Curve Finance Proposes New Revenue-Sharing Model for CRV Holders

Curve Finance has unveiled a proposal for a new protocol called Yield Basis, which aims to directly share revenue with CRV token holders. This initiative represents a transition from temporary incentives to a more sustainable income model.

Key Takeaways

Curve Finance introduces Yield Basis, which directly shares revenue with CRV holders.
The new model offers a clear revenue stream for those who lock their tokens for voting rights.
Funds will be directed primarily from Bitcoin-focused liquidity pools.
The proposal responds to earlier financial challenges faced by Curve’s founder.
If successful, CRV could become a more appealing income-generating asset.

Curve Finance CRV Yield Basis proposal

Overview of the Yield Basis Proposal

Michael Egorov, the founder of Curve Finance, has released a proposal aimed at providing CRV token holders with a more straightforward method to earn income. This new Yield Basis system seeks to transform the governance token into a sustainable, yield-producing asset. The proposal is accessible on the Curve DAO governance forum, where voting will remain open until September 24.

Innovative Approach to CRV Rewards

The Yield Basis protocol is designed to offer transparent and steady returns to CRV holders who lock their tokens to obtain veCRV governance rights. This differs significantly from previous incentive strategies that mostly relied on airdrops and token emissions. Instead, the new system will funnel income generated from Bitcoin-centric liquidity pools directly to CRV holders.

To kick off the initiative, Curve plans to mint $60 million in crvUSD, its over-collateralized stablecoin. The proceeds will be divided among three liquidity pools: WBTC, cbBTC, and tBTC, with each pool capped at $10 million. Additionally, 25% of Yield Basis tokens will be designated for the Curve ecosystem, while 35% to 65% of Yield Basis's revenue will be allocated to veCRV holders.

By emphasizing Bitcoin liquidity and maintaining yields without the risks of short-term losses commonly associated with automated market makers, the Yield Basis protocol aspires to attract professional traders and large institutions.

Background and Implications for Curve Finance

This proposal comes at a challenging time for Curve, particularly for its founder Michael Egorov, who has had to liquidate several highly leveraged CRV holdings in 2024, resulting in $10 million of bad debt and losses exceeding $140 million. In December, he faced further difficulties with nearly $900,000 worth of CRV being liquidated due to a sharp market decline. Despite these challenges, Curve has remained one of the largest liquidity hubs for stablecoins in the decentralized finance (DeFi) space.

If the Yield Basis proposal is approved, CRV could transition from being primarily a governance and emission-focused token to a more desirable income-generating asset. Advocates of the model believe it could reduce Curve's reliance on inflationary rewards, thereby enhancing its long-term sustainability as the DeFi landscape continues to evolve.