Introduction
Curve Finance has climbed the ranks of decentralized exchanges (DEXs) not through breadth of service, but through strategic focus and innovation in a specific niche which are stablecoins and pegged asset swaps. This targeted approach has established them as a critical player in the DeFi ecosystem, attracting both traders and liquidity providers. While Curve Finance primarily operates on the Ethereum blockchain, its reach extends beyond it to multiple smart chains, expanding its user base and offering distinct advantages depending on the chain chosen.
Staking in Curve Finance
Curve Finance staking offers users a way to earn passive income on their CRV tokens while contributing to the stability and security of the protocol. Users that stake their CRV will receive a share of the trading commissions that the protocol collects. Curve Finance offers two main staking options: CRV staking and veCRV (vote-escrowed CRV).
– CRV Staking: This basic staking requires no lock-up, allowing you to deposit CRV and earn a share of Curve’s trading fees. It’s easy to set up and provides immediate access to your tokens. However, the rewards are lower, and you lack voting power or boosted liquidity incentives.
– veCRV Staking: This advanced staking involves locking your CRV for a chosen period (from a week up to 4 years) in exchange for veCRV tokens. These represent your voting power and influence over Curve’s governance. Additionally, veCRV holders earn significantly higher rewards from trading fees, boosted liquidity incentives, and airdrops. The longer the lock-up, the greater the rewards and voting power per CRV.
Advantages of Staking in Curve Finance
- Passive income generation: Staking CRV tokens allows you to earn additional CRV rewards, fostering passive asset growth over time.
- Enhanced rewards through vote-locking: Extending the CRV lock-up period facilitates boosted yield from platform trading fees. This mechanism, known as veCRV, grants voting power and increases rewards commensurate with the lock-up duration.
- Participation in governance: veCRV stakers hold voting rights within the Curve DAO, enabling them to contribute to the platform’s governance and development direction.
- Eligibility for airdrops: Staking CRV can make you eligible for airdrops from other DeFi projects aiming to incentivize participation.
- Composability: Curve Finance’s integration with other DeFi protocols allows you to leverage your staked tokens in various applications while maintaining reward generation. This composability enhances the value and flexibility of your holdings.
- Reduced volatility: Curve largely focuses on stablecoin pools, potentially offering lower volatility compared to staking other assets, providing an attractive option for risk-averse investors.
Simple Staking in Curve Finance
Simple staking involves locking up CRV tokens, the native token of Curve Finance, in a smart contract and receiving a share of the trading fees that the platform collects. Users can also choose to vote to lock their veCRV for a longer period (up to four years) to increase their rewards and governance power. Simple staking is suitable for users who want to support the platform and benefit from its growth.
How to Simple Stake in Curve Finance
- Navigate to Curve.fi and connect your wallet. Look for the “DAO” tab near the top of the page, beside the “Home” option.
- Select the amount of CRV you wish to lock and choose your desired lock duration. Remember, longer lock times yield higher voting power and rewards.
- Confirm your selection and create the lock. Scroll down to view the distribution of your locked funds based on each token’s weight.
Liquidity Staking in Curve Finance
Liquidity staking involves providing liquidity to one of the pools on Curve Finance, such as the stETH/ETH pool, and receiving LP tokens in return. These LP tokens represent the user’s share of the pool and can be staked in a gauge to earn CRV tokens and other rewards. Liquidity staking is suitable for users who want to earn interest on their stablecoins or other assets, as well as trade them with low slippage.
How to Liquid Stake in Curve Finance
- Visit https://curve.fi/#/ethereum/pools/steth/deposit and connect your wallet.
- Provide liquidity in the Curve stETH pool by clicking “Deposit & stake in gauge”. Choose the proportion of ETH/stETH to stake. You will receive LP tokens in return and become a liquidity provider (LP).
- Stake your LP tokens in the Curve gauge to earn trading fees in CRV. You can also retain exposure to stETH to earn staking rewards from Lido Finance.
By providing liquidity to carefully chosen Curve Finance pools and staking your resulting LP tokens in gauges, you can earn trading fees, additional CRV rewards, and potentially minimize impermanent loss while still participating in the DeFi ecosystem.
Risks
- Impermanent loss: Prices of assets in a liquidity pool can fluctuate, leading to impermanent loss if you withdraw before the prices return to their original levels.
- Smart contract risk: As with any DeFi platform, there’s a risk of bugs or exploits in the smart contracts underlying Curve.
- Locking your tokens: Locking your CRV for longer periods means you can’t sell it readily, potentially missing out on price gains.
Security measures taken by Curve Finance
- Regular audits by reputable third-party firms, such as Trail of Bits, Quantstamp, and mixBytes, to check for potential vulnerabilities and ensure that the smart contracts function as intended.
- Compliance with the General Data Protection Regulation (GDPR) and the Payment Card Industry Data Security Standard (PCI DSS), which set standards for protecting customer data and card payment systems.
- Card authentication, instant card lock, and hidden card details to safeguard access to the Curve wallet and card.
- Active protection against fraudulent activity, faulty or non-delivered goods, duplicate charging, and more.
- All purchases protected up to £100,000.
Conclusion
- Curve Finance staking presents a compelling opportunity for investors seeking to generate passive income and actively participate in the platform’s governance. By locking their CRV tokens, individuals gain access to several advantages like earning attractive yields, securing voting rights, enabling liquidity, and potential airdrop access amongst others.
Sources:
https://resources.curve.fi
https://curve.fi/#/ethereum/pools/steth/deposit
Disclaimer: Nothing in this article is financial advice. It is for educational purposes only. Staking on Curve is risky. Always do your due diligence and research.
