Curve Finance, one of the largest decentralized finance (DeFi) protocols with roughly $4.4 billion in total value locked (TVL), has launched its algorithmic U.S. dollar-pegged stablecoin called “crvUSD” on the Ethereum mainnet. This marks a significant step towards the public release of the stablecoin, which has already minted over $22 million worth of crvUSD in the past eight hours, with $20 million of that amount minted within the first five minutes, according to data from blockchain explorer Etherscan.
While the stablecoin remains inaccessible to general users pending integration with Curve’s front-end user interface on its official website, an admin claimed it will be coming “soon”, as Curve looks to lead the trend in developing algorithmic stablecoins.
Algorithmic stablecoins have faced industry-wide criticism following the collapse of the Terra ecosystem in May 2022 when the TerraUSD (UST) stablecoin lost its peg and the value of its sister token, Terra Classic (LUNC), plunged by more than 99%. UST’s value was maintained by a complex arbitrage mechanism that was eventually brought down by a group of sophisticated traders.
Curve’s crvUSD differs from the now-defunct UST by utilizing a similar design to MakerDAO’s (MKR) DAI stablecoin. CrvUSD will function as a “collateralized-debt-position” stablecoin, meaning that users must deposit collateral in order to take out a loan in crvUSD, although the preferred asset for use as collateral has not yet been specified by Curve Finance.
Competitor protocol Aave (AAVE) released a testnet version of its “native decentralized, collateral-backed stablecoin” dubbed GHO in February this year, as DeFi protocols look to compete in the development of new stablecoins.
Curve’s plan to release an algorithmic stablecoin was first announced by Curve Team member @mrblocktw in a Twitter post on July 21, 2022, and later confirmed by Curve’s founder, Michael Egorov, that the stablecoin would be overcollateralized at the ReDeFine Tomorrow Web3 summit, showing a longer-term plan for Curve Finance’s development.
Following the launch of the new stablecoin, the protocol’s native Curve DAO (CRV) token spiked around 7% according to data from TradingView, changing hands for $0.96. The debut of the crvUSD is a sign of the continued momentum in the DeFi space and the growing interest in algorithmic stablecoins as a more secure alternative to traditional stablecoins.