Understanding the correct position of Curve: Business status, ecological development, moat and valuation comparison in the head liquid market

DeFi is   Mint Ventures  Long-term concern and optimistic encryption business circuit, and Curve is   DeFi  One of our biggest concerns in the field.

Compared to others. DeFi  Products, Curve  A number of features make it of high research value:

Located in the largest market, but also the most competitive circuit:   1. Asset transaction; 2. Liquid market, and always in the front line of the race

Designed a complex and exquisite "ve" economic model, trying to achieve two levels of coordination:

1. Business coordination: realize the coordination among business demands such as "trading", "liquidity procurement and distribution", "governance", "market value management", and "expanding ecological partners"

2. Participant coordination: Realize interest coordination among "trading users", "market making users", "liquidity purchasing users" and "token holders"

Formed protocol ecology, based on   Curve  Numerous projects build up layers of financial Lego

Multi-chain layout, in each mainstream   EVM  Compatible chains have version deployment, and the traffic is in the front position

Since the launch of the project, we have actively practiced the capture of token value, and many free public categories. DeFi  Form a contrast

We are self-contained. 2020  The year began to pay attention. Curve, and in   2021  Year   9  For the first time in June, a report on the Curve  In depth report:Uni V3 Attack  CRV: In-depth Analysis  Curve  Business Model, Competitive State and Current Valuation. After an interval of time 1  Year and a half, Curve  In terms of market size proportion of liquidity, trading volume and other indicators, it is still in the first line, but its product mechanism, business composition, governance game have undergone many changes, around   Curve  The ecosystem of agreements is also becoming more complex.

So we try to repair. Curve  Investigate and sort out its ecology to find answers to the following questions:

1. Business: Curve  What is the current business situation and where is it in the market?

2. Ecology: Curve  What are the ecological projects in the ecology, the competition and cooperation between them and the right. Curve  The value of

3. Moat: Curve  Is there still a solid moat? DEXs  Is the racetrack endgame a monopoly of head agreements, or a long race of blood?

4. Valuation: Compared with similar agreements, Curve  What is the current valuation?

This report will focus on elaboration and discussion. Curve  Its ecological self   2021  The part that has changed since last year, for   Curve  The basic business, token design, and basic concepts of the project are covered less and can be read by interested readersUni V3 Attack  CRV: In-depth Analysis  Curve  Business Model, Competitive State and Current Valuation, Curve  The core business mechanics and token design have not changed.

The following report is the author's phased views on the project up to the time of publication. There may be errors and biases in data, facts and opinions, which cannot be used as reasons for investment.

2. Basic Information of the project  

2.1 Business scope of the project

Curve  Based on   AMM (automated market maker) mode   DEX  Service is well known. In the early days, Curve  Compared to conventional Uniswap V2 AMM  Mode   DEX, which features extremely low transaction slip points and fees, serves the paper market, where stablecoins, packaged assets such as   wbtc\\renbtc), LSD assets (e.g.   stETH) is its main trading category. Eg. Nowadays Curve  The proportion of non-stable consideration asset transactions (type V2 transaction pairs) is also gradually increasing.

Curve  Its other core business is the procurement, distribution and management of liquidity. Curve  Differ from   Uniswap  The main business. In general, Curve  By paying your own governance tokens. CRV  Unified procurement of liquidity from the market, then through their own. Gauge  Voting governance module, for the demand side of liquidity (each project side) to provide a liquidity "auction market", convenient for them in. Curve  Unified procurement of their own needed liquidity. In this process, the CRV (after pledge) is the currency used to pay for the auction.

Curve , which revolves around two businesses: trading and liquidity services; Also constructed are the ecological participants' views on   CRV  Demand for:

In order to obtain the agreed transaction fee cash flow distribution

In order to get the cash flow benefits of vote buying to govern the vote

Governance votes (vecrVs) are purchased for liquidity

In order to obtain   Curve  Governance participation rights are used for indirect rent-seeking or direct control agreements

The specific methods will be described later.

2.2 Project History and roadmap

The following is   Curve  Important deeds since the creation of the project, up to 2023  Year   2  Month.

And now. Curve  The announced future product milestones are Stablecoin products. crvUSD  Online and interactive. Gas  Continuous optimization (facilitates allocation to more small transactions by various transaction aggregators). Where   crvUSD  Although the excess mortgage mechanism is adopted, its segmented liquidation mechanism is well combined with the design. Curve  The advantage of massive liquidity has a stabilizing effect on the crypto market as a whole, but so far. crvUSD  No timetable has been announced for the launch.

2.3 Core team

Curve  Is a real name team, founded by   Michael Egorov (based in Switzerland) and another key team member. Julien Bouteloup Stake DAO  The founders of the program provide similar. Convex  Revenue and governance aggregation services, owned   Curve  Whitelist of governance). Curve  The team is a relatively lean small team, the core members are about. 8  People around.

More team information is available previously. Curve  It is understood in the "Team Situation" section of the research newspaper. This article will not be repeated.

3. Business Analysis  

As mentioned above, Curve  The core business is:   1. Spot trading; 2. Procurement, distribution and management of liquidity.

The former are used by traders and market makers, while the latter's core users are issuers of project notes, which include stablecoins (e.g.,   BUSD, FRAX), depositary receipts (e.g.   stETH, aUSDC) and packaged or synthetic assets (e.g.   renBTC, sETH).

In view of   Curve  Before sorting out and analyzing the specific business, let's take a look at the overall market situation of these two types of business.

3.1.1 Spot trading

Spot transaction is the crypto business scenario with the largest number of users and the most frequent exchange of funds. According to   DeFillama  Data,   2023  Year   1  Month   DEXs  The monthly total transaction volume was   706.5 & have spent $100 million, accounting for the total trading volume of the spot crypto assets. 7.21% & have spent , means there is more than. 90%  The volume of physical asset trading is still in. CEX  Take place.

Data source:https://defillama.com/DEXs

On the one hand, this means that centralized exchanges are still the main place for trading, but it also means that. DEXs  We have a large market share expansion space, and DEXs  The impetus to further increase trading market share is likely to come from:

Users' trust in centralized institutions is gradually lost, and the demand for asset autonomy and privacy is increased. 2022  Thunderstorms on trading platforms such as FTX accelerated the user trading scene. DEXs  Migration speed (The sharp increase in hardware wallet sales during the same period also confirms the trend of user assets moving to the chain)

Dex  nbsp; DeFi  The composability of large ecology greatly improves the capital efficiency and freedom of users. For example, users can pledge in Lido. ETH  Obtain   stETH  After that, in the acquisition   Pos  The proceeds of the pledge will be pledged at the same time. stETH  Put   Curve  Market making to obtain fee income; Or will. stETH  Put   Aave  Lend out ETH,   ETH  For   stETH  Continue to lend on pledge. ETH, amplified in this circular way. Pos  income

Native   Web  3  The project is mostly chosen. DEXs  As the first port of call for trading and deploying liquidity. CEXs  Only to be the afterthought of the follow-through

In summary, DEXs  In terms of the non-licensing of [shelf assets], [transactions], [provision of liquidity], the autonomy and transparency of the user's assets, and the free composability of the agreement, it owns   CEXs  An obvious advantage you don't have.

This is   DEXs  To be a fluid home for innovative projects (and, of course, a lot of bad ones), and Web  3  Root cause of long-term migration direction of users.

So, in the long run. DEXs  The track will benefit from:   1. Growth in asset classes and transaction volumes due to crypto business development (Industry   Beta); 2. Pairs   CEXs  The gradual erosion of trading market share (track   Alpha).

3.1.2 Liquidity procurement, distribution and management services

a. Business nature of liquidity services market

"Liquidity" has a rich meaning in different scenarios. The liquidity mentioned in this section refers to the fact that a crypto asset can be converted into mainstream stabletcoins or   quickly and with low losses. ETH  The ability or extent of such mainstream assets. The more liquid the crypto asset is, convert it into stablecoins or   ETH  The lower the difficulty, the less transactional wear and tear.

Thus "liquidity procurement, distribution and management services" means:

Purchasing: Obtain liquidity from the market through its own token incentive + transaction fee incentive

Distribution: The distribution (usually for a fee) of liquidity obtained from purchases to other institutions \\ project \\ users who need to purchase liquidity

Management: It also provides liquidity management tools for those who purchase liquidity, so that they can plan their expenditures on liquidity costs

Take   Curve  And   Lido  For example:

Purchasing: Liquidity initiative to gather   Curve  The platform, in part because of the transaction fees, but also because of the platform. Curve  Through its own token. CRV  Provides an incentive for liquidity. nbsp; Curve  Money used to purchase liquidity from the market.

Distribution: Liquidity pooling to   Curve  Then, a project party, for example, Lido  In order to obtain liquidity for their equity tokens (Ldos) and notes (stETH) to ensure the normal operation of their business, they can purchase. CRV  Lock to get   veCRV, with   veCRV  In the governance module   Gauge  Give oneself a pool of assets. stETH-ETH  And   LDO-ETH  Vote, guaranteed next. CRV  More during the emission cycle. CRV  Reward, while   CRV  And channeled liquidity to stETH-ETH  And   LDO-ETH  Two pools, so far. Lido  By   Curve  Completed the purchase of liquidity. Neil: Of course. It is also available through the   Votium  Such as buying votes platform directly buy the next phase. Gauge  nbsp; veCRV  Votes, to achieve the purpose of liquidity procurement, but this procurement is one-time.

* There are also cases where project parties purchase liquidity in a more roundabout manner. For example,   Curve  Ecological income Aggregation & Credit Project   Clever  Through the transfer of token investment share, in exchange for comprehensive. DeFi  Protocol   Frax  Promise to   Clever-ETH  The pool is carried out for a period of time. 6  Weekly   veCRV  Voting is also a form of liquidity procurement. Here I want to explain is: Curve  The liquidity procurement method is actually a variety of, but all based on. Curve  nbsp; Gauge  Module.

We can conclude here.

Liquidity procurement, distribution and management services are a specialized service created around the need for liquidity in the project side's tokens and notes. It acts as a liquid wholesale and transit market.

Of course, the project side to solve their equity tokens and notes liquidity, not only. Curve  This way, in a. Curve  There have been other solutions before, such as:

Keep your equity tokens and notes on active, centralized exchanges and work with professional market makers to keep your tokens liquid, such as MakerDAO's equity Tokens   MKR  And notes. DAI, are in many. CEX  It's on the exchange.

In   Pancake  Uniswap; Pancake  Iso  DEX  Deploy their own tokens for initial liquidity and then adopt to encourage users in   DEX  Make markets and pledge to users in their own contracts. LP  The issuance of project equity token awards to increase token liquidity, which is often referred to as "liquidity mining" or "two pools".

To others. Protocol control value (PCV), such as Fei protocol  Cooperation, by   Fei  To provide self-controlled liquidity to the project side, but most of the projects using such schemes have declined

And   Curve  The advantages of Class A liquidity scheme over the above schemes are:

Relative to   CEX  Liquidity plan -- with or without license, low threshold and combinability: the first-line large firms with good liquidity, such as Binance and Coinbase, have high cost and threshold, and most projects cannot afford or meet the standards, while the second - and third-line small firms have the problem of poor liquidity. While in   Curve  The Factory pool trade is not licensed for shelves, of course, want to pass. Gauge  Obtain   CRV  's mobility guidelines also require community voting, but are generally much cheaper. In addition, the liquidity of a project party in Binance is closed, let alone has no external composability, while in   Curve  The liquidity on not only can be other. DEX  Aggregation protocol routing, but also can be borrowed and so on. DeFi  The combination of protocols, with far more than   CEX  Positive externalities of theta.

Compared with project-operated liquidity mining -- lower liquidity cost and flexibility: project-operated liquidity mining and two-pool mode used to be   DeFi  The mainstream of the game, but later proved to have many problems, including:

And through   Curve  Liquidity management has solved the above problems to a certain extent:

So the low cost of permissionless, low threshold, composability, liquidity, and flexibility of the management scheme is exactly what it is. Curve  As a liquidity market for the project side of the core value, is also. Curve  The bedrock of the business model.

We will follow the analysis. Curve  Liquidity business can also be expanded from the above several levels.

The same item in Curve  The cost of raising liquidity online would be lower than raising it themselves. This aspect comes from   Curve  The pooling of liquidity in China is relatively risky. Yield preference (  for most pools; apr  Not high); Second want to get   Curve gauge  The liquidity incentive authority, need   Curve  Community audit and real money vote, which itself is a disguised "audit mechanism", relative to the direct injection of liquidity to the project side of the two pools, people will be more assured in. Curve  To provide liquidity, or to demand lower risk compensation for providing the same liquidity.

Whether the project party to   CRV\\veCRV  Purchasing liquidity as a media, or purchasing liquidity with one's own tokens on the election bribery platform, is more roundabout than the self-run two-pool mode, which can reduce the volatility related to the main business and the currency price, and is more flexible in terms of the incentive plan, with lower comprehensive cost.

Users have higher risk concerns for the proprietary second pool of new projects, so they require higher liquidity. APR  Subsidies, resulting in higher liquidity procurement costs

If the project side takes equity tokens as liquidity incentives, there will be too strong positive correlation between token price and business, and huge fluctuations of spiraling price and business often occur, which is not conducive to the long-term and stable development of the project

The project side directly adjusted the incentive strategy of Erchi mining, which is easy to be over-interpreted by the community, and the lack of more abundant liquidity management schemes except the adjustment of token incentives

b. Future development of liquidity services market

In my opinion, like the trading market, the increase in the size of the liquid market is also driven by two factors: first, the growth of the total asset class and the total value of assets in the crypto world; The second is the trend of user funds shifting from centralized institutional custody to self-management on the chain. And in   CEX  Market making is different, users in   DEX  The difficulty and barriers to market making are lower, and it is easier for those who manage their own liquidity in the chain to access the liquidity services market for revenue.

So in the long run, the size of the liquid market will continue to grow as a result of these two factors.

3.2 Service Status

About   Curve  The current situation of the business, we also from the spot trading and liquidity market two perspectives to observe.

3.2.1 & have spent Spot trading business

a.DEXs  Lateral comparison of trading volume

According to   DefiLlama  Data, present   Curve  The weekly trading volume basically ranked in   DEX  Trading ranking top three, the author nearly. 6  Weekly   DEXs  Transaction statistics are as follows:

Uniswap  As a result of V  3  Pancake  a centralised liquidity mechanism and low trade slip points due to a very low transaction fee position, allowing it to capture most of the volume in the market; Is occupied by   BNBChain  80%  About the trading volume, so that it can maintain in the total number of the top three position, Curve  In terms of trading volume is also in the top three position.

Of course, trading volume ranks first. Uniswap  Is the former   5  DEXs  The only one with no agreed revenue.

b.Curve  Transaction volume and revenue breakdown

Based on the asset attributes in the liquidity pool, Curve  nbsp; Pool  It can be divided into the assets in the pool without anchored consideration relationship   Crypto   V  2  Pool, and non -   with consideration relation; V  2  The pool.

Photo credit: Curve  Product   Pool  Detail page

The introduction of V2 pool breaks through the previous people's understanding. Curve  The perception that it is a "stable asset trading platform" means. Curve  More trading asset classes could be included.

What's more, the transaction rates of the V2 asset pool are much higher than those of the stable asset pool, as shown in the chart above. Transaction rate of the LDO-ETH V2 pool   0.374% & have spent nbsp; stETH-ETH  Stabilizing the asset pool   9.35 & have spent Times (then because V2 pools use a dynamic rate mechanism that rises and falls with the volatility of asset prices), is   3  pool (USDT-USDT-DAI)   37.4 & have spent Times. So for   Curve  For example, transactions from pool V2 have a very high cost contribution.

According to   2023.2.15 & have spent Daily trading data:

Although before trading volume. 15  nbsp; Pool  In, the trading volume of V2 pool only accounts for. 21.9% & have spent But its share of the agreement's revenue has reached a similar level. 75.9% & have spent The core reason is that V2 pools have higher transaction rates.

Because the class and quantity of stable consideration assets are more stable, and the rates are subject to. Uniswap  Direct competition, Curve  The potential for future revenue growth will come more from the growth of the V2 asset pool.

It is worth noting that the current V2 pool except   Curve  Ecological   CRV, CVX, CNC, YFI assets, STG, LDO, MATIC  Also in Curve  The placement of a good flow, wherein. LDO  And   MATIC  It was just recently. Curve  The placement of fluidity and flow through. Gauge  The vote was won. CRV  The emission incentive.

Image credit: Curve

On the whole DEXs  Spot is an extremely competitive market.

Current former   5  Top Head players, Uniswap  Concentrated liquidity + low fees + 0  The protocol fee scheme, which has given it the lion's share of mainstream currency transactions, has in effect reduced the value of the currency. Uniswap  Has become an unprofitable "Public good" in the face of criticism from critics. Curve  As represented by others. DEXs  The cutthroat competition, Hesitating to flip the switch on fees for agreements (there are other concerns about regulation).

And   Pancake  Rely on Binance endorsement and resource advantages, as well as the advantages of user habits, in   BNBchain  Has the majority of market share, but this advantage is difficult to extend to other competitive main chains (although the market maker module is added to improve liquidity, but Pancake  Business on Ethereum is still dismal).

DODO  By its   PMM  Mechanics have the highest   LP  Capital efficiency, but most of its trading volume occurs in stablecoin trading, and the protocol is currently adopted for most stablecoin trading pairs. 0  The rates.

And   Curve  And upgraded   Balancer adopts the comprehensive mode of spot trading + liquid market. The business is more complicated, and requires more coordination of ecological project portfolio. At the same time, there is necessary liquidity purchase expenditure (token incentive).

3.2.2 & have spent Liquid market business

The module of liquidity business

As mentioned above, liquidity procurement, distribution and management services (abbreviated as liquidity market services) are a specialized service created around the need for liquidity in project side's tokens and notes.

During the period of writing the research newspaper, the author also interviewed in   Curve  Project party with a long track record of liquid procurement. For liquidity purchasers (asset issuers and, in most cases, project parties), the most important thing is the comprehensive procurement cost of liquidity, followed by the maturity of procurement components and mechanisms, procurement flexibility, uniformity of liquidity, and so on.

Take   Curve  For example, a liquid market has the following core components:

Dex: Dex  The transaction scenario can make use of liquidity, and the resulting commission will feed back to the agreement. If the development is smooth, it can partially or completely cover the platform's procurement cost of liquidity (namely token incentive), which is also the main hematopoietic module of the liquidity procurement platform

Pledge and governance module: ve  The core part of the model includes pledge and   Gauge  Function, with multiple purposes:

Recovery of project equity tokens (CRVS) released for liquidity purchase. The cash holder obtains the right to distribute dividends, the right to govern rent-seeking (used to obtain election bribe income) or the right to purchase liquidity at the same time, it also gives. Curve  The system pays the "fee" in a roundabout way, that is, by locking itself up. CRV  The "liquidity value" lost by tokens. And the payment of this part of the "fee", actually played a delay. Curve  System purchase   CRV  Expenditure becomes the direct effect of token selling pressure

To some extent, it binds the participant to   Curve  The benefits of the system make it difficult for participants to extract value from the system in a one-way, short-term way without contributing

By   Gauge  The data Kanban and the external election buying platform provide the purchasers with abundant liquidity purchasing information, ensuring that the purchasers can plan the purchasing behavior more efficiently and participate in the game based on the information

Curve  Governance module   gauge  Kanban, provides game information of liquidity procurement, source: Curve

3. Bribery module: through   Convex+Votium  The combination guarantees those who temporarily do not wish to pass through purchase and pledge. CRV  Come and see. Curve  Deep binding of liquidity purchasers, also through the purchase. veCRV  Vote for their assets to purchase short-term liquidity, but also for. veCRV  The holder of the ballot provides rent-seeking income

Of course, in Curve  In addition to the classic liquid market model, there are other products trying to construct a new liquid buying and selling model.

For example,   2021  The liquidity management platform debuted in 2005. Tokemak, which "Liquidity as a service", was culled. Curve  Mode   DEX  Module, hoping to act as a middleman to directly purchase and distribute liquidity. Eg. In this conception, Will also become   Tokemak  The flow downstream. But at present, this mode does not run through, because of the lack of. Dex  Cash flow generated by business, Tokemak  The business model of being a "liquidity trafficker" is even tougher. It is hard to break even.

And the main   The concept of PCV (Protocol Controlled Liquidity)   Fei Protocol  After several attempts, it gradually withdrew from the stage of history, although it was associated with Tokemak  Different liquidity financing modes (Fei  By issuing stablecoins), but the reasons for its failure and Tokemak  Similarly, it is impossible to achieve a long-term balance of payments by simply adopting the "purchasing - leasing liquidity" mode without sufficiently operating the liquidity obtained by the platform to obtain income.

And   Curve  The core of the continuous operation of liquidity procurement and distribution business lies in the fact that it is not a simple liquidity dealer, but an effective use of purchasing liquidity through its trading module. There is a strong synergy between the two businesses of trading and liquidity market.

competitor

In   Curve  After the formation of the liquidity market model, the old   Dex Balancer, New Item   Solidly, BNBchain  On   Wombat  And so on. 2022  In 2007, he followed up, trying to build his own "Liquidity  War" narrative. But so far, except for... Balancer  Most of the other projects are due to TVL, trading volume are small, have not yet. Curve  The liquidity market produces greater competitive pressure.

War  List of Concept Items, Source:https://www.defiwars.xyz/wars

This article only deals with transaction volume and   TVL  The first   Balancer  And   Curve  Compare services.

Where   Balancer  And   Curve  Both. Dex  And liquidity market function, built in   Balancer  Aggregator on revenue and governance Aura Finance  It provides a vote-buying module.

As mentioned above, for liquidity purchasers, one of the most valued elements of liquidity market is the "purchase cost efficiency ratio" of liquidity, that is, the liquidity value that can be exchanged for per unit amount of input. Other things being equal, buyers would expect to get more liquidity for the same purchase cost.

We know that in order to purchase the liquidity of the platform, there are two main methods:   1. The purchase of platform tokens through the long-term, continuous pledge   gauge  Module voting, long-term voting can obtain liquidity; 2. By paying fees on the vote-buying platform, according to the governance cycle (14  Days) to buy one-time liquidity.

Method   1  It is complicated, and there are too many expected variables to be considered, so it is difficult to make a direct cost comparison. Therefore, we adopt the scheme of buying liquidity by buying votes here. Curve  And   Balancer  A rough comparison of liquidity procurement costs is made.

For the purchaser, there are two issues involved:

1. How much value of platform token (CRV \\ BAL + CVX \\ AURA) incentive can I buy for one dollar?

2. How much [liquidity value] can I create \\ maintain with the platform token incentive of one dollar value?

According to   Llama.airforce  nbsp; Curve  The main platform for buying votes   Votium  The most recent round (38  Wheel,   2.21 & have spent As of the day) vote buying data statistics, the round of vote buying liquidity buyer total investment. 296  Ten thousand dollars worth of tokens, yes. Convex  Controlled   veCRV  Voting rights (total   veCRV  nbsp; 51% ) Make a purchase. By buying votes, all liquidity buyers for their own. Pool  It was worth about that time. 385  A hundred thousand dollars CRV  And   CVX  Emission (purchase amount ×  1.3 & have spent Emission \\ bribe coefficient).

Photo credit: llama.airforce

According to   DeFiLlama  Data, present   Curve  The total liquidity is   49.6 & have spent $100 million (here   TVL  Have already sent. CRV  Deduct the value of its own pledge).

Photo credit: Defillama

Because   Convex  Have a possession of 51%  nbsp; veCRV  The right to vote is a guide. 51%  nbsp; CRV  Emissions, we can crudely understand as its guidance. Curve 51%  The liquidity of   TVL*  51%  =  25.3 & have spent A hundred million dollars.

Image credit: Curve

So, with the investment of buying votes. 296  From the point of view of $10,000, it is equivalent to [average] the use of   1  $can be bought. 14  The value of heaven 854.7 & have spent $  Curve  Liquidity.

Let's look at it again. Curve  Competitors in the liquid market. Balancer  The situation of

According to   Llama.airforce  nbsp; Balancer  nbsp; Hidden hand  Of bribery statistics, its recent round ended in vote-buying (th. 18  Wheel,   2.21 & have spent Up to), the total value expended by liquidity purchasers. 66.7 & have spent Tens of thousands of dollars worth of purchasing costs, gained value. 104  A hundred thousand dollars BAL+ Aura (aura. finance  Is based on   Balancer  The revenue and governance aggregation platform, similar to   Convex  And   Curve  The relationship) reward.

Photo credit: llama.airforce

While the same period   Balancer  nbsp; TVL  Is   11.4 & have spent A hundred million dollars. possessive veBAL  The proportion is   25.5% & have spent .

Photo credit: Defillama

Photo source:https://dune.com/aura_finance/aura

Because   Aura  Have a possession of 25.5% & have spent nbsp; veBAL  Voting Rights, Corresponding Guidelines   25.5% & have spent nbsp; BAL  Emissions, corresponding to the guidelines. Balancer 25.5%  The liquidity of   Balancer TVL*  25.5% & have spent =  2.907 & have spent A hundred million dollars.

So, with the investment of buying votes. 66.7 & have spent From the point of view of $10,000, it is equivalent to [average] the use of   1  $can be bought. 14  The value of heaven 435.8 & have spent $  Balancer  Liquidity.

It's more intuitive to compare it in a table:

From bribery into... TVL  According to the data results, although the procurement cost can be in. balancer  Can obtain higher value of liquidity incentive emissions (CRV& CVX  Or   BAL& AURA), but gain from the end. TVL  From the point of view, or nbsp; Curve  This side can provide higher   TVL.

Of course, the author above for. Curve  And   Balancer  The calculation of the cost-effectiveness ratio of liquidity procurement of the two platforms is rough, and at least the following factors are not taken into account in the calculation:

Curve  And   Balancer  Two platforms   TVL  The composition of the assets is different, wherein   Curve  nbsp; TVL  It contains close to 80%  The stable consideration of assets pool, while   Balancer  The pool of similar assets is approximately   50%  Left and right

Curve  The asset value ratio in the asset pool is unified as   1  :   1  , while   Balancer  Since the ratio of assets in the pool can be customized, there are quite a few. 8:  2  Asset pool, such as   TVL  In second place. BAL-WETH Pool  That's   8:  2  Asset pool of

Photo credit: Balancer

Curve  And   Balancer  The transaction volume, transaction fee is different, the same. LP  There is a difference in capital efficiency only from the volume of transactions. Let's see, Balancer  It's better than... Curve  High (of course, there is. Curve  Stablecoin assets   TVL  Account for a high percentage but low transaction volume)

Photo credit: Defillama

Bribe input in table The calculation is just an average, which is how much you can get out of each cost input. TVL, for liquidity providers, it is also necessary to measure the asset quality and pool size of the market

Pool   TVL  Incomplete = liquidity value, the distribution of assets in the pool (concentrated or dispersed) and various pool parameters will affect the same. TVL  Below the value and efficiency of liquidity

But even if the above factors are taken into account, for liquidity purchasers, the same cost input probability is high. Curve  You still get better liquidity. Curve  Relative to   Balancer  Higher cost-effectiveness ratio, Curve  It is still the "first stop of liquidity" for most projects.

Neil: Of course. By imitation Curve  The liquidity business model, is also gradually closer to. Curve  Emissions / $  Emissions / $& NBSP; Emissions / $& NBSP; 1. spent on bribes has declined, which means that liquid buyers have spent on bribes. Balancer  Liquidity bid.

Besides, once those who did. Curve war  The main players in the game -- such as   Frax -- also started to be discussed in Balancer  On the establishment and procurement of liquidity, Frax  Community in   2  Month   26  [FIP-191  The proposal will be funded. 10  A hundred thousand dollars' worth. FXS  Or   cvxCRV, for   veBAL  Or   Aura  A bribe of... Balancer  On   BB-E-FRAX | BB-E-USDC  Pools introduce liquidity.

In addition to liquidity costs, Balancer  The unique features on the product are also. Frax  Factors to consider:

Boosted Pools  Function: This class of pool can be   Pool  The idle liquidity in China is deposited into external lending agreements (e.g.   Aave  Or   Euler), to   LP  Provides higher capital efficiency and returns (this   Frax  Proposed   BB-E-FRAX | BB-E-USDC  Pool, will deposit idle money. Euler)

Boosted Pools  The stablecoin can be easily exchanged with other interest-bearing stablecoin in the lending pool, so that stablecoin can enter more channels

Custom asset ratio   Pool: The project can be found in   Balancer  Create a custom ratio of liquidity, such as many project parties will for their own governance tokens vs. ETH  Create   80%  /20%  While ensuring a certain liquidity, the pool can save market making capital and increase the market makers' demand for their own governance tokens.

But the proposal hasn't gained enough traction yet. Frax  Community vote for it.

In addition to   Balancer  In addition, the same   DEX+ liquidity purchasing market dual mode also. BNBChain  On   Wombat, and   Solidly (V2).

Where   Wombat  And its revenue and governance aggregators. Wombex  All in the world 2022  In the year of Pancake  On the   IFO, but   Wombat  At present only   5300  A hundred thousand dollars TVL, and   BNBChain  As   Binance CEX's awkward positioning of the "side chain" leads to its ecology. DeFi  Both have visible ceilings.

And   Solidly  The same as   2022  Its core concept was created by   AC  Put forward, synthesize   Curve, Uniswap  As well as numerous ( 3  ,   3 ) Features of the project following the recent release of V2. TVL  And trading volumes have increased significantly, its own vote-buying function, at present. TVL  Is   7800  Ten thousand dollars, belongs to a relatively noteworthy revitalization project, but in terms of business volume, the current distance. Curve  There's still a long way to go.

Generally speaking, due to the comprehensive advantages of purchasing cost, brand, liquidity level and mature liquidity purchasing system, Curve  It is still the first stop for most projects to build liquidity, but now more and more projects are starting to follow suit. Curve  The practice of joining the liquidity market war, there is no shortage of them. Balancer  So both innovative ability, the old history. DeFi  The project.

3.3 DeFi  Realm of "Infinite War"

Curve  nbsp; DeFi  The fierce competition in the field goes far beyond the race for feature innovation and fierce competition for users. It also lies in the existence of the coin offering mechanism.

In the author's opinion, the introduction of token mechanism in Web3 project has multiple meanings, among which the most important value is that after the issuance of tokens, the project has a flexible monetary policy choice, which can be used to rapidly expand its business and strive to form a "network effect lead" earlier than competitors, so as to build a competition barrier for the latecomers.

The so-called network effect refers to the condition that "every new user in the product network increases the value of other users in the network".

Curve  nbsp; DEXs  Racetracks also have network effects, but they are cross-boundary network effects: "The increase in the size of the users on one side will increase the utility of the users on the other side, thus reinforcing each other." In the Internet field, the typical case of cross-border network effects is e-commerce platform, where the scale growth of merchants on one side brings about rich categories and price competition, which will make the shopping experience better for consumers on the other side, and vice versa. While in   DEXs  The more market makers who provide liquidity, the deeper the asset depth, the more willing traders are to trade here. The more traders, the larger the trading volume, the higher the commission for market makers, which also inversely encourages the further inflow of market making funds.

Cross-border network effect is one of the most powerful moats of enterprises. Therefore, to stimulate the bilateral business with their own tokens and promote the formation of cross-border network effect as soon as possible has become a large number of Web3 projects, especially. DeFi  The start of a project.

However, when all players did this, the track wars that should have ended early continued, with too many options for users, and the battle to subsidize liquidity (or trading volume) continued, and no project managed to build a monopoly in stages, resulting in a persistent deficit at the token level (agreement revenue - token incentive negative).

At this time, who can ensure the expansion of the network at the same time, let the distributed market budget (token subsidy) to the secondary market later, can keep the price of incentive currency (token) stable or even upward, forming a better. 3,  3) Effect of network expansion.

This is also true. Curve  Designed   ve  One of the main purposes of the model.

One of the endgames in this war is that certain projects (e.g. Curve  Or   Uniswap (Uniswap) chewed up competitors, others took stock and gave up on the battle, stabilizing the market. There are several ways for a project in a monopoly position to start turning a profit:

- Operating with thin margins and scale through far greater market share than competitors

- Direct increase in service charges (revenue enhancement)

- Direct reduction of token emission expenses (reduced cost or selling expenses)

The other endgame of this war is that there is no endgame.

All of the projects are in a prolonged and bloody competition, monopolies are out of reach, and almost none of them have strong pricing power over users (liquidity providers, traders, and buyers). The only way for a project to survive is to pursue extreme operational efficiency and a constant race for innovation. Uniswap, Curve  And   Balancer  Continuous innovation in business mechanism), in the hope of gaining phased users' favor through superior mechanism and better experience (but it will often be caught up or surpassed by other projects' imitation or innovation later). And this is the project side and project investors do not want to see the situation, but users are happy to see.

The above two possibilities, in the end which is more likely to become. DEXs  The end of the track?

I currently prefer the latter.

Because crypto business based on blockchain, due to the autonomy of accounts, funds and no license, the cost of user migration between platforms is much lower than the traditional Internet. DeFi  Project creation, operation, fork  At present, there are no strict approval restrictions in the traditional financial field, and a variety of convenient secondary market financing channels (xx to earn  All of these factors make Web3 a more diverse, competitive and brutal world: as you evolve, competitors evolve, and a large number of new commercial species are about to be born, brewing possible cross-border invasions.

The idea that a business leader in the Web3 world would sit in a natural or administrative monopoly like an Internet giant might itself be a delusion.

And want to stay ahead in such a brutal pace of competition, The role of ecology is very important.

3.4 Curve  The Lego Ecology

So called   Curve  Ecological projects are broadly defined as such. Curve  Stakeholder, combination agreement or simply   Curve  Major customers of products. They can be categorized in terms of product functionality, such as   Curve  Chinese-speaking@Mr. BlockOnce upon a time Curve  Ecology has been sorted out as follows:

Photo source:https://twitter.com/mrblocktw

In my opinion, however, Ecological projects can be roughly divided into core ecological projects, ecological projects, cooperative projects and user projects according to their ecological importance.

1. Core ecological projects

To be defined as "core", two conditions are required:   1. This type of project is based on   Curve  Construction, disengagement   Curve  Will not be able to maintain the operation of its principal business or products. Curve  Have a high degree of interest alignment; 2. The existence of such projects. Curve  Its core business is also critical.

One of the most typical projects is. Convex, also based on   Convex  And its derivative projects, Curve  The liquidity purchasing market was formalized.

2. Ecological projects

Ecological projects are also based on   Curve  Construct, and with   Curve  There is a high degree of interest alignment, but in terms of importance less than the core ecological projects, its existence, to a certain extent played a lubrication. Curve  The role of business, but without them. Curve  Its core business is also operating normally.

A typical project is a revenue aggregator. Concentrator, Convex  Income aggregation and lending Projects Clever, and liquidity led programs. Conic (product is not online), etc.

3. Cooperative projects

This kind of project is related to Curve  There are agreements and cooperation at the business level, and a small part of its business is based on   Curve  Construct, they are associated with   Curve  Service combination pair   Curve  It has a driving effect.

Such as a loan agreement. Abracadabra, whose support is based on   Curve Pool LP  The collateral for the loan. Likewise, MakerDAO  Also supports   Curve  nbsp; ETH\\stETH LP  Lend as collateral. DAI. Revenue Aggregator   Yearn  Projects also fall into this category, with multiple revenue streams based on. Curve  Build.

4. User project

This kind of project is needed. Curve  Services such as those needed in   Curve  Market making and purchasing liquidity. For example, the well-known   LSD  Project   Lido, which is right there. Curve  Constructed its depositary notes asset pool, and in the   Curve  Has a long track record of liquid purchasing. However, user items are just that. Curve  Whose core business is not built on. Curve  Nor does it depend on Curve  And exist. This type of project is Curve  The mainstream of the ecosphere.

According to the above classification, we can classify the present. Curve  Representative projects in the ecology are summarized with examples:

From the above table, we can find that. Curve  The main values of ecological projects are:

Is   Curve  Provide direct agreement income, i.e. liquid purchase costs

Is   Curve  Our core business -- Liquidity Marketplace -- provides experience optimization or assistance in liquidity solicitation or liquidity procurement

Absorb and increase   CRV (or   CVX) lock, avoid CRV  Flow to secondary market

From a higher level, in addition to the direct customer project, which is the source of value that provides the underlying value to the agreement, the main functions of other projects are as follows:

Eg. It was subcontracted. Curve  Ecological tool and product innovation, and as described in the section [ 3 D eFi  Infinity War in the Realm], functional innovation and continuous upgrading of experience, is   Curve  An important condition for maintaining the stage lead

By layer upon layer nested way, the   Curve  Relatively high liquid purchasing currency. CRV  To lock in, avoid its dumping to the secondary market trigger. Curve  The negative spiral of the overall business, for example:

Convex  Guide user to long-term lock   CRV, and give   CRV  The lock-up user allocation   Convex  The agreed income as an incentive

Convex  The agreement revenue is derived from the extraction through. Convex  In   Curve  Market maker LP  The income of... 17%  And the reason market makers are willing to do so is because Convex  Markets are made because. Convex  Provide for them. CVX  The token award

So nbsp; CVX  Eg. The price determines what people pay in Convex  Market-making provides an impetus for liquidity. The higher the price, the more people will pass. Convex  Give   Curve  Provide liquidity, Convex  The higher the income of the agreement can be allocated to the Convex  nbsp; CRV  The higher the revenue of users, people lock in. CRV  The stronger the motivation

At this point, The price pressure through this series of actions, part of the transfer to. CVX

b. Clever, Concentrator  Guide the user long-term cycle lock   CVX, decrease   CVX  Pressure, maintenance   CVX  Price stability of

So... Curve  All kinds of ecological associated projects, for   Curve  The main value of the "product features and experience innovation" subcontractors, and CRV  Lockup system (Direct influence   CRV  The direct or indirect maintainers of prices, which are exactly the same thing. Curve  In   DEXs  And liquid markets in the "infinite war" will survive until the moment of "natural monopoly formation."

3.5 Risks

Curve  It has a good team performance history, execution and safety record. Its main development risks come from the increasingly fierce market competition, as well as the coordination of interests within the ecology, and to prevent the possibility of a negative spiral between currency price and business in a bear market.

Competition Challenge: Spot   DEXs

Spot   DEXs  As   DeFi  In the field of the most important, the competition is also the most intense circuit, at present in the first-line competitors have formed two modes, namely   Uniswap VS Curve. This is   DeFi  A great comparative experiment in whether a field can build a monopoly. At present, it is simple and free and open, which is a typical public goods agreement, resulting in delayed profitability; And   Curve  Try to combine with its associated projects through trading + liquidity trading market, hoping to build a cash flow project with moat, monopoly and strong value capture, but. Uniswap  The challenge of this kind of free public good, in the bear market limited trading share only to give. Curve  That leaves a limited space.

Competitive Challenges: Liquid markets

Compared to spot   DEXs, Curve  There are more obvious advantages in liquid markets. But as more and more projects realize. The benefits of DEXs+ Liquid market this business model, Balancer, Solidly, Velodrome  And other projects have also adopted this model, the subsequent competition for liquidity will be further intensified.

The challenge of harmonizing interests

For   Curve  The continuous accumulation of ecological governance rights can gain direct benefits for ecological projects in the acquisition of liquidity and rent-seeking of governance tickets, which has become CRV  One of the direct sources of demand. But on the other hand, permissionlessness, low threshold, composability, low cost of liquidity and flexibility of management scheme, yes. Curve  As a liquidity market for the project side of the core value. At present, for most new projects, step in. Curve  The ecological barriers are getting higher, and while they are free to build factory pools, they want access. Gauge  But it requires a vote from the community, which is not an easy threshold to cross. Follow-up   Curve  It is also a big challenge for the community to strike a balance between "ensuring the interests of the existing governance power holders" and "opening the ecosystem to more participants" through internal coordination.

CRV  A negative spiral of business caused by declining liquidity incentives caused by falling currency prices

With many. DeFi  It's the same thing. The business is motivated by its equity tokens. CRV  Take charge, please. The rise of the currency price will increase the incentive value and promote the business growth, whereas the fall of the currency price will cause the decrease of incentives and the liquidity will be gradually lost. This negative spiral is a tough test for projects in a bear market, but for now. Curve  The ability to withstand pressure is good.

Iv. Valuation comparison

Considering the business model, market position similar and similar, the author here choose the same old. DeFi, which also operates on the side. DEXs  And liquid market; Balancer  Come and follow. Curve  Do a horizontal comparison of valuations.

The specific comparison scheme adopted here is to take transaction fee + bribe election income as the income item of the two projects, and compare the income multiple of the issued tokens and the market value of the fully diluted tokens of the two projects. In addition, we calculated the value of tokens on liquidity incentives for the two projects relative to their revenue.

From the results in the table, we can see that:

The two are very close from a revenue multiple point of view. (The market value of the issued tokens is more indicative, and we mainly use this as the basis)

Curve  The income \\ incentive ratio is higher, shown under the same liquidity incentive amount, Curve  It now has a higher combined income

Of course, the above. Curve  And   Balancer  The comparison at the earnings multiple level is rough, and the following factors are not fully taken into account:

Vote-buying income column, the author only statistics. Llama.airforce  , which only covers the income data of the election buying. Votium (Curve  The main vote-buying platform) and nbsp; Hiddenhand (Balancer  The most major vote-buying platform)

Election bribe income does not fully include the payment of liquidity purchasers in purchasing liquidity, because there are many project parties did not use the way of purchasing liquidity, but choose to buy directly. CRV  Or   BAL  Lock up to get   veTOKEN, to make long-term liquidity purchases

Curve  In addition to the liquidity incentive, the weekly token incentive for teams is also available. 3,  841,  978  CRV (time value near   400  $10, 000), though most of these tokens have not entered circulation

Overall, based on the above earnings multiples, Curve  Compared with   Balancer  The valuation is within a reasonable range.

V. Acknowledgements

This paper needs to be thanked for its birth. Curve  Chinese-speaking community@HaowiWangTo share information and advice, as well as Curve  Community users @Stakeholder and our founding partners@fanyayun, researcher@lawrence_leeeeReview and feedback. In addition, this article also asked for some questions@DeFi_CheetahOf his views with@WinterSoldierxzAbout   Uniwap VS Curve  The discussion provided me with a lot of inspiration.

Other reference information:

Vote-buying information: https://llama.airforce/#

Curve  Integrated data Kanban (@mrblocktw  Create) : https://dune.com/mrblock_buidl/Curve.fi

Balancer  Income: https://dune.com/balancerlabs/Balancer-  V  2  -Revenues-Overview

DeFi  Data: https://defillama.com/

Original link