- crvUSD will use the Lending Filter Algorithm Model AMM or LLAMMA to mitigate collateral risk.
- crvUSD will become decentralized, backed by crypto assets, and pegged to the US dollar.
- The release date of crvUSD is unknown.
Curve Finance (CRV), one of the longest-running decentralized exchanges built, on Tuesday released a white paper detailing the upcoming crvUSD stablecoin.
According to the document, the core idea of the new decentralized stablecoin is what Curve founder and white paper author Michael Egorov calls the Lending Filtering AMM Algorithm, or LLAMMA.
LLAMMA works by converting between the collateral offered and the stablecoin, depending on which is higher and which is lower. For example, if the price of a collateral in the form of ETH is high, then the users’ deposits consist only of ETH. In the event that the collateral falls in value, LLAMMA converts some of it into a stablecoin, which helps to better manage collateral risk.
The LLAMMA mechanism, according to the white paper, differs from traditional automated market maker (AMM) designs in that stablecoins are on top and collateral is on the bottom.
Similar to DAI, another decentralized stablecoin issued by Maker, crvUSD will be collateralized by other crypto assets and pegged to the US dollar.
Curve has joined Aave in issuing a crypto-backed stablecoin. Aave’s GHO will also be a collateralized stablecoin which users will be able to mint directly on Aave. It is scheduled to be released in the near future.
The market capitalization of crypto-asset-backed stablecoins is currently $6.7 billion, according to data from DefiLlama. It tops the list among Maker’s DAI, with a market capitalization of $5.3 billion. The total market cap of stablecoins is just under $144 billion with USDT, USDC, and BUSD issuing nearly $132 billion of their tokens.
on the flip side
- It is not clear when crvUSD will be launched.
Why should you bother
Decentralized, crypto-backed stablecoins make up only a small portion of the total stablecoin market. Curve’s crvUSD, along with Aave’s GHO, is set to increase the decentralized stablecoin market share in the near future.
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