In a significant move, the Curve decentralized autonomous organization (DAO) has approved a substantial $60 million credit line in crvUSD stablecoin for Yield Basis, a new protocol spearheaded by Curve founder Michael Egorov. This funding comes just ahead of Yield Basis’ imminent mainnet launch.
The recent vote enables Yield Basis to establish Bitcoin-centric liquidity pools, which aim to mitigate impermanent loss—an issue that arises when liquidity pool assets lose value relative to holding them outright. This initiative is designed to tap into decentralized finance (DeFi) opportunities for Bitcoin (BTC), thereby enhancing the overall Curve ecosystem.
Under the strategic plan, three liquidity pools will be initiated using Curve’s automated market maker (AMM) architecture on Ethereum. The pools will include Wrapped Bitcoin (WBTC), cbBTC, and tBTC, with an initial cap of $10 million on deposits.
This development is expected to deepen the integration of crvUSD within the DeFi landscape, potentially increasing revenue streams for holders of veCRV tokens, which are the vote-escrowed variant of Curve’s governance token, CRV.
Despite these advancements, the proposal has faced scrutiny from some Curve DAO members. Notably, the pseudonymous Twitter user Small Cap Scientist expressed concerns regarding the significant risks associated with the credit line on September 18. The user described the scheme as “extremely extractive” for the DAO and highlighted the lack of a third-party review of the economic risks linked to Yield Basis. There were also worries about the absence of caps related to crvUSD’s total value locked (TVL), raising alarms about potential vulnerabilities that could arise from hacks or exploits of the new protocol, which could leave Curve liable for any lost funds.
In response to these criticisms, Michael Egorov defended the proposal. He affirmed that Yield Basis had undergone six audits, with an additional audit presently in progress. Egorov outlined safeguards, including an emergency stop mechanism controlled by Curve’s Emergency DAO multisig, underscoring that Yield Basis would be liable for any related exploits. He also noted that the investor allocation framework was clearly presented in the governance proposal and emphasized the strategic importance of collaborating with respected players in the ecosystem.
Egorov asserted, “If anything happens, of course, it’d be on Yield Basis to deal with it to the highest degree possible,” addressing community concerns about accountability and transparency.
This initiative to bolster liquidity for Bitcoin pools could reshape how Curve fixtures operate within the DeFi sector, bringing forth new financial pathways while also spotlighting the balance between innovation and risk management in decentralized protocol operations.
While the prospect of increasing Bitcoin liquidity through Curve’s frameworks excited many, ongoing dialogue within the community suggests that it will be essential to keep transparency and risk assessments at the forefront as Yield Basis embarks on this new endeavor.
