Curvance: Wrapped Token Lending Protocol
A new way to earn yield and unlock the full power of your liquidity
Curvance is a decentralized stablecoin lending protocol with an initial focus on wrapped tokens from the Curve, Convex, Yearn, and Badger ecosystems. Curvance seeks to allow users to continue earning yield while unlocking capital through peer-to-peer lending. Assets such as cvxCRV, bveCVX, and yvBOOST could earn similar or higher APR they would earn on their original platforms, but with the added ability to use deposits as collateral for secure stablecoin loans. Interest rates on these loans are based on several factors including pool APR, price volatility, token liquidity, and loan-to-value ratios.
Curvance is utilizing some familiar concepts in new ways to create unmatched value for its users:
- Decentralized Lending - A peer-to-peer lending contract that allows users to provide liquidity, and allows collateral depositors to borrow stablecoins at fair market value rates.
- Token Governance - The CVE governance token will allow for participation in DAO voting. The DAO will control various things including pool gauge weights, collateral eligibility, lending assets, and platform fee rates/distribution.
- Liquidity Routing - Collateral deposits to the Curvance platform will be routed to the underlying contracts that earn them yield i.e cvxCRV deposits would point back to Convex Finance so users' interest rates would not be affected while utilizing loan services.
Website: https://curvance.com/
Twitter: https://twitter.com/Curvance
Telegram: https://t.me/curvance
Discord: https://discord.com/invite/curvance
Introduction
The founding narrative of the blockchain ecosystem has been opening up financial services to all people without reliance on a centralized entity. This was the main impetus around Bitcoin and Ethereum. To further facilitate this, DeFi (Decentralized Finance) platforms were launched to replicate the expected functionality of traditional financial tools. DeFi provides a new financial ecosystem that is decentralized, global, transparent, resistant to censorship, without intermediaries, and easily accessible.
As demand for censorship-resistant mediums of exchange increases, platforms like Uniswap and Sushi are starting to rival their centralized counterparts in terms of volume traded. With this monumental shift in volume, the industry has already faced numerous growing pains, including but not limited to the issue of slippage when a user facilitates trade on a DEX. Unlike a centralized exchange, a decentralized exchange relies on anonymous users to create liquidity for various markets. Low liquidity and large transaction volume can result in higher fees for the end-user. To combat this problem, new ways of transacting have been created for certain assets.
One such platform is Curve, which created an Automated Market Maker(AMM) that reduces slippage and fees by only accommodating assets that behave similarly (stablecoins, wrapped tokens, etc.) and using a bonding curve formula to facilitate swaps.
A Decentralized Autonomous Organization (DAO) was formed and controlled by the veCRV governance token to ensure that this protocol was properly governed. To participate in voting and earn rewards, CRV has to be locked for 1, 2, 3, or 4 years at a time. This mechanic results in a mass amount of the token supply being locked up. Users who want the benefits of locking without carrying a locked position choose to use platforms like Yearn or Convex Finance, allowing those protocols to lock their CRV receiving wrapped versions of CRV in exchange with secondary markets so users can trade the positions openly.
As the value of Curve’s voting rights increased, something known as the Curve Liquidity Wars started between Yearn, Convex, and Stake DAO. While these platforms fought for voting rights, use cases for interest-bearing tokens became a quick afterthought. This is where Curvance comes in, furthering the development of this locking cycle and allowing users to gain even more utility for their wrapped tokens without the need to take from other protocols.
The Lockening
Curve is an automated market maker on the Ethereum blockchain, designed to achieve (1) efficient stablecoin trading (2) low risk, supplemental free income for liquidity providers. Curve allows users to trade stable coins like DAI and USDC with low slippage, low fees, and low risk by utilizing a specifically built algorithm for stablecoins (3) Rewards to users for supplying liquidity to the Curve protocol by receiving the CRV token. CRV is the governance token for the Curve DAO.
One of the common issues in the Curve ecosystem is the inflation of CRV tokens. Because CRV tokens are primarily used for governance of the Curve ecosystem, there is a lack of utility for individuals primarily motivated by profit-seeking activities. Locking mechanisms exist that allow for the staking of CRV for veCRV to earn more platform fees and voting rights. While this reduces short-term inflation for the ecosystem, it creates a new problem for the user who now has a locked, illiquid position for up to 4 years.
Yearn Finance, realizing this as an issue for most users, created the yveCRV vault. This vault would allow Yearn to lock CRV tokens on behalf of the user indefinitely, giving the user a wrapped version of their CRV (yveCRV), which necessitated the creation of secondary liquidity markets, so users could trade these tokens freely. With the innovations from Yearn garnering billions of dollars in total value locked (TVL) and a large voting share in the Curve DAO, it was only a matter of time for competitors to start popping up.
Convex launched their platform with one goal in mind: to retain voting rights for the Curve DAO. Convex founded the cvxCRV pool, which offered the same benefit as Yearn’s yveCRV but with a boosted reward feature to increase the end user’s APR. The community praised this improvement by giving Convex a staggering $6.6 Billion in TVL after just three months of being live.
Between users locking CRV for more yield and protocols locking for more voting rights in the DAO, the rate of locking has started to outpace overall CRV emissions. At the time of writing, Curve now has 48.4% of all tokens locked (93.8% excluding voting escrow) for an average of 3.6 years. As CRV becomes more sought after and less available, more capital will be locked than ever before. The lockening is creating opportunities to expand DeFi in ways previously unseen.
The Unlockening
A common issue a user would face while providing liquidity to various pools is the inability to borrow against their tokens uninterrupted. In many cases, a user would need to stop providing liquidity to the most lucrative pools and bring the asset to somewhere like Aave or Cream. While these protocols are perfect for collateralized loans, they are not ideal for the simple farmer, whose yields become decimated when removing their tokens from participation.
Curvance seeks to unlock wrapped tokens such as cvxCRV, bveCVX, yvBOOST and many others allowing users to earn the APR they would on their original platforms while using those deposits as collateral for secure, stablecoin loans. Each asset's borrowing limit automatically determines lending ratios based on various factors, allowing users to borrow funds to invest and earn more.
For example, a user may deposit cvxCRV tokens from the Convex Finance platform into Curvance. Our protocol routes the deposited cvxCRV to the original Convex pool. While the tokens are earning interest, the user can 'lock' their deposit as collateral to gain a credit limit.
Liquidity providers to the Curvance protocol earn CVE tokens, which can be staked to receive boosted rewards:
- Shares of a platform fee based on TVL
- Profits from the lending market
- Voting rights in the Curvance DAO
By extending collateralized credit limits to yield farmers, Curvance is, in a way, unlocking a large percentage of the deeper DeFi market. This breakthrough, alongside other products like a CVX wrapper, would make our DAO a significant contender in various DeFi wars.
Tokenomics
CVE is an ERC-20 governance token on the Ethereum Network To better facilitate protocol governance and fee redistribution, Curvance is creating the CVE token. This token will allow users to lock up for a set period to gain DAO voting rights, boosted rewards, and platform fee redistribution. The total breakdown of token allocation is as follows: 16% [640,000] Treasury – Vested over 4 years released monthly (25% will be minted on TGE [Token Generation Event], locked in CVE locker) 13.5% [540,000] Team – Vested over 2 years released monthly 5% [200,000] Seed Raise – Vested over 1 year, 10% TGE with 22.5% unlocks every 3 months or 1 year vote-locked 1% [40,000] Early Backers Raise – Vested 14 months released monthly 37.15% [1,486,000] Bonding & Boosted Rewards 1.67% [66,800] Initial Pool Liquidity – Unlocked on TGE 8% [320,000] CVE Lockers – Spread over an 8-year period 15% [600,000] Lending Liquidity Incentive 2.68% [107,200] Airdrop – 2.18% on TGE with 0.5% vested for future community airdrop events
nitial Circulating Supply on TGE is: 174,800
The initial total supply on TGE is: 1,100,000
Max Supply is: 4,000,000
Token Distribution
Community (64.5% – 2,580,000 CVE) We have allocated tokens to various liquidity incentive programs, keeping long-term sustainability in mind. The rates shown in this section will likely change as the token value fluctuates. This system is becoming more common among other DeFi projects. 37.15% [1,486,000] Bonding & Boosted Rewards – 4 years released monthly with distributions based on gauge weights and governance The Curvance DAO can decide which pools and bonds are allocated tokens from the emission schedule, but it cannot expand past the 1,486,000 CVE allocation. A maximum of 1,486,000 CVE will distribute to the community for liquidity incentives and bonding. Using a monthly release schedule, Curvance will have the ability to issue up to 30,958.33 CVE tokens per month for four years. We predict larger allocations for bonding than boosted rewards in the early stages as it is more beneficial for the protocol's health. These limits put a hard cap on the amount of CVE that can be minted and a better understanding of the number of years required to distribute the CVE. This rate was chosen to balance the need for incentivized rewards to early adopters while not distributing all CVE too early, which is a requirement for long-term sustainability. 15% [600,000] Liquidity Incentive – 4 years unlocked bi-monthly with distributions based on gauge weights and governance Since Curvance doesn't plan to issue its own stablecoin, instead, we will incentivize community-injected liquidity to our lending pools. To scale at a rate that can benefit the greater Curve ecosystem, we will need to rely on many consistent liquidity providers. That is why 600,000 CVE tokens are allocated for extra incentives at a rate of 25,000 CVE every two months. The reason for issuing tokens every two months is to have a more predictable interest rate for our liquidity providers. As lending LPs, APR will come from the number of active loans issued and the amount of CVE they are earning in proportion to the total liquidity provided for their specific pool. More details regarding how our lending market works can be found here. 8% [320,000] CVE Lockers – 8 years released monthly As an added incentive for users to lock their CVE for vlCVE, a boosted interest reward will go to vlCVE holders. This boost will consist of 3,333.33 CVE tokens per month for 96 months. To further incentivize long-term locking, users who lock their CVE for one year will earn the majority of the monthly allocation. The actual split for reward distribution will be 25:75 in favor of the one-year lockers resulting in 833.33 tokens per month for the 30-day lockers and 2,499.99 tokens per month for the one-year lockers. For example, User Brad decides to lock their CVE for 30-days, while User Chad locks for one year. Because Chad is locking into a longer-term commitment to benefit the entire ecosystem, he will earn more rewards than Brad. And since Brad is still adding value to the protocol by locking for 30-days, he will also earn some rewards. This distribution is, of course, weighted by how much of the total vlCVE the individual holds compared to the entire supply of vlCVE in existence. 2.68% [107,200] Airdrop – 2.18% on TGE with 0.5% vested for future community airdrop events Details regarding our Airdrop can be found here. 1.67% [66,800] Initial Pool Liquidity – Unlocked on TGE This is for bootstrapping initial liquidity to our CVE/ trading pair, depending on if we use a LaaS provider or not for the early stages; this balance will either be deposited to the DAO treasury holdings or issued as bonds after enough liquidity has accumulated. Team & Investors (19.5% - 780,000 CVE) 13.5% [540,000] Team – 2 years unlocked monthly Team tokens will be issued for founders, early contributors, and staffing core team members. Long-term development of the protocol is key to staying relevant in the ever-changing world of crypto. Rather than selling an overly large chunk of our tokens to VCs to pay our team with dollars, we choose to compensate our core team with a smaller salary and a token package. This payment structure incentivizes quality work from the core team as most of their salary will depend on CVE token price. 5% [200,000] Seed Raise – 1 year, 10% TGE with 22.5% unlocks every 3 months Our seed raise is only being given to strategic partners who add more than just capital to the project. The allocation amount for each investor is between $100,000 and $250,000 per investor. This ticket size ensures that no individual group or angel has an undue advantage when it comes to DAO governance. Since the beginning, we have listened to our community about raising capital, and every investor we chose reflects that. 1% [40,000] Early Backers Raise – 14 months unlocked monthly Our Friends & Family investors are people aligned with the long-term vision of Curvance, and they were offered an early-stage investment opportunity to help bring this idea to life. These investors were vital in getting our team together and giving us a small working budget to create something beautiful before we had a name, website, or even anything more than a goal to expand DeFi's wrapped token utility. THANK YOU! Treasury (16% - 640,000 CVE) 16% [640,000] Treasury – 4 years released monthly (25% will be minted on TGE, locked in CVE locker) The Curvance Treasury is a DAO and core-team governed pool of CVE tokens. The treasury could be used to upkeep the code, future audits of smart contracts, bug bounties through our DAO work portal, possible cross-chain implementations, new features, DAO investments, partnerships with exchanges, or issuing more bonds in the future if needed. In its infancy, the treasury allocation will be minted and locked for vlCVE that carry no voting rights but can still earn their share of platform fees. The platform fees earned from this pool will be used to acquire more CVE LP tokens and other governance tokens to strengthen the protocols bond treasury further. As these tokens vest, the DAO can decide where/when to allocate them elsewhere; otherwise, they will remain vote-locked, earning platform fees.
Capital Raise
We've allocated 6% of the total supply for early-stage capital, 1% for our friends and family investors, and 5% for the seed. The total amount of money raised adds up to $3,733,200. The seed capital is for staffing the core team and adding initial liquidity to the CVE LP.
Our friends and family investors purchased CVE tokens at $8.33 with a 14-month vesting schedule released monthly.
The seed round is $17 with a vesting schedule of 12 months, 10% TGE with 22.5% released every three months.
While vetting potential investors, the main focus was identifying groups/individuals that shared our long-term vision for Curvance. In doing so, we are only allocating CVE to strategic partners and other DAOs.
Vote Locking
Like Curve's CRV, the CVE token can be locked up to gain access to DAO voting and other benefits. Whenever CVE is locked, a new token will be minted, vlCVE. There will be two options for vote locking; one is a 30-day lock, and the other is a 1-year lock.
CVE locked for 30-days will mint vlCVE at a 1:2 ratio, meaning for every CVE locked, 0.5 vlCVE will be minted. Locking CVE for one year will mint vlCVE at a 1:1 ratio, meaning for every one CVE locked, one vlCVE will be minted.
vlCVE will grant voting rights in the Curvance DAO, with every vlCVE equaling one vote. If a user holds 100 vlCVE in their wallet, they would have the ability to vote on proposals with 100 votes.
Similarly, vlCVE will earn platform fees from the total value locked in the protocol based on the amount of vlCVE in existence. If 100 vlCVE is all that exists and a user owns one vlCVE, they would earn 1% of the total platform fees distributed.
Platform Fees
To further strengthen the growth of the Curvance treasury and incentivize vote locking, a platform fee will be taken from deposited assets interest rates. This fee will vary per pool.
An example of how this would look is that a user deposits cvxCRV as a collateral asset, which will automatically be directed back to Convex Finance to earn interest (~60% APR). The platform fee deducts from the ~60% APR cvxCRV production - meaning the user's interest rate on Curvance would be the native rate minus the platform fee of ~4% in this example, making their total APR ~56%.
This platform fee will redistribute back to vlCVE holders in proportion to the amount they hold versus the amount of vlCVE in existence. If 100 vlCVE is all that exists and a user owns one vlCVE, they would earn 1% of the total platform fees distributed.
In the early stages of Curvance's development, a 0.3% tax will be implemented on the platform fee to strengthen the treasury and expand the team. The tax will ensure continued growth and sustainability regardless of market conditions and will allow us to avoid costly VC raises in the future. The DAO can change this function in the future once a point of stability has been achieved.
Rewards
Benefits you receive for holding vlCVE
Curvance's entire tokenomic structure is designed to give the most benefit to users who vote-lock their CVE. While holding vlCVE, you will receive platform fee distributions, a portion of lending market profits, and the ability to vote for various things on other protocols, thanks to whatever governance tokens live in our treasury. As a bonus, we've allocated 8% of CVE's total supply over eight years to be distributed to vlCVE holders, ensuring that you will always receive something for locking your CVE.
As an example of how rewards could be generated for any given month, let's create a scenario: Curvance has $1,000,000,000 in TVL with $300,000,000 of active loans issued, and 50% of CVE has been locked for vlCVE with an average CVE price of $250 per token.
Assuming the average platform fee on TVL's APR is 3% (0.25% monthly) and the average loan profit distributed is 2% (0.16% monthly) while adding in our CVE boost, totaling 0.08% for the month, we can find our sum.
($1,000,000,000 x 0.25%) + ($300,000,000 x 0.16%) + (256 CVE x $250) = $3,044,000 in total rewards for the month
In this example, 50% of all circulating CVE are vote-locked and eligible to receive these rewards. To keep the math simple, let's say that 1,000,000 CVE tokens are circulating (25% of the total supply). That would mean 500,000 vlCVE exist at this time.
$3,044,000 / 500,000 CVE = $6.08 per CVE in rewards that month
At $250 per CVE, that would indicate a current 2.72% APR monthly for vlCVE holders, and if the same conditions held the entire year, you would earn 32.64% APR yearly.
Airdrop
Details regarding the CVE token airdrop
As I'm sure most of you have seen we tweeted out on Dec 14, 2021 something that got a lot of attention.
It is no surprise this list was created for users to receive a portion of the CVE Airdrop. However, we were pretty shocked by how many entries we received. Even with a basic bot and double-entry filters, we had just over 10,000 entries!
Let's get into the numbers a bit more for the airdrop. As shown in token distribution, 2.68% of the CVE supply has been allocated for airdrops. The breakdown for how this will look is like this:
2.18% minted on TGE airdropped with 0.5% vested for future community rewards/airdrop events. The original plan was to use 0.18% of the supply for the social media airdrop, but with 10,000+ entries, it wouldn't make it very worthwhile to those who could benefit from it.
With this in mind, our team has decided to implement a few social tracking bots within the discord to reward those who provide social value. Ultimately your airdrop size and placement on the final list will come down to your ability to show you are A.) not a bot and B.) genuinely interested in participating in our DAO.
We don't want you spamming channels or being forced to sit at the computer all day for some sort of social proof; our bots are being custom-coded by our team to reward meaningful discussions over simple "gm" or "hi" messages.
You will do just fine if you pop in a few times a week to ask questions or give feedback during open discussions regarding the protocol. You will also be rewarded for talking about us on Twitter, posting threads, making memes, or just sharing general excitement for our protocol's launch.
Remember that 0.5% of CVE we mentioned that is vested for future rewards? We plan to continue to reward users who participate socially at random. This way, most of the rewards stand to be earned AFTER the initial airdrop. Hooray! for incentivizing participation even further for our community.
What about the remaining 2%?
The remaining 2% of the airdrop allocation will go to relevant LPs on Curve, Convex, Yearn, Badger, and Frax. More details regarding this along with snapshot dates will be shared as we get closer to launch. Users will have to claim the airdrop on our site if their address is whitelisted.
What is Bonding?
Bonding is a mechanism in which a user can sell assets to a protocol in exchange for its native token.
To incentivize users to sell to the protocol, rather than the open market, bonds are offered at a discounted rate. Bonds also have a vesting period to prevent users from selling all the discounted tokens at once for a quick profit. Bond price is determined by the supply and demand of bonds. It trends higher when there is more demand. As a result, bonding is a very competitive space - bonders compete with each other to grab the largest discount.
Bond price can also be controlled by BCV (Bond Control Variable). It is a parameter set by the policy team to adjust bond capacity. When BCV increases, bond price increases, thus resulting in a smaller bond capacity.
Bonds are linearly vested over a period of time (5 days by default) to reduce sell pressure due to arbitrages.