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Curve’s Troubled Governance Is a Warning for Other DAOs in DeFi

Several yield farming schemes this summer have made many users rich. But when it comes time to vote on protocol improvements with their newly-earned governance tokens, many farmers have been silent. 

Republished by Plato



Curve’s Troubled Governance Is a Warning for Other DAOs in DeFi | Crypto Briefing

Yield farming a protocol’s governance tokens may mean mega profits, but does it convert into decentralized control over the protocol.

Key Takeaways

  • Curve’s liquidity providers don’t actively participate in the governance process, which leaves decision-making in the hands of a few powerful stakeholders.
  • While the latest reward boosting initiative improved the situation, it doesn’t solve the fundamental governance problem.
  • Non-financial incentives are important for building long-lasting decentralized communities.

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Several yield farming schemes this summer have made many users rich. But when it comes time to vote on protocol improvements with their newly-earned governance tokens, many farmers have been silent. 

The idea of liquidity mining assumes that reward tokens are used to steward the evolution of DeFi protocols. But the sector’s obsession with profit poses challenges to this assumption.

The example of Curve DAO shows that users aren’t willing to stick with the project after receiving short-term gains. Consequently, only a handful of large players are left to govern the project, which creates an environment for hostile power grabs.

The issue is not Curve-specific; its roots are in the community itself. Human nature eagerly seeks the path of least resistance on its way to riches. Hence, DAOs should find ways to harness greed for the benefit of their protocols.

Misalignment of Incentives

While the DeFi platforms have been growing since 2018, their popularity exploded after Compound launched its governance token COMP on Jun. 16, 2020.

The introduction of COMP ignited the yield farming movement, where users provide liquidity to help the lending function for rewards. Curve followed the same path with its CRV token.

The overarching idea of decentralizing Curve’s governance is to give tokens to liquidity providers through inflation, as stated in the protocol’s guide:

“The circulating supply at the end of year one should be around 750m CRV. The rate of inflation is there to help put the DAO’s control in the hands of liquidity providers on the Curve Finance protocol.”

By giving out governance tokens, the team distributes control over the network. Users can lock their CRV in the system to influence Curve’s future by proposing ideas or voting for other proposals. 

However, holders of CRV bear an opportunity cost when they lock-up their tokens because tokens are tradable. If the price moves up or down, the tokens are stuck in the protocol and can only be sold or bought after spending hefty gas fees to remove them from lock-up. Besides, high inflation will negatively affect CRV’s price in the upcoming years. 

Consequently, using rewards for governance means passing up on lucrative gains.

Curve Inflation
CRV inflation. Source:

In reality, Curve’s governance model shows that users prefer instant profits over having a say in the project’s governance. After farming the CRV, rarely do liquidity providers lock up their tokens.

Curve Locked Tokens

Total vote locked CRV (black) vs. circulating supply (green). Source:

Curve Price

CRV price. Source: CoinGecko

The Curve Cartel

Low governance participation is not unique to Curve, but that doesn’t change the outcome—it makes power grabs easy. 

SIMETRI gains of 1031%

The first Curve DAO war occurred on Aug. 23, when the project’s CEO, Michael Egorov, captured over 70% of the DAO’s voting power. As Egorov commented, he “over-reacted to balance out the growing influence of yEarn, lead by Andre Cronje.

Curve Tokens Distribution
The difference in vote locked CRV distribution before (top) and after (bottom) Egorov’s intervention. Source:

Egorov’s intervention put the DAO in a predicament.

Voting on the platform requires a 30% quorum, so the founder has to participate in the voting process. Hence, he theoretically could influence decisions on the platform in his favor. While in reality, Egorov acted professionally, the situation showed how a single actor could easily hijack the DAO. 

The second war was connected to CRV inflation. The protocol distributes inflation across its liquidity pools according to how users vote each week. By having substantial voting power, a large player can direct the majority of inflation to a pool of their liking.

On Aug. 26, almost 50% of the CRV inflation was proposed to go to the sBTC pool. However, the distribution changed dramatically in favor of the Y pool shortly after.

Curve Gauge Weights
Difference between gauge weights on Aug. 26, 2020. Source: Julien Bouteloup

The rapid shift in the votes’ distribution not only confirms that Curve’s DAO is small and volatile but also shows that financial incentives are the key influential factor in the platform’s governance. 

yEarn and Y pool dominate the governance because they offer lucrative rewards. Notably, the rewards come from the yEarn platform instead of Curve. 

When liquidity providers lock their stablecoins on Curve’s Y pool, they receive ownership tokens, which they can take outside of Curve and lock on yEarn for over 90% ROI.

ROI on Curve Y Pool
ROI on Y pool ownership tokens on yEarn. Source: yEarn

By using yEarn as a proxy for earning profits, Curve’s liquidity providers form a cartel. They combine their governance power to adjust Curve in a way that maximizes yEarn’s returns, which is not necessarily beneficial for other Curve users.

Besides influence within the DAO, there’s some questionable activity coming from the outside. Namely, the team extends the product without asking for prior approval from the users.

Ideally, the Curve DAO should decide which extensions should be built and deploy capital for development. However, the recent move from Curve’s core team broke this relationship. 

On Aug. 25, the team added a new pool to the platform before polling token holders, going around their governance process. After getting backlash from the community, Michael Egorov proposed on-chain voting, which technically should have been done in the first place.

Curve CEO Commentary
Michael Egorov’s proposal. Source: Curve Governance Forum

At the moment of writing, the pool is still available on the platform’s UI, and users can interact with it. If the team can modify Curve at will, it undermines the DAO’s value proposition.

Can Financial Incentives Fix The Issues?

Starting from Aug. 28, 2020, Curve launched an incentive program to increase participation in the DAO. The platform offers up to 2.5x boost of the CRV rewards to those who lock enough tokens.

Keeping the boost stable, while capitalizing on the rewards, is laborious and risky. Imagine a user provides 10,000 DAI to the Y pool. She will need over 5,000 CRV under a 1-week vote lock to maximize the boost, which means risking more than $20,000 in CRV. 

Cred - earn easier

One way to reduce the amount of CRV needed is to extend the locking time. However, it’s not an optimal short-term strategy, as the boost is likely to change at every withdrawal of the rewards.

The system is designed to encourage long-term vote locking, as proved by one of the team’s recent responses to Andre Cronje. Long-term vote locking without withdrawing rewards should encourage users to stick with the project and contribute to its future success.

The boost incentive worked to drive the attention of users to the DAO. The day before the incentive kicked in, the number of vote locking addresses increased seven-fold. However, the interest quickly died off, most likely because of the boost’s complexity.

Curve Addresses
The number of addresses that locked CRV. Source:

Nevertheless, the inflow of new users diminished the influence of large players in the DAO, which is an encouragingly healthy dynamic.

Curve Distribution
Current vote locked CRV distribution. Source:

Importantly the distribution between short and long-term vote locks is in favor of the long-term ones. The majority of the addresses locked their tokens until 2024.

Curve Tokens Unlocking in a Year
Distribution of the number of addresses by unlocking year. Source:

The short-term effect of the boost is promising, but it may not be enough to fix low voter turnout in the long term. Despite the initial excitement, only 1,147 out of over 8,000 holders locked their CRV since the incentive started.

In a sense, farming CRV with the boost is like staking, and staking platforms suffer from low voter turnout despite providing financial incentives. Making money via short-term trading turns out to be preferable over holding tokens and going through the governance hustle.

Curve DAO is still vulnerable to oligarchy and technocracy. It needs to grow to a critical mass to balance out the team and cartels. Whether or not it will happen largely depends on the community and the introduction of other incentives.

If most of Curve’s users will merely aim for quick profits, boosting will turn into a game of musical chairs. 

The team needs to find creative ways to direct greed into meaningful governance activities to mitigate this. Money can bring users to the platform, but they will need something more to stick around, something that will make them feel they are a part of the group.

Curve’s Warning Sign for Others

Curve’s example is not unique. On-chain governance is a complex topic, and there’s no flawless architecture. Still, there are some lessons other projects can learn from. 

A DAOs ethos is essential. The community around a project needs to have a long-term vision and active participants to propagate this vision. In such a case, financial incentives will act as oil for a well-built machine. 

In other, poorly designed schemes, the project will become a cash cow to a handful of whales and tech-savvy people.

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How NFTs, DeFi and Web 3.0 are intertwined

Republished by Plato



While blockchain itself provides the technology constructs to facilitate exchange, ownership and trust in the network, it is in the digitization of value elements where asset tokenization is essential. Tokenization is the process of converting the assets and rights to a property into a digital representation, or token, on a blockchain network. 

Distinguishing between cryptocurrency and tokenized assets is important in understanding exchange vehicles, valuation models and fungibility across the various value networks that are emerging and posing interoperability challenges. These are not just technical challenges, but also business challenges around equitable swaps.

Asset tokenization can lead to the creation of a business model that fuels fractional ownership, the ability to own an instance of a large asset. While discussing asset tokenization in a previous article, I also mentioned the value of an instance economy in democratizing finance, commerce and global access, as well as in creating a broader global marketplace at a scale never before seen.

With digital assets and their fungibility in a blockchain ecosystem, there are various drivers of valuation. These include: 1) tokens based on crypto economic models that are driven by supply and demand, and the utility of the network; 2) nonfungible tokens, or NFTs, which have an intrinsic value such as identification, diplomas and healthcare records — essentially, tokens that are simple proof validations of the existence, authenticity and ownership of digital assets; and 3) fungible tokens that are valued on various bases, such as the sum total of economic activity in the network (cryptocurrency), its utility (smart contracts and transaction network processing), assigned values (stable coins and security tokens), and so on.

In this article, I address the complex issue of the hyperbolic and rapid rise of NFTs, after a similarly meteoric rise of decentralized finance, or DeFi, creating amazing innovations — with immense promise of democratization, new business models and global marketplaces with global access — all fueled by the basic premise of decentralization and fundamental constructs of tokenization and wallets. While NFTs may be characterized as one-of-a-kind cryptographic tokens with some intrinsic value to a holder or to a market (art, collectibles), the NFT movement is indicative of a larger token revolution that will not only fuel massive innovation and growth in Web 3.0 protocols but also test the resolve of the DeFi movement, along with its ability to intersect and provide platforms and an exchange vehicle for all token types.

Growth in Web 3.0 protocols

The first two generations of web protocols were largely about disseminating information and connecting people. They fueled a massive growth in information and collaboration, and did wonders for connecting the world. However, those web protocols were never designed to move things of value. Also, as the Web 2.0 era reached its fullest potential, vulnerabilities such as “fake news” and the “batched relay” of the movement of assets via a series of intermediaries emerged. Threats to the commerce and financial infrastructure of the system risk destabilizing it.

Web 3.0 promises to safeguard all things we value: information, truth and digital assets — both fungible and nonfungible. Whereas Web 2.0 was driven by the advent of social, mobile and the cloud, Web 3.0 is largely built on three new layers of technological innovation: edge computing, decentralized data networks and artificial intelligence.

The growth of NFTs has not only empowered the ability for artists, skilled professionals and entrepreneurs to encapsulate innovation in a tokenized form but has also fueled the democratization of the platform as one of the promises of blockchain technology. The underlying infrastructure includes decentralized storage technologies, efficient consensus protocols, off-chain computing, and oracle networks to provide connectivity and validation to existing systems.

Collectively, the Web 3.0 set of technologies envisions a connected, trustless, accountable network for efficiently delivering value, thus crafting an infrastructure for things of worth. NFTs represent both transferable entities and nontransferable tokens that we value. The latter include things such as our identification, healthcare records and passports, things that represent us and allow us to participate in the digital economy with our own unique, digital identities.

As we dare to envision a shift toward a world with decentralized control, governance based on distributed technology that challenges every business model, and governance structure built upon centralized business frameworks, we do have to ponder some things. Not only the shift itself, but the motivation, incentive and monetization elements that fuel and power the economic infrastructure to move things that have value — thereby keeping up with our changing perception and subsequent realization of that value.

Intersecting with finance — DeFi

DeFi is the movement in the blockchain applications space that leverages decentralized network technology to disrupt and force a transformation of old financial products into trustless, transparent protocols, facilitating digital value creation and dissemination with few to no intermediaries. It is widely understood and accepted that — due to new synergies and co-creation via new digital interactions and value-exchange mechanisms — blockchain technology lays the foundation for a trusted digital transactional network that, as a disintermediated platform, fuels the growth of marketplaces and secondary markets.

While DeFi aims to deliver the promise of finance democratization, NFTs test the resolve of DeFi by delivering a competitive yet inclusive asset class, plus avenues to provide a medium of exchange, fungibility by other fungible asset classes, and liquidity to a traditionally illiquid market.

Asset classes resulting from DeFi protocols and NFTs avail themselves of the advantages of fractional ownership of the assets, blurring the lines between asset classes and using constructs like digital wallets as a receptacle for them. This is all supported by underlying layers of Web 3.0 that provide security and availability via decentralization, as well as trust and immutability via consensus, extending these principles to basic computer infrastructure like storage and interconnect.

Commercialization of Web 3.0 protocols, which manifest as fungible utility tokens, further blurs the lines with diverse financial innovation products introduced by DeFi (such as base assets and derivatives), products that are also tokenized. So, while decentralization is the underlying theme — and the wallet and the token are fundamental constructs — these blurring lines are quite profound.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Nitin Gaur is the founder and director of IBM Digital Asset Labs, where he devises industry standards and use cases and works toward making blockchain for the enterprise a reality. He previously served as chief technology officer of IBM World Wire and of IBM Mobile Payments and Enterprise Mobile Solutions, and he founded IBM Blockchain Labs where he led the effort in establishing the blockchain practice for the enterprise. Nitin is also an IBM Distinguished Engineer and an IBM Master Inventor with a rich patent portfolio. Additionally, he serves as research and portfolio manager for Portal Asset Management, a multi-manager fund specializing in digital assets and DeFi investment strategies.

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Has the rally ended for altcoins like LINK, ADA, and NPXS?

Republished by Plato



With most altcoins rallying at the current point in the market cycle where Bitcoin is making a comeback, there are a few altcoins that may have ended their price rally. Among these, LINK ranks in the top 10 cryptocurrencies based on market capitalization.

LINK’s oracles may have filled the void left from the removal of XRP from Grayscale’s fund. However, that does not seem to have had an impact that would last long enough to boost the price on spot exchanges. The asset is currently trading at the $32 level, down from its ATH. Though there is anticipation that the price will rally to its ATH, the dropping trade volume across exchanges signals otherwise.

After being added to Grayscale’s fund, LINK’s price went up steadily, however, a boost from institutional demand may not be enough to boost the asset’s price. 93% HODLers are profitable before the asset takes a dip in the current cycle

The altcoin rally may have ended for LINK, ADA and NPXS

Grayscale LINK Holdings || Source: Bybt

LINK’s institutional demand has had only a partial impact on price, and the trend reversal depends on the HODLers profitability at the current price level and the rally of altcoins led by ETH. Historically, Bitcoin’s rally has had a negative impact on LINK’s price and that remains to be seen as Bitcoin traders above $60000 once again this weekend.

Another top altcoin, Cardano has offered HODLers an ROI of over 440% in 2020. This altcoin has been considered to be the one to HODL in the long term based on on-chain analysis and trader sentiments. In the current cycle, 65% HODLers are profitable at the price level of $1.23. This is one of the top altcoins in which the concentration by large holders is low, below 50%, currently at 24%.

Additionally, at this point in the rally, there is a significant drop in ADA’s trade volume across exchanges. This drop in liquidity may lead to a drop in price over the following week. Though large transactions in the past week have been above $30 Billion, the volume is dropping consistently.

The altcoin rally may have ended for LINK, ADA and NPXS

ADA price chart || Source: Messari

Unlike ADA and LINK, in the case of NPXS, the price is back to the same level as a month ago. The 24-hour trade volume has taken a plunge with a near 100% drop in 24 hours, and this is a unique position in NPXS’s price cycle. Moreover, the on-chain sentiment is bearish and this may be the ideal time to buy altcoins like these that are consolidating. The confidence is consistently high in top markets on spot exchanges, and the dropping trade volume is a sign of consolidation.

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Kraken Daily Market Report for April 09 2021

Republished by Plato




  • Total spot trading volume at $1.02 billion, down from the 30-day average of $1.34 billion.
  • Total futures notional at $417.0 million.
  • The top five traded coins were, respectively, Bitcoin, Tether, Ethereum, Ripple, and Polkadot.
  • Strong returns from Waves (+23%), Basic Attention Token (+17%), Keep (+13%), and Filecoin (+12%).

April 09, 2021 
 $1.02B traded across all markets today

#####################. Trading Volume by Asset. ##########################################

Trading Volume by Asset

The figures below break down the trading volume of the largest, mid-size, and smallest assets. Cryptos are in purple, fiats are in blue. For each asset, the chart contains the daily trading volume in USD, and the percentage of the total trading volume. The percentages for fiats and cryptos are treated separately, so that they both add up to 100%.

Figure 1: Largest trading assets: trading volume (measured in USD) and its percentage of the total trading volume (April 10 2021)

Figure 2: Mid-size trading assets: (measured in USD) (April 10 2021)

Figure 3: Smallest trading assets: (measured in USD) (April 10 2021)

#####################. Spread %. ##########################################

Spread %

Spread percentage is the width of the bid/ask spread divided by the bid/ask midpoint. The values are generated by taking the median spread percentage over each minute, then the average of the medians over the day.

Figure 4: Average spread % by pair (April 10 2021)


#########. Returns and Volume ############################################

Returns and Volume

Figure 5: Returns of the four highest volume pairs (April 10 2021)

Figure 6: Volume of the major currencies and an average line that fits the data to a sinusoidal curve to show the daily volume highs and lows (April 10 2021)

###########. Daily Returns. #################################################

Daily Returns %

Figure 7: Returns over USD and XBT. Relative volume and return size is indicated by the size of the font. (April 10 2021)

###########. Disclaimer #################################################

The values generated in this report are from public market data distributed from Kraken WebSockets api. The total volumes and returns are calculated over the reporting day using UTC time.

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