Swerve vs. Curve: How long can the mobility advantage of a forked community last?
Author: Ryan Watkins, Research analyst, Messari
Compiled by: Leo Young
If the past few days are any indication, it's when everyone starts thinking about the most recent NBSP; DeFi fork tides are disillusioned. Recent hot DeFi splits such as SWRV, CREAM and SUSHI are down 30 per cent and in some cases as much as 80 per cent from the past seven days. It's a big wash.
So does it make sense to split it?
Many DeFi forks are nothing new, just money-making games, not real competition, and some make sense. Swerve is one of them, which will be elaborated in this paper.
What is Swerve?
Swerve On Sept. 3, it announced the bifurcation stability coin automatic market maker (AMM) exchange platform Curve. Swerve's hair originates from the controversy over the scrip issue of Curve in August. Until the scrip was issued, Curve was favored by the DeFi community, but the project's reputation declined due to poor scrip issuance management, predig was criticized. And in an effort to dilute Yearn's 50% voting stake in Curve DAO, the Curve founders locked down a handful of CRV tokens that gave them a 79% voting share, even as their reputation crumbled. Meanwhile, valuations are still in the billions of dollars as the price of ultra-high inflation CRV tokens continues to fall slowly, in terms of fully diluted circulation.
In short, the trust between the community and the Curve team is deteriorating.
The launch of SushiSwap has inspired community leaders to fork out for fair token distribution and community governance. An anonymous team branched off in an effort to solve the current Curve problem. Its public publicity is as follows:
We will launch the Curve Bifurcation project Swerve, 100% community owned.
There were no pre-deployment contracts, no controversial pre-excavations, no founders controlling most governance votes, no dubious team votes, no 30% team "shares", no decades-long scrip distribution plans... All have no.
Source: Swerve
The main differences of Swerve are as follows:
Fairer and more transparent distribution of SWRV tokens. All tokens are awarded to liquidity providers (LPS) and are not reserved for founding teams, consultants, and venture capital firms
Optimize distribution plan. Two weeks before the protocol goes online, large rewards are given in advance, and then the reward drops and the distribution curve slows down
Swerve is available online on 4 September and users can provide Swerve with liquidity with a stable currency and receive SWRV scrip as a reward for "profit farming". Swerve piled up $8 million in dollar stability in two weeks under the weight of the prize and the persuasive story, far more than Curve.
A mobility war?
Curve total liquidity did not drop significantly since Swerve came online. This means that Swerve liquidity is mainly new funds rather than liquidity derived from Curve.
Which raises a question: Does Swerve the liquidity fund in pursuit of the high yield of the stable currency? Or bullish bifurcation agreement waiting to hoard governance tokens? After all, the rewards dropped sharply from Monday, when 9 million tokens were handed out in two weeks to 9 million tokens a year. The market has been volatile over the past two weeks, and holding cash in Swerve to make triple profits is attractive.
Source: Swerve
The change of liquidity after the decrease of reward is uncertain, and SushiSwap can be used as a reference case to analyze the retention of liquidity after the decrease of reward.
The firm's liquidity dropped from a peak of $1.4 billion to $610 million as the company's high rewards fell. Although it is only a data, it can be used as a reference to analyze the trend of liquidity in the future after the Swerve award falls.
Liquidity sensitivity and relative value
Total lock volume (TVL) is not a perfect basic valuation indicator. But AMM's stated goal is to build and use its balance sheet as efficiently as possible, to promote large transactions and reduce slip-points, so TVL can at least be used to assess utility.
In this sense, the total liquidity of the Swerve DOLLAR stability pool is 28% higher than that of the Cureve dollar stability pool. This means traders can get the best possible exchange price for us dollar stability currency Swerve, which is a much better deal. According to the total market capital index, SWRV trading price discount. This suggests that the market either suspects Swerve liquidity to fall with the reward or simply undervalues SWRV.
As noted above, the retained liquidity after the SWRV incentive falls can better assess the risk-return of SWRV versus CRV trading. The current liquidity Value of Swerve can be estimated by SushiSwap's liquidity decline and compared with Curve with a Year+1 Market Market Capitalization/Total Value Locked ratio one Year later. This can be used as a reference for valuation.
Swerve versus Curve
For AMM, liquidity is not all. In such an early arena, the evolution of protocols matters most. Code that simply copies the successful protocol can only copy the function, but it is difficult to copy the development path.
At present, Swerve is not completely differentiated from Curve, and the liquidity advantage is probably only temporary. There are plenty of reasons for Swerve Bifurcation Curve, and the community is enthusiastic. Beyond retaining liquidity when incentives fall, the real test will be whether the future delivers compelling products.
The fork is easy, but the construction is difficult.
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