Curve Finance is a decentralized exchange (DEX) running on Ethereum. It's specifically designed for swapping between stable coins. All you need is an Ethereum wallet, some funds, and you can swap different stablecoins with low fees and slippage.
Like Uniswap, tokens can be swapped as long as there is liquidity. The main difference between Curve and other DEXes is that Curve focuses mainly on stable assets. Curve offers a large variety of stablecoins including DAI, USDT, USDC, BUSD, and TUSD.
The Curve Finance protocol also contains the Curve token known as CRV. It is mainly used to incentivise liquidity providers on their platform and to get as many users as possible involved in the governance of the protocol.
The amount of liquidity Curve provides allows other DeFi applications to use Curve pools as part of their ecosystem. Applications like Yearn Finance and Compound use Curve as a farming solution in their ecosystem.
What is Defi?
DeFi, short for decentralized finance, is a new paradigm that enjoys increasing popularity in the financial world. DeFi posits that financial services should not rely on centralized intermediaries but should be provided by users for users. This is done by deploying software components to a decentralized peer-to-peer system which is grounded on blockchain technology. This introductory text discusses the origins of DeFi and delineates DeFi characteristics from those of traditional finance. Several examples of DeFi applications are given, the disadvantages resulting from this paradigm are discussed, and an outlook is provided.
How does Curve Finance work?
At curve finance, assets are priced according to a pricing formula instead of an order book. The formula used by Curve is specifically designed to facilitate swaps that happen in a roughly similar range.
For example, we know that 1 USDT should equal 1 USDC, which should equal roughly 1 BUSD, and so on. However, if you'd like to convert 100 million dollars of USDT to USDC, then convert it to BUSD, there's going to be some slippage. Curve's formula is designed to minimize this slippage as much as possible.
There are different assumptions about trust and risk, so liquidity and execution don't count for the whole picture. But it's certainly exciting to see competition between the centralized and the decentralized world in this way.
Main Advantages
Low trading fees — Curve offers traders far lower trading fees for stablecoin trades than Uniswap (0.3% per trade at Uniswap vs. 0.04% on Curve).
Minimized slippage — Whale traders and high-volume trading pairs are subject to slippage, but Curve’s similar asset pools minimize this.
No impermanent loss — Liquidity providers on Curve supply stablecoin pairs that nearly eliminate impermanent loss.
Key Resources & Readings
Curve.fi
Curve Finance (@CurveFinance) · Twitter
https://twitter.com/CurveFinance
Curve Finance - CoinDesk
https://www.coindesk.com › tag › curve-finance
What Is Curve Finance in DeFi? | Binance Academy
https://academy.binance.com › articles › what-is-curve-...
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