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An On-Chain Look at DeFi’s Most Shady Token Launch

flipsidecrypto Aug 27, 2020

On Thursday August 14th, an anonymous DeFi user deployed Curve Finance’s Decentralized Autonomous Organization (DAO) and token smart contracts without the team’s permission. Around 80,000 Curve Tokens were mined before the official launch several hours later. 

Curve Finance’s highly anticipated token, CRV, was launched on August 14th by an anonymous developer rather than its core team. Curve was initially “skeptical” but later found out that the deployment was with “correct code, data and admin keys” and opted to accept the launch. 

Around 80,000 Curve Tokens Were Pre-Mined 

Since the contracts were deployed, some users started staking yCRV tokens, which represent shares of Curve’s liquidity pools, to earn CRV tokens. This inevitably led to many people accusing the team of pre-mining for themselves and their friends, i.e. benefiting from having early exclusive access to win more Curve tokens as rewards. 

Looking at Curve’s on-chain activity we can see that around 80,000 CRV tokens were pre-mined before the team announced the official launch. We labeled those users “pre-miners” in the bubbles above (in dark red). 

Pre-CRV liquidity pools, which include the pre-launch users of the Curve product, are the only ones receiving rewards from the Vesting Escrow (in red). 

Pre-miners and Farmers receive CRV from the new supply generated via the liquidity gauge (in grey). 

Some Farmers are Leveraging yEarn to Maximize Yield 

yEarn.finance is an automated DeFi yield aggregator that executes yield-generating strategies on behalf of its liquidity providers. It allows users to simply deposit tokens into yEarn vaults and let the YFI do all the work. 

We labeled the yCRV vault and strategy contracts in dark blue. The contract stakes yCRV in the Curve liquidity gauge, receives CRV rewards (“new supply”) for doing so, and sells it on a decentralized exchange (DEX) right away to make a return on investment. 

More Users are Starting to Vote in Curve’s DAO. 

Notice the growth in the amount locked up in the voting escrow, in orange. Users can lock up their tokens to give themselves voting power in the DAO. They can then participate in deciding how much rewards each Curve pool should receive. 

About Curve Finance

The biggest problem faced by liquidity suppliers to pools is usually the risk of major relative price movements between the paired assets; if the price of an asset in a trading pair surged suddenly, it could cause a ripple effect of negative counter-trades from a lack of proper liquidity. It is therefore ideal to supply liquidity in terms of a stable asset, instead of a volatile one like ETH, which is what Curve does.

Curve Finance is a decentralized exchange for trading of stable pairs. By focusing only on mean-reverting trading pairs, Curve is able to offer traders extremely low slippage, and liquidity providers enjoy little-to-no impermanent loss. 

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