• Curve recently deployed crvUSD smart contracts on the Ethereum Sepolia testnet ahead of launch on Ethereum mainnet.
• The new stablecoin will be pegged to the US dollar and overcollateralized by various crypto assets, using a novel lending-liquidating AMM algorithm.
• This is a challenge to MakerDAO’s DAI, which currently has a market capitalization of $4.71 billion.
What is crvUSD?
Curve recently deployed crvUSD smart contracts on the Ethereum Sepolia testnet in preparation for launch on Ethereum mainnet. crvUSD is a decentralized stablecoin that will be pegged to the US dollar and overcollateralized by various crypto assets, using a novel lending-liquidating AMM algorithm (LLAMMA). This approach works by converting between the provided collateral and the stablecoin depending on which is higher or lower.
Why Is This Important?
This challenge to MakerDAO’s DAI could prove vital for the market as both USDC and USDT have depegged during the current crypto bear market. A new decentralized stablecoin might offer an alternative solution as well as greater decentralization and trustlessness than its centralized competitors.
How Does LLAMMA Work?
LLAMMA works by converting between different types of collateral depending on which is higher or lower in price at any given time. If there is an increase in the value of provided collateral such as ETH, users’ deposits are comprised solely of ETH; however, if it depreciates then LLAMMA converts some of it into crvUSD helping better manage collateralization risks.
Competition with DAI
It will be difficult for crvUSD to outcompete MakerDAO’s DAI, which currently has a market capitalization of $4.71 billion; however, this does not mean that it cannot succeed in its own right with its unique advantages over other decentralized stablecoins like trustlessness and decentralization.
Circle CEO’s Thoughts On Stablecoins In The U.S.
Circle CEO Jeremy Allaire believes that legislation needs to be introduced in order to combat de-dollarization among cryptocurrency adoption in the U.S., stressing how important stablecoins are for financial stability within America: “The fact that you can move money around faster than ever before across borders means that you can now use non-sovereign backed digital currency units instead“. Additionally, Polygon Labs recently partnered with Google Cloud to drive further innovation within their blockchain platform making them one step closer towards introducing their own version of DeFi into mainstream markets alongside other major players like Curve Finance and MakerDAO’s DAI token.