By Larry Wright
With the advancement in decentralized finance technology, many new applications have been introduced that have really changed the way we interact with our finances and, for sure, the future of the financial realm. Decentralization has allowed everyone to become their own bank without the need for an intermediary or a centralized platform to carry out their request of withdrawal or crediting their accounts.
People now have the authority to do so on their own without any discrimination or having to showcase how much they earn or give away their personal or financial information of any kind. The crypto market has been the pioneering technology on which the rest of the decentralization is built, and the services and applications that are present today thanks to decentralized finance would only have been a dream in the past.
DeFi and Curve DAO
The innovation within the decentralized finance space has given rise to newer solutions such as the Curve DAO and the native token, which supports the financial aspects of the network. DAO, without any doubt, is the most significant element within the Curve.fi ecosystem that provides the end users with a completely decentralized financial ecosystem working on the principles of the automated market maker.
The Curve DAO Token has its own resonance on the Curve platform as it allows people to pay not only for transactions that they are going to conduct on the network but also for the resources that they are going to use while exploring through the exemplary UI of Curve finance.
The automated market makers have presented decentralized finance with an opportunity that is limited in its own doing and not available in various instances, such as the development of liquidity platforms. The curve actually helps in this swapping of stablecoins at exemplary lower transaction fees that even the rivals are not able to provide.
To be able to fully understand how this platform works and what is the significance of Curve DAO at present within the decentralized finance world, it is important that you take a look at the following data, which will not only help you to understand the working of this platform but also its significance.
What is Curve DAO Token (CRV)?
The first thing that you need to understand about the Curve DAO Token is that it works as a utility token and not as a governance token which means that you can’t use the token for the sake of casting votes or engaging in other legal elements of the platform. You can use this token for the sake of swapping your stablecoins or other crypto tokens with the ERC-20 tokens.
The primary focus and work of this native token are to help those users who want to exchange their crypto tokens or stablecoins with the ERC-20 tokens with the help of exchange protocols.
An exchange protocol is a platform that you get redirected towards where you have to dump your stablecoins and fill out all the particulars, such as what kind of stablecoin you have with yourself, what is its present value, and everything else, and then you select the crypto token that you want to swap the stablecoin with, and the rest is taken care of automatically by the DAO technology. The working of this decentralized finance platform is completely non-custodial, which means that users act as the custodians of their own tokens.
The design of Curve DAO is nothing less than elegant; it allows users to engage with the best UI that has ever been prompted by a decentralized finance application rest assured, you won’t have any problems navigating through the settings as well as the resources that you want to use while interacting with the platform. The infrastructure, however, has been designed in such a way that a user only has to pay a minimal fee on the transaction they conduct for swapping their stable coins with any crypto token of their choosing.
Multiple routes are present on the platform that lead to various exchange protocols, and based on the request of the user and the volume of exchange, only the best route is chosen, which eliminates long queues and waiting on end for their transaction to be completed. Liquidity pools are leveraged by Curve for the sake of facilitating the exchange of stablecoins with crypto tokens, and these work on the principle of leveraged positioning by the users who actively take part in depositing their tokens within the liquidity pools for the sake of earning rewards and various other benefits.
Price vs. Cost
To make sure that the price of the asset and the cost to exchange these elements is at their bare minimum, a number of different liquidity pools are being set up by Curve DAO, which ensures that the fee would be at its bare minimum while the exchange process would go forward or through without any potential issues. The use of incentive is comprehended by the liquidity pools, which help the providers of the tokens with various rewards and native tokens of Curve DAO for their participation in a definitive liquidity pool.
Longer they leave their assets deposited in a dedicated mining pool more intensive the rewards will be for them. CRV works as the utility token for the Curve DAO protocol, and it incentivizes the liquidity providers by allotting themselves bounds and bounds of this token for their participation in providing liquidity in one of the liquidity pools.
Working Mechanism of Curve DAO Token
The next step towards understanding the Curve DAO Token is to understand how it works but more openly how does, its native token CRV works. CRV token serves as the main component for the current decentralized finance protocol, and the most astonishing thing that you would find about this whole assembly is that the native token itself acts as an automated market maker and decentralized exchange that is tethered with the primary platform which is kind of a decentralized finance protocol.
Automated market makers help in providing the users with an environment for trading that is completely permissionless and automatic, which means that you do not need an intermediary or even a smart contract to carry out the exchange of tokens from stable coins into crypto tokens as all of it takes place on its own.
Also, the best thing about this kind of protocol is that there are absolutely no intermediaries whatsoever; these automated market makers help the protocol in itself for the sake of executing trades in an automatic fashion using different kinds of liquidity pools.
Now the next thing you need to understand is about the liquidity pools; not every liquidity pool has all the crypto tokens that a potential user would want to swap their stable coins with. This is not how it works.
So there are different liquidity pools created for the purpose of exchanging stable coins with crypto tokens, and each and every liquidity pool has its own pair of crypto tokens with which an exchange can take place. So it means that a dedicated liquidity pool might not have Bitcoin in it at all, while the other one might not have Ether in it as an option to switch or swap the stable coins with that particular token.
Every liquidity pool is supported by liquidity pool providers who earn pretty decent rewards and incentives for the time being; their assets are locked in a mining agreement. There is also an abundant supply of a dedicated crypto pair which the liquidity pool represents to make sure that in case of a huge rush in the exchange rate or requests that users make for that particular token, an abundant supply is already present to tackle any inconvenience.
Future of Curve DAO
Automated market makers and liquidity pools are actually the future of decentralized finance, and both are represented by Curve DAO as a primary platform on which this business takes place. There are going to be present not only different liquidity pools to find the exact crypto token that you as a user are looking to swap your stable coins with. But there are also going to be different exchange markets so that you can discover the whole thing in its entirety and choose the ones with the most favorable fee rates.
This is to ensure that traders have the ability to improve the returns that they are getting by reducing slippage. If there is too much user activity taking place on the Curve network, then it is only a good sign for the longevity as well as the significance of the network among those who engage with swapping of tokens more often.
The liquidity fee that the user is paying for swapping their stable coins with the crypto tokens is actually used partly to sustain the activities of the platform, which is Curve DAO, but a part of it is also being paid to the liquidity providers as an incentive for their trust and participation that they have taken place within the liquidity pool with their own crypto tokens.
Significance of Curve DAO
Just like there isn’t a single decentralized finance platform out there, there isn’t only one swapping platform for the sake of exchanging stable coins with regular crypto tokens or even regular crypto tokens with other crypto tokens that a user might require for a fee. So, what makes Curve DAO special? What is the selling point behind this platform, and more importantly, why you as a user must hover towards this kind of platform, especially when you have tons of others to choose from?
The very reasoning that could be applied to this element is that this platform has received tons of accreditation from not only regulatory authorities but also from many crypto users around the globe. The most tenacious selling point for this platform is the lower transaction fee that it incurs to dedicated users whenever they want to swap their stable coins with regular crypto coins, it has the lowest possible transaction fee than any other swapping platform out there and is not only this but low slippage as well which is kind of a treat on top of issuing a low transaction fee.
The attraction that this platform has does not come from the use of liquidity pools but from the use of automated market makers. Users themselves have the authority to explore a variety of avenues that are made available to them for the sake of exchanging their stable coins into regular cryptocurrencies based on the best transaction rate that they are getting on top of what comes out as feasible to them and what doesn’t.
Last but not least, the rates that are being offered on this platform are accurate to the very dot; you would assume that if such an exchange is taking place on the crypto platform, then obviously, the rates are all intermingled, but that is actually not the case, you would get the ideal rates on this platform than any other swapping protocol out there.
Features of Curve DAO Token
The introduction, as well as the significance of the Curve platform, is incomplete without mentioning a few highlights of its native token. Curve DAO Token works as a utility token for the decentralized finance protocol, and it is basically an ERC-20 token, just like a normal crypto token that you managed to acquire and trade with on an occasional basis. For the Curve decentralized exchange, this native token works as a governance token which usually means that people holding this token have the authority to cast their vote in important discussions and legal matters of the platform.
It also allows them to choose the very future steps of the platform, such as what kind of services it will be offering and what kind of changes would be made within its infrastructure moving forward. The same token CRV that acts as a governance token is also used for the sake of incentivizing the liquidity providers in terms of rewards for their participation with crypto tokens that they have provided to uplift the overall essence of liquidity for a dedicated mining pool.
If you have ownership of this specific token, you have the voting power regarding various purposes and decisions that would be made for the Curve decentralized exchange protocol. The worth of your vote or how competent it is would eventually depend on the volume of native tokens for the Curve decentralized protocol that you are presently holding, the more tokens that you have, the more intensive it would become for you to cast your vote into the legal matters of the platform.
Apart from that, the holders of this governance token have another special attribute to themselves which is the fact that they can change the schedule for burning of tokens that are active presently. The significance of the native token is more relevant as a governance token rather than being a utility token because, this way, it gives the user the voting power to analyze and influence multiple functions of the platform.
The strength of the vote, however, will depend on just how many tokens you have in person and for how much time you have allocated your own crypto tokens into a dedicated mining pool which will give you an instant boost within your voting power which is why the token could be referred to as a digital asset.
Takeaway
Now that you have clearly understood what Curve DAO Token is and just how significant it is in the real world, the question begs what about the long-term potential of the project? The automated market maker technology and other features, including an engaging UI of the platform, seriously strengthen the popularity of this protocol among crypto users who want to swap their stable coins with regular crypto tokens. Who in their right mind would want to avoid having the benefit of low transaction fees and low slippage when swapping their stable coins with regular crypto coins?
It is understandable that the utility of the native token for Curve DAO decentralized finance platform has immense value as a utility token, but as a governance token, it has got more value and uses a case in the real world. There are other crucial factors that you need to take into account that act as the value drivers for this overall decentralized finance protocol, such as consecutive upgrades and updates to its infrastructure, over-the-top adoption rate as well as the growing interest of the public moving towards a swapping platform.
It provides them with the added trifecta of low slippage, low transaction fee as well as the chance to hold governance tokens for the sake of receiving voting power in that very platform, so yes, in a way, the platform is popular at the moment, and its popularity is only bound to grow in the future.