The Curve decentralized autonomous organization (DAO) has greenlit a proposal to extend a $60 million credit line in crvUSD stablecoin to Yield Basis, a new protocol created by Curve founder Michael Egorov, in advance of its mainnet launch.
The vote paved the path for Yield Basis to launch Bitcoin-focused liquidity pools aimed at mitigating impermanent loss — the depreciation of assets in a liquidity pool compared to merely holding them. The protocol also seeks to unlock yield opportunities for Bitcoin (BTC) within decentralized finance (DeFi).
As part of the initiative, three pools (WBTC, cbBTC, and tBTC) will be established on Ethereum utilizing Yield Basis’ automated market maker (AMM) structure. According to Curve Finance, the pools will initially be limited to $10 million.
This move aims to enhance Curve’s ecosystem, embedding its native stablecoin further into the DeFi landscape. Additionally, it is designed to increase potential fee revenues for holders of veCRV tokens, the vote-escrowed version of CRV, Curve Finance’s governance token.
Cointelegraph reached out to Curve for further information but had not received a reply by the time of publication.
Concerns Regarding Risk Controls, Tokenomics, and Liability
Not all members of the Curve DAO supported the proposal. On Sept. 18, the pseudonymous social media personality Small Cap Scientist expressed that the plan exposed Curve to considerable risks.
In a post on X, the user asserted that the plan is “extremely extractive” for the DAO. He cautioned that no third-party had assessed the economic risks associated with Yield Basis, and the $60 million credit line lacked caps linked to crvUSD’s total value locked (TVL). Additionally, he mentioned that a compromise on the new protocol could result in Curve bearing the liability for any drained funds.
The community member raised additional concerns about the transparency regarding Yield Basis seed investors and the incomplete tokenomics, indicating that the protocol should not be granted control over crvUSD without stronger protections.
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Curve Founder Defends Proposal
Egorov responded to these concerns. In reply to the X post, Egorov stated that Yield Basis had undergone six audits, with a seventh currently in progress. He also highlighted an emergency stop mechanism overseen by Curve’s Emergency DAO multisig as a safeguard.
He reassured the community that Yield Basis would be accountable for any exploits and noted that details of its investor allocation were included in the governance proposal.
“If anything occurs, it would certainly be Yield Basis’s responsibility to address it to the fullest extent possible,” Egorov stated.
Egorov mentioned that enlisting well-known figures from the ecosystem as investors is typical for a project like Yield Basis, asserting that partnerships are a strength for Curve.
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