Curve Finance transitions from 3crv to crvUSD for fee distribution, thereby improving the stablecoin’s ecosystem integration and utility.
Curve Finance has implemented a modification to its fee distribution mechanism, transitioning from the 3cr token to its native stablecoin, crvUSD.
The objective of the initiative is to enhance the utility of crvUSD and incorporate the stablecoin into the Curve Finance ecosystem in order to motivate users.
As per a press release that was shared with Cointelegraph, the transition to crvUSD for commission distribution will generate “an additional supply drain for the stablecoin.”
The “supply deficit” is primarily caused by uncollected fees, according to the release, which has the potential to increase the total value locked (TVL).
The transition would affect Curve Finance users, as Michael Egorov, the inventor of Curve Finance, discussed with Cointelegraph.
“The transition to crvUSD will result in consumers receiving fees in a stablecoin that is denominated in dollars.” This change substantially facilitates the process, as crvUSD does not require conversion to any other currency in order to be used in Curve Finance products.
The press release states that the distribution of fees in crvUSD will encourage users to engage more in products and services that utilize the stablecoin, thereby incentivizing the use of the stablecoin.
Egorov informed Cointelegraph that Curve users could deposit crvUSD into the ecosystem using fees garnered during the transition as community incentives.
“The value of 3crv is usually going up, but the exchange rate changes all the time. It is currently around 1.03.” Users were required to take additional steps to convert 3crv into a more stable or viable form of currency for other activities due to this variability.
In the press release, Curve Finance announced its intention to mitigate potential liquidity concerns and risks associated with the transition.
Egorov disclosed to Cointelegraph that there are “a handful of potential risks associated with this transition,” including operational risks and asset age.
“The 3crv token has been operational for more than four years without any issues.” […] CrvUSD has only been operational for one year and has yet to demonstrate its reliability in its entirety. Despite having undergone numerous audits and been approved for deployment, it is inherently less time-tested than 3crv.
Egorov also addressed the operational risks that were present during the “preparation phase” for the onchain votes that were necessary for the transition. However, these risks have been mitigated as a result of the passage of “all relevant votes.”
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