Curve launches lending marketplace Curve Lend, reducing user asset risk through soft liquidation.
Stablecoin AMM blue-chip protocol Curve officially launched its own lending market, Curve Lend, yesterday. Unlike mainstream lending models such as Aave, Curve utilizes a unique liquidation mechanism to reduce the risk of liquidation for users and allows users to freely open lending markets for any token.
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Introduction to Curve Lend
Curve Lend Soft Liquidation: LLAMMA
Curve Lend Design Architecture
Expanding DeFi Development Strategy for Product Line
Curve Lend is a permissionless lending market where users can borrow or lend crvUSD using any asset through an oracle price, enabling users to go long or short on the asset.
Curve Lend is built on Curve’s unique liquidation algorithm LLAMMA. By placing the borrower’s collateral into the AMM model, LLAMMA allows for partial liquidation through automatic exchange in case of collateral price fluctuations, reducing the risk of full liquidation when prices fluctuate significantly. The team refers to this mechanism as soft liquidation mode.
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LLAMMA: Curve Releases Algorithmic Stablecoin Whitepaper, Progressive Liquidation Solves Lending Liquidity Issues
Reason for recommendation: The LLAMMA model, which stands for “Lending Liquidation Automated Market Maker Algorithm,” is the core mechanism for products with liquidation needs, such as Curve USD. Reading this article will help understand the differences between LLAMMA and the traditional liquidation mechanism.
Traditional lending markets like Aave require strict control over the types of collateral tokens to ensure sufficient liquidity and reduce the risk of defaults. Unlike traditional lending markets, Curve Lend, thanks to LLAMMA’s soft liquidation mechanism, inherently has liquidity. Therefore, it has a higher acceptance of collateral types and can support a more diverse market. The team claims that they can lend out any token supported by LLAMMA using crvUSD.
However, soft liquidation is not without drawbacks. Once a soft liquidation is triggered due to price fluctuations, even if the collateral price later returns to its original state, there will be some loss of funds due to the fees charged by the AMM trades, compared to traditional lending markets.
The entire Curve Lend system is similar to the protocol for minting crvUSD. Each token’s lending market has a separate controller, LLAMMA, and vault.
The controller serves as an on-chain interface where most user operations take place. For example, creating loans, repaying loans, or managing existing loans are all done through this contract.
LLAMMA is an AMM trading model that holds collateral assets and is crucial for executing soft liquidation.
The vault is the protocol where lenders provide assets, following the ERC-4626 specification to enhance composability and security. However, the contract itself does not hold any assets; it is held by the controller.
Curve Lend is a brand-new product built by the team using existing technological architecture, entering the relatively mature lending market with innovative products. However, acceptance of the advantages and disadvantages of soft liquidation in the market still needs to be verified over time.
In addition to its original stablecoin trading protocol, Curve continues to launch stablecoins, other cryptocurrency trading protocols, lending protocols, and DAO governance protocols, among others, to enhance its product line and meet users’ multifaceted financial needs.
Curve’s strategy is similar to Uniswap, Frax, and Alpaca Finance, continuously launching diverse financial services to gradually target niche markets with specific positioning.
It can be predicted that blue-chip DeFi protocols will continue to deepen and expand their services in the financial field to serve specific niche markets.
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Curve Lend
DeFi lending
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