution contract will be deployed for the non-custodial distribution of the ARB tokens.
- Incentive Campaign: Run incentives to the specified Cuve pools for 16 weeks
Grant Timeline:
The projected timeline is as follows:
- Development: 3 weeks. This is for necessary pool and distro contract deployments. While a relatively simple undertaking, there is some uncertainty about when the stablecoin-ng implementation will be in production. It is currently undergoing an audit.
- On-chain vote: 1 week. A vote to allocate ARB to the distro contract
- Incentives: Incentives will run for 16 weeks.
SECTION 4: PROTOCOL DETAILS
Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.
Is the Protocol Native to Arbitrum?:
No, Curve is native to Ethereum and has deployed on 12 other chains and L2s. As described above, it has a cross-chain governance system for handling funds on Arbitrum.
On what other networks is the protocol deployed?:
As per DefiLlama on September 25th, 2023:
| Ethereum | $1.808b |
|---|---|
| Arbitrum | $31.5m |
| Polygon | $26.74m |
| Base | $23.33m |
| Celo | $20.74m |
| Optimism | $14.61m |
| Kava | $12.73m |
| Avalanche | $12.55m |
| Gnosis | $10.38m |
| Fantom | $2.92m |
| Moonbeam | $419,503 |
| Aurora | $17,068 |
| Harmony | $0 |
What date did you deploy on Arbitrum?:
September 12th, 2021
Protocol Performance:
As per DefiLlama on September 25th, 2023:
TVL: $1.963B
Cumulative Revenue: $126.53M
Cumulative Admin Fees Paid to LPs: $126.53M
Cumulative Annual Volume: $90.977B (average $249M/day)
Past Performance:
A report by Delphi Digital released in July 2022 pulled data from every trade on the ETH/USDT pair on both Curve Tricrypto and Uniswap and simulated every trade on the opposite venue. It found that price quotes were better on Curve 65% of the time, although it only captured 35% of the volume. This was attributable to the higher gas cost of the more complex Curve pool.
When running the same test on Arbitrum, the “ideal” volume matched the actual volume much more closely, suggesting that Curve performs much better on a cheap gas platform like Arbitrum.
Not only does Curve have the capacity to offer superior trade execution on L2s like Arbitrum, it offers a superior experience for LPs. Curve uses an internal price oracle and dynamic fees, only updating the price scale if losses from re-pegging are made up for by at least half of the pool profits from fees. While the complex logic makes Curve V2 pools less competitive on mainnet, it is a truly automated market maker designed to protect LPs from erosion of their supplied value through impermanent loss.
Protocol Roadmap:
Curve is making strides with the adoption of crvUSD. New pool implementations (tagged -ng) have an EMA oracle used with the Curve LLAMMA algorithm. The roadmap includes plans to make use of Curve LP positions as markets for crvUSD, enabling leveraged liquidity. There are also plans for money markets around crvUSD. Pegkeepers currently support the stablecoin peg and improvements are being made to the PK algorithm.
Curve is also working to integrate RWAs such as offerings by Matrixdock, Ondo, and others that are tokenized t-bills and overnight reverse repos. These assets have unique challenges to comply with regulations and Curve is working with them to find compliant solutions that unlock reliable yield for DeFi.
Audit History:
Curve has been heavily audited. The crvUSD protocol underwent a comprehensive audit by 3 separate audit firms before launch. Every upgrade to the Curve protocol involves audits as part of standard security practice.
A list of Curve audit reports can be found here. Also, see a crvUSD specific audit by Mixbytes.
SECTION 5: Data and Reporting
Provide details on how your team is equipped to provide data and reporting on grant distribution.
Is your team prepared to create Dune Dashboards according to program requirements for your incentive program?:
Yes, we can provide a dune dashboard that covers the following metrics:
- crvUSD supply on Arbitrum over time
- TVL of incentivized pools over time
- Volume of incentivized pools over time
- Liquidity utilization of incentivized pools over time
