Curve Finance allows staked Ether to mint crvUSD.
Staked ether (stETH) holders can now use their tokens to mint Curve USD (crvUSD), a decentralized stablecoin issued by stablecoin swapping protocol Curve Finance.
A proposal to allow crvUSD minting via stETH was passed by 100% of the Curve DAO community members in a vote that ended on Thursday morning. Users can use their stETH tokens as collateral, and Curve will automatically mint crvUSD whose value will be a portion of the value of the stETH.
Currently, users have to pay a 6% borrowing rate and will be automatically liquidated if the value of the lent stETH falls below the intended $1 peg value of crvUSD.
As of Thursday, there is a maximum limit of $150 million worth of crvUSD that can be issued using stETH as collateral.
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Curve deployed its much-awaited crvUSD stablecoin on the Ethereum mainnet last month after stating its intention to issue a dollar-pegged stablecoin last June. The token is backed by a basket of tokens and controlled via smart contracts to ensure it is fully backed at all times, in a move that hopes to prevent a repeat of the TerraUSD disaster.
Some market observers have previously weighed in on the impact of crvUSD in the broader crypto ecosystem once it is issued.
“The crvUSD could be a very interesting development, as we haven’t yet seen a stablecoin that is issued by a major decentralized exchange,” Daniel Zlotin, senior DeFi developer at Orbs, said in a Telegram message to CoinDesk.
“Connecting a stablecoin with a viable [decentralized finance] platform could open up some interesting possibilities in terms of new models (such as using LP tokens as part of the backing system),” Zlotin added, cautioning that there would “definitely be some challenges” in implementing such a concept.
Edited by Parikshit Mishra.
