Curve Finance, a DEX platform, is poised to distribute $2,631,601 in fees to its governance token holders as a result of a community election.
Users who time-lock their CRV tokens will be entitled to receive 0.02 percent of every trading volume through swap fees as of yesterday. Liquidity providers used to get the entire 0.04 percent charge, but the vote split it in half to align incentives.
What type of earnings might CRV investors expect from fees?
Curve’s token bonding model is cautious, which seeps into how users earn exchange fees. Instead of merely staking your CRV in a governance contract, you must lock it in for a period ranging from one month to four years.
The longer you keep your CRV tokens locked, the more veCRV you’ll get back. This way, a user with half the capital of another user can have the same amount of say in governance provided they demonstrate commitment by locking their funds for a longer length of time.
Your share of the 0.02 percent fees is proportional to the number of veCRV tokens you own as a percentage of the total supply. The total supply continually changes because they burn or mint through the entrances and exit into the governance contract.
Due to several unsustainable incentives in the DeFi industry right now, the average true daily volume is unclear, although the average volume since August has been approximately $80 million. If the protocol can handle this volume, it will be worth around $29 trillion per year and $5.8 million to governance participants.
APY for veCRV, a holder, is currently 183 percent. But this will undoubtedly decline as more people become aware of the possibility.
How fees accrued in Curve?
Curve is a stock exchange that prioritizes reducing slippage at the expense of competitive prices. To avoid pricing concerns, pools exclusively trade stablecoins for stablecoins or assets for wrapped variations of the same asset.
For instance, I can currently buy $500.05 TUSD on Curve for $500 USDC. But only $496.60 TUSD on Uniswap for the same amount. Uniswap charges 0.3 percent in trading costs, while Curve charges only 0.04 percent.
Curve’s capacity to save users money explains their willingness to pay fees. Fees deduct in the currency that the user exchanged for another pool item. The cash then converts to CRV tokens and distributes them to governance stakeholders.
Because the contract to do so currently works on, there isn’t a mechanism to claim your incentives yet. Anyone who invests in the governance contract now will have rewards later. Once building the ‘claim’ function, a user will likely need to call it and pay for gas for fees to swap with CRV and are available to all impacts.
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