The mythos of Curve Finance
February 24th, 2022

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An intro to Curve Wars and how it might change the landscape of crypto - forever

A lengthy introduction and backstory

There is a lot of ground to cover. I am no expert. I’ve said before that crypto is still a Wild West, no matter what your favorite influencers try and say. The story that I’m sharing with you is one that should absolutely reaffirm the above statement and make you realize just how absurd this all is. It is my honor to introduce to you, anon, the great Curve Wars.

Here’s a bit of backstory.

TVL. We all know what this acronym stands for, and how it’s changed crypto ever since its implementation. The ever so elusive ‘total value locked’ or as the team over at Olympus DAO has suggested, ‘total value deposited.’ First coming to fruition in the great DeFi summer of 2020, this benchmark served as the stamp of approval in a sea of endless DeFi food protocols popping up.

Cornswap, Bananaswap, Smoothieswap. These may or may not be real, there’s probably no way to tell at this point.

My sources? I made it up.

Protocols fought over who could obtain the biggest TVL to display to the world they were king, thus demanding that liquidity farmers of all net worths come to their protocol. This was a very hectic time in Crypto (or so I’ve been told) but it would seem that very little has changed, the space has just become much more professional about their shenanigans.

Instead of protocols named after food, we have more professional conventions: Curve Finance, Convex Finance, Yearn Finance and many more. These all sound like quality applications to send your money too - as evident with a combined TVL of $30 billion between these three. Wow, that’s a lot of money. One might even ponder how much of it belongs to a degenerate spartan and a market making whale.

But aside from all that…

Everyone likes money. No matter how intelligent you are, no matter how much you say you’re in it for the tech, no matter how many times you shout the words ‘new paradigm’ to the sky - you’re lying to yourself and everyone around you. We are all participants in the world’s greatest casino, a 24/7 stampede of nonsense, headlined by anonymous anime character PFP wielding degenerates with 8/9 figure net worths.

Protocols picked up on this early on, creating sleek and easy to use applications with tons of incentives for liquidity providers. The Uniswap v. Sushiswap debacle is a story for the ages, and one that taught me a lot about Crypto and the frenzied mindset of CT. Sushi waged an all-out war for Uniswap’s TVL and users, all while Uniswap had to sit back and take it. Fortunes were made and lost, users went from one protocol to the next, and developers learned more in these moments than they could have in four years at university studying game theory.

This is where DeFi really came into its own, for better or worse. As Uniswap was forced to create a native token thanks to Sushiswap’s antics, users became accustomed to rewards and incentives. After all, why give a protocol your funds for a measly 25-50% APR with the added risk of a rug pull?

Decentralized exchanges (Often abbreviated as ‘DEX’) became super popular amongst the crypto native, with Uniswap now remaining as number one in total volume and Sushiswap coming in around the top 5 as well.

So how the hell did we get into a war?

One automated market maker to rule them all

In comes Curve Finance.

Crypto had seen an explosion of wealth pile in, and with this came the need for a market maker. Just as TradFi market makers help keep the system running smoothly, Curve does the same - but with stable coins. You know, the ones Degen Spartan holds. I guarantee you at least one of them will triple from here - why else would he be holding so many?

Curve became the predominant automated market maker (Abbreviated as ‘AMM’) for stable coins, due to their ability to keep these stables pegged to a dollar. Minimal slippage, no nonsense. Curve also provided users with low fees, another huge incentive for users who were growing tired of the absurd fees on CEXes. Curve’s native token ($CRV) is a liquidity incentive, given to those who deposit their funds and preserve the sanctity of stable swaps. This way, 1 USDT can always equal 1 USDC, etc etc.

For every trade that occurs on Curve, liquidity providers earn a percentage of fees in the form of CRV tokens. And just to be clear, a lot of trades happen on Curve, as it’s currently the #1 place for stable coin swaps. But the fun doesn’t stop here - why should it?

Those who have earned CRV also have the option to “vote lock” their tokens, giving them even more CRV - veCRV (vote escrowed Curve). Be warned, token names are going to start being thrown around a lot here. Grab a notepad.

You see, veCRV isn’t just your ordinary LP token. This is a governance token, used to provide a vote in whatever important matter has been proposed for Curve. This could be a change in one of the many pools, a proposal of a new pool or a change in gauge weight (which we’ll get to). This veCRV is powerful, and given Curve’s influence and power in the crypto markets, it would make sense to want to own a lot of it.

The holders of veCRV are able to receive “bribes” from protocols in return for voting for a protocol’s pool. This allows users to be happy and earn some extra coins, while those in pursuit of veCRV obtain more votes.

Many different players in this game all share one goal: for their coin or protocol to be number one, with the most traffic directed their way. For them, having an influence on Curve is absolutely necessary to ensure survival. This is a wild space, and narratives change practically everyday. To stick around, you either need to a) innovate or b) control a lot of money.

Continuing on, in order to preserve their attractive APRs, Curve incentivizes those who stake and lock their coins by giving them more CRV, perpetuating the cycle and allowing users to make a bang for their buck. Win-win, right?

Every protocol wants to offer the highest yield, as it’s an almost surefire way to attract TVL. After seeing the OHM fork silliness play out, this couldn’t be more obvious. Why stick your money in something earning 43% APR when you could pile it into something yielding 652,984%? It’s simple math, duh.

Curve essentially monopolized this need for liquidity, as without Curve, a protocol can’t provide the best yield. Stables account for a significant amount of volume, and as much as we like coins that go up, these stores of value are necessary.

So who is really involved, and who stands to gain the most?

The war cometh

Enter Convex Finance.

Convex changed the game for good, with a very simple model for obtaining veCRV. Why go through the hassle of getting it yourself, if you can simply get users to give their veCRV to you?

Those who stake their CRV on Convex receive cvxCRV, a token which holds no voting rights. What’s the good in that, you might ask? Well, Convex gives users the same yields as Curve, oftentimes providing better opportunities. Who doesn’t like a little more money?

In addition to those cvxCRV stakers also receive CVX rewards, on top of the Curve trading fee rewards and yield. I know, there are way too many combinations of these letters.

Convex also has its own version of a governance token - vlCVX (stands for vote locked Convex). This allows holders to vote on decisions that affect the Convex protocol, and deal with issues pertaining to Convex’s supply of veCRV. In summary, Convex holds a lot of veCRV, and this number is only growing.

Let’s introduce another major player.

Yearn Finance, a popular DeFi yield aggregator used to provide depositors with the best passive investment opportunities. Created by Andre Cronje and team, this protocol boasts over $5 billion TVL and significant returns for those who seek high yield for (relatively) low risk.

Yearn is able to provide fantastic yield thanks to Curve, by providing liquidity and earning rewards, which can then be paid out to those who deposit into Yearn Finance. Kind of like a magic money wheel, one that requires more liquidity to keep rolling.


Yearn eventually created a vault, giving CRV depositors the opportunity to earn an even higher yield than they’d obtain on Curve. With this, Yearn was able to use their power to hold more voting weight, giving them an edge in the war.

Recently, Yearn did something interesting. They actually gave up 23 million veCRV to Convex, while retaining voting rights. This was done to further boost (or prop up) yields, while also aligning themselves with a major player in the war. Now allies, Yearn and Convex stand as significant players in the Curve Wars, positioning themselves very nicely.

Yearn most likely gave Convex this significant amount of veCRV due to Convex’s already massive stake, partly signaling a white flag from the side of Yearn. Why risk destruction when you can collaborate and keep the printer going? This is the way I see things, at least. I’d insert a Sun Tzu quote but I haven’t read anything of his.

But what exactly is it these protocols are all fighting over? This mythical talisman is typically referred to as ‘The Gauge.’ More simply put, the gauge is a magical money gun that shoots more money to the pools earning the most fees. See why all that governance was important? The money printer runs deep, and everyone wants to get their hands on it, for obvious reasons.

The war rages on

Convex and Yearn aren’t the only players in this war-game. Olympus DAO, Frax and Abracadabra (or wonderland, whatever it’s called) have all recently moved into battle with one goal in mind - accumulate CVX in order to inevitably acquire governance.

Protocols don’t want to be left behind. This is incredibly important in a space that moves at light speed, and it’s pretty easy to get left in the dust if you’re not spending every waking second on Twitter, Telegram or Discord.

In order to keep up, these protocols have been incentivizing their pools, offering rewards in an attempt to gain an edge. Olympus, for example, released CVX bonds in order for them to accumulate - you guessed it - CVX.

FRAX and MIM are two new stable coins, eager to gain - you guessed it, again - liquidity! In order to bootstrap this, they’ve been giving out bribes and other goodies, as every reputable stable coin needs to keep their peg and maintain order. I’m not well versed with either of these, but I have held some before and they didn’t go to zero, so that’s nice.

Even Terra is getting involved, after a recent proposal to increase liquidity for their UST-3CRV pool through incentivizing with Votium, a platform dedicating to bribing veCRV holders.

Everyone realizes the Curve ecosystem (if that’s the right term) will remain wildly important, and getting in earlier gives you more of a voting weight than it would if you got in at a later date. I believe we’ll see this heat up to a boiling point, as CVX will continue to be acquired at a frenzied pace by those looking to stay afloat in this constantly changing crypto market.

At the forefront of all this is the anonymous Tetranode, a DeFi whale capable of doing God only knows what. Famously a major supporter of Ethereum and known for his market making of CVX, Tetranode is prolific in the community for his involvement with protocols. Bolstering the gauntlet of infinity stones (CRV, CVX, RGT, you know the deal), Tetra inevitably decides which way the market goes - or at least I believe he does.

It’s hard to deny his influence, especially after the recent Mochi Finance debacle, resulting in the obliteration of Mochi’s pool and the slaughtering of Mochi’s native token. Tetra has had his hands in the cookie jar of CVX for a while now, hence the market making status. It would be wise to give him a follow on Twitter, as he’s a good barometer for what’s going on in the Curve Wars.

As for me? I’m just sitting back and watching all of this unfold. A lot of this is still pretty under the radar, and it’ll be interesting to see what plays out next.

Conclusion and parting thoughts

After reading all that, you’re most likely confused about what to do, and most importantly, what to buy. In my opinion, $CVX feels like a no-brainer here. Most of this drama probably doesn’t even show up on most of CT’s timelines, as DeFi nonsense (besides OHM forks) gets kind of technical and doesn’t compare to dog coin casinos or NFTs.

For me, this is the greatest aspect of crypto. All-out warfare, conducted entirely online, with anonymous market makers, shadowy super coders and tens of thousands of DeFi soldiers fighting to hit portfolio ATHs and achieve an APR of 100%. Instead of fighting over countries like we did in the past, we fight over users and TVL. We’ve come so far.

I try to avoid trading most of the time, and while $CVX seems like an easy swing trade in the next three months, I’d advise you to just stake it and claim bribes and stuff like that. I’m almost certain it goes for a 3-5x from these levels, and there’s really no telling what comes next.

As for you, keep your head above water and move with the tide. Don’t get caught holding any bags, and always try to pivot to the next big narrative. This is it, prepare you capital accordingly.

* As always, follow me on Twitter @knowerofmarkets and share this article all over, it would mean a ton. I’d also like to give a shout out to the DeFi Education Substack, as I was able to grab some more info from their Curve Wars article. I’d provide a link to the page but it isn’t working right now. I think they’re the same people that run the Bow Tied Bull newsletter, so go check them out. *

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