Curve DAO (CRV) is the utility token of Curve Finance, a decentralized finance (DeFi) protocol that acts as a decentralized exchange (DEX) of stablecoins. ^[1]

History

Curve’s native governance token CRV was officially scheduled for launch on the the 14th of August 2020, but an anonymous developer with a newly created Twitter account - @0xc4ad, tweeted on August 13, 2020, affirming they had deployed Curve DAO smart contracts. The developer spent 19.9 ETH (~$8,000) in fees to deploy the smart contracts on Ethereum.

The Curve Finance team was unaware of this event, and since the contracts were deployed, some users started staking yCRV tokens, which represented shares of Curve's liquidity pools, to earn CRV tokens. This led to confusion and accusations of "pre-mine" among the DeFi community. More than 80,000 CRV tokens were pre-mined before the Curve team could verify the deployed smart contract. Initially skeptical, the individuals involved eventually found evidence of the deployment being executed accurately, incorporating the correct code, data, and admin keys. As a result, they publicly announced their decision to adopt the CRV launch on August 14, 2020, citing the growing traction and interest surrounding it. ^[7]

Overview

The primary objectives of the Curve DAO token involve incentivizing liquidity providers on the Curve Finance platform and promoting active user participation in the governance of the protocol. CRV has three primary functions: voting, staking, and boosting. Engaging in these activities requires the process of vote locking CRV tokens and acquiring veCRV. ^[8]

veCRV stands for vote-escrowed CRB, which is a CRV locked for a period of time. The longer the locking period, the more veCRV is received. ^[8]

Staking

By staking (locking) CRV tokens, users can receive trading fees generated by the Curve protocol. A proposal by the community has introduced a 50% administrative fee on all trading fees, which is distributed to veCRV holders. These fees are collected and utilized to purchase 3CRV, which is the LP token for the TriPool. Subsequently, the acquired 3CRV tokens are distributed among veCRV holders. ^[8]

Boosting

CRV token holders can boost their rewards by providing liquidity. By vote locking CRV tokens, users can acquire voting power, enabling them to actively participate in the DAO's decision-making process. This vote locking mechanism grants them the ability to earn a boost of up to 2.5 times on the liquidity they contribute to the Curve platform. ^[9]

Voting

After CRV holders vote-lock their veCRV tokens, they gain the ability to actively participate in the voting process for different DAO proposals and pool parameters. This voting privilege allows them to have a say in shaping the decisions and directions of the DAO. ^[8]

Tokenomics

Initial Supply

The initial distribution was about approximately 1.3 billion CRV tokens, representing about 43% of the total supply. Five percent of the tokens were designated for pre-CRV liquidity providers, with a vesting period of one year. Shareholders, including the team and investors, received 30% of the tokens with vesting periods ranging from two to four years. Three percent was allocated to employees, subject to a two-year vesting period. An additional 5% was set aside for the community reserve. At launch, there was no circulating supply, and the initial release rate was estimated to be around 2 million CRV tokens per day. ^[6]

Supply Distribution

Curve DAO (CRV) token has a total supply of 3.03 billion tokens, distributed as follows: 62% to liquidity providers, 30% to shareholders, 5% to a community reserve, and 3% to employees. The shareholder and employee allocations are subject to vesting schedules, typically 2-4 years.

On August 13, 2024, coinciding with its fourth anniversary, Curve Finance implemented a significant reduction in CRV emissions. This strategic move aimed to minimize inflation, preserve the token's value, and alleviate vote dilution for stakers. The annual CRV emission was reduced from approximately 274 million tokens to 162.7 million tokens, resulting in a daily emission rate of 375,000 CRV. This change contributed to a substantial drop in the annual inflation rate from around 20% to approximately 6.35%. ^{[10] [11] [12]}