A Simple Introduction to Curve Finance

What is Curve?

  • Curve Finance is a decentralized exchange (DEX) running on Ethereum
  • It’s specifically designed for swapping between stablecoins. Includes but not limited to: DAI, USDT, USDC, GUSD, TUSD, BUSD, UST, EURS, PAX, sUSD, USDN, USDP, RSV, LINKUSD
  • Liquidity protocols like Uniswap, Balancer, and PancakeSwap allow anyone to become a market maker and earn fees on many different market pairs
  • Curve allows investors to avoid more volatile crypto assets while still earning high interest rates from lending protocols

How it works?

  • Automated market makers allow digital assets to be traded permissionlessly and automatically by using liquidity pools instead of trading between buyers and sellers
  • At its core, a liquidity pool is a shared pot of tokens
  • Users supply liquidity pools with tokens, and the prices of the tokens in the pool are determined by a mathematical formula

The Curve AMM model has four main components

  1. Liquidity providers are people who deposit tokens to the Curve liquidity pools
  2. Liquidity pools are where liquidity provider tokens are kept to create exchange liquidity.
  3. Traders swap tokens with the liquidity pool, creating buy and sell pressures that help determine token prices.
  4. AMM algorithms efficiently price the tokens in the liquidity pool according to various factors, such as buy and sell pressures driven by traders.

Advantages to Curve

  • 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.
  • Minimized slippage: Whale traders and high-volume trading pairs are subject to slippage, but Curve’s similar asset pools minimize this.

To learn more, visit Curve Finance official website here.

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Ricky Young

My belief is that financial freedom cannot be obtained by just a 9-to-5, but a combination of smart investing and passive income. This is my journey to achieve financial freedom.

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