Glossary · C
Curve Finance
A decentralised exchange (DEX) optimised for trading between assets that should have similar prices — typically stablecoins (USDC, USDT, DAI) and liquid staking tokens (stETH, rETH). Curve uses a specialised bonding curve that minimises slippage for pegged assets.
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How Curve Finance works in practice
Curve specialises in swaps between assets that should trade near parity — stablecoins, or ETH against liquid staking tokens. Its curve is flatter than a constant-product AMM's near the peg, which means far less slippage for like-for-like trades and far worse behaviour if one asset actually depegs.
Worked example
Swapping 1,000,000 USDC for USDT on a deep Curve pool costs a few basis points. The same trade on a general-purpose constant-product pool of similar size would cost substantially more, because that curve is not optimised for assets meant to be equal.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
The flat curve assumes the assets stay near parity. When one breaks, the pool absorbs the bad asset almost one-for-one — liquidity providers end up holding overwhelmingly the depegged side. Concentrated efficiency and depeg exposure are the same design decision.
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Curve Finance: common questions
- What is Curve Finance?
- A decentralised exchange (DEX) optimised for trading between assets that should have similar prices — typically stablecoins (USDC, USDT, DAI) and liquid staking tokens (stETH, rETH). Curve uses a specialised bonding curve that minimises slippage for pegged assets.
- How does Curve Finance work in practice?
- Curve specialises in swaps between assets that should trade near parity — stablecoins, or ETH against liquid staking tokens. Its curve is flatter than a constant-product AMM's near the peg, which means far less slippage for like-for-like trades and far worse behaviour if one asset actually depegs.
- Can you give an example of Curve Finance?
- Swapping 1,000,000 USDC for USDT on a deep Curve pool costs a few basis points. The same trade on a general-purpose constant-product pool of similar size would cost substantially more, because that curve is not optimised for assets meant to be equal.
- What do people get wrong about Curve Finance?
- The flat curve assumes the assets stay near parity. When one breaks, the pool absorbs the bad asset almost one-for-one — liquidity providers end up holding overwhelmingly the depegged side. Concentrated efficiency and depeg exposure are the same design decision.