Curve Proposes Giving 10% Of crvUSD Revenue To Savings crvUSD Holders

The Curve community is showing early support for a proposal to divert 10% of the fees generated by its crvUSD stablecoin to holders that “stake” their tokens.

The vote began on Nov. 3 and has received 9 million worth of vote escrowed CRV (veCRV) or 92% of votes in favor so far, while nearly 8% of votes have been cast against.

However, the current number of votes cast so far equates to just 4% of the required quorum threshold for the proposal to go through. Voting will end on Nov. 9.

Michael Egorov, the founder of Curve, said the move aims to scale crvUSD adoption and minimize both prices and interest rate volatility for the stablecoin.

Curve launched scrvUSD four days ago, comprising a modified Yearn v3 savings vault that supports deposits in the form of crvUSD. Users can mint crvUSD against deposits made to the Curve Finance protocol. CrvUSD is currently the 29th-largest stablecoin with a $50.8 million market cap, down from an all-time high of $163.9 million in March. Its price has oscillated between $0.985 and $1.005 in 2024.

CrvUSD is currently lagging behind GHO, a rival decentralized stablecoin minted against deposits made to Aave, which ranks 17th among stablecoins with a $175.6 million capitalization, down from a high of $180.4 million last week. GHO’s price has similarly oscillated between $0.985 and $1.01 since March.

Liquidity sink

CurveCap, a Curve-focused web3 influencer, said the proposal aims to establish scrvUSD as a liquidity sink for crvUSD to stabilize the stablecoin’s market dynamics.

“Most of the time, $crvUSD sits near the peg, generally a couple basis points under an even dollar,” CurveCap said. “Many borrowers like to take out a loan, then trade the $crvUSD for another stablecoin, which pushes the peg downward slightly. The dumping continues until the system’s borrow rate naturally pushes upward to the point where no more new borrowers are incentivized to enter the system. In other words, it stops scaling.”

Egorov noted that crvUSD borrow rates are currently 15%, while the scrvUSD savings rate is 8%, meaning tokenholders are losing 7% by holding the token. CurveCap asserts that redistributing the high borrow rates back to scrvUSD holdings incentivizes users to lock up crvUSD for scrvUSD, reducing borrowing rates in the process.

“This takes $crvUSD off the market, causing borrow rates to drop,” CurveCap said. “A virtuous cycle.”

The analyst added that scaling crvUSD could provide additional revenue to veCRV holders in the future at a cost to short-term revenue through funding the savings rate.

The price of CRV is up 0.5% over the 24 hours, according to CoinGecko.