The long-awaited stablecoin of the Curve (CRV) altcoin ecosystem, crvUSD, has been launched according to on-chain data.
Curve is a decentralized exchange (DEX) that specializes in swapping stablecoins and other assets with low slippage. It also allows users to earn interest and rewards by providing liquidity to their pools.
crvUSD was a proposed stablecoin that would be backed by a basket of other stablecoins and collateralized with Curve tokens (CRV). It will use a new mechanism called the Lending-Liquidation AMM Algorithm (LLAMMA) to keep it stable and avoid liquidations.
Curve announced its plans to launch crvUSD in June 2022 and published a whitepaper in November 2022.
LLAMMA works as follows:
- When a user wants to mint crvUSD, they have to deposit some CRV tokens as collateral. Margin is added to a LLAMMA pool, which is an automatic market maker (AMM) that allows swaps between CRV and crvUSD.
- The user can borrow up to a certain percentage of the collateral value in crvUSD, depending on the liquidation rate. The borrowed crvUSD is also added to the LLAMMA pool.
- If the price of the CRV drops, the LLAMMA pool automatically sells some CRV for crvUSD to reduce the user's debt and increase the collateralization rate. This prevents the user from being liquidated and losing their collateral.
- If the CRV price rises, the LLAMMA pool will automatically repurchase some CRV with crvUSD to increase the user's debt and lower the collateral rate. This allows the user to borrow more crvUSD or withdraw some of their collateral.
- The LLAMMA pool adjusts the swap curve to supply and demand for CRV and crvUSD, keeping the crvUSD price close to 1 USD.
*Not investment advice.
