CrvUSD Two-Year Evolution: From Over-Collateralized Stablecoin to DeFi Interest Rate Setter

Original Title: crvUSD: 2 Years On

Original author: Curve News

Source:

Compiled by: Daisy, Mars Finance

crvUSD celebrates its second anniversary, with circulation reaching an all-time high.

On May 14, 2025, crvUSD will celebrate its second anniversary, and scrvUSD will also complete six months since its launch. During this period, the two systems have undergone several subtle optimizations, continuously validating their robustness under different market conditions. Just this week, the circulation of crvUSD has surpassed $181 million, setting a new historical high and demonstrating the growing recognition of the market for its protocol design and practicality.

Starting Point: The Birth of crvUSD and LLAMMA

On May 14, 2023, crvUSD made its debut in the market as a truly decentralized and over-collateralized stablecoin. Its innovation lies in the unique liquidation mechanism LLAMMA, which provides a new alternative to traditional systems. Even now, crvUSD remains one of the most capital-efficient stablecoins.

Unlike the sudden liquidations on other platforms, crvUSD offers borrowers greater flexibility and stability. With a loan-to-value ratio (LTV) of up to 91%, users can pledge fewer assets to borrow more funds, while enduring less impact during market fluctuations. This makes crvUSD particularly suitable for advanced trading strategies or long-term holdings.

The three pillars of crvUSD stability

The design essence of crvUSD is completely decentralized - it does not rely on centralized oracles and has no human intervention. Every aspect of the system operates autonomously based on transparent, permissionless logic through smart contracts. This ensures that crvUSD always maintains anti-fragility, censorship resistance, and credible neutrality - a stablecoin fully governed by code and DAO.

Dynamic Interest Rate Adjustment

When the price of crvUSD is higher than the pegged exchange rate, the borrowing rate automatically decreases; when it is lower than the pegged exchange rate, it automatically increases. This self-correcting mechanism achieves stability through supply and demand balance—completely without external intervention.

Stable Reserve (formerly PegKeepers)

By adjusting the supply in the Curve liquidity pool, the stable reserve mechanism keeps the crvUSD price around 1 USD. When the price is above 1 USD, the system injects crvUSD into the pool; when the price is below 1 USD, it recovers crvUSD. These operations can be triggered by anyone through a smart contract to balance the market price.

Savings-type crvUSD (scrvUSD)

scrvUSD is the interest-bearing version of crvUSD. Users can deposit crvUSD into the savings vault to share in the interest paid by borrowers. When the price of crvUSD is below the pegged exchange rate, the yield on scrvUSD becomes more attractive—because the rise in borrowing rates will simultaneously increase the returns for holders. This increase in yield will stimulate market demand for scrvUSD, theoretically encouraging users to purchase crvUSD for deposits, ultimately helping to restore the price peg.

crvUSD supply increase

Even in the harsh environment of the DeFi market, two major catalysts have still driven the growth of crvUSD supply:

the launch of scrvUSD

The Resupply protocol of Convex and Yearn is online.

These mechanisms jointly drive crvUSD to break through the historical supply peak and continue to expand.

crvUSD 1 year supply changes

Stability of borrowing interest rates and anchoring strength

Before the launch of scrvUSD, the borrowing interest rates fluctuated wildly, akin to a roller coaster with dramatic ups and downs. A single large borrower could trigger a sharp spike in rates by selling off the borrowed crvUSD. The original intention behind the design of scrvUSD is to stabilize rates by increasing the organic demand for crvUSD.

As shown in the figure below, the borrowing interest rate peaked shortly after the launch of scrvUSD and has since remained stable at a level lower than competitors like Aave's USDT and USDC.

Similarly, scrvUSD has significantly enhanced the price peg of crvUSD. Since the launch of scrvUSD, price fluctuations have continued to narrow, demonstrating strong resilience in maintaining the peg to 1 USD. crvUSD once became a premium lending product due to its "soft liquidation" protection mechanism, and now it has become a market leader in terms of lending rate competitiveness and peg stability.

14 day moving average interest rate comparison of Aave's USDT and USDC borrow markets and crvUSD average borrow rates

At the same time, the total liquidity of crvUSD in the stable reserve (marked as "pegkeeper liquidity" in the chart) continues to grow, enabling the system to meet larger borrowing demands while maintaining a stable peg.

crvUSD 1 year peg chart, showing the strength after the introduction of scrvUSD

Usage and Yield Performance of scrvUSD

Currently, the holding of scrvUSD accounts for 20%-30% of the total circulation of crvUSD, and this ratio will fluctuate with the annual percentage yield (APR) of the staking.

Amount of crvUSD which is staked in the savings-crvUSD vault.

Since its launch, scrvUSD has provided depositors with an approximate total return of 3.8% within six months.

Total yield earned by scrvUSD vault depositors

The Resupply protocol serves as a "reservoir" for crvUSD.

The Resupply agreement provides additional liquidity outlets for crvUSD, significantly increasing the total amount of crvUSD injected into Llamalend through its unique supply mechanism.

crvUSD supplied to Llamalend directly vs. supplied through Resupply

Future Outlook

Although crvUSD has been online for two years, its adoption rate, scale expansion, and development process are far from complete. The technical infrastructure and user interface are continuously evolving, aimed at providing users with the most seamless and intuitive lending experience possible.

The following are the upcoming development plans and expected directions:

More lending markets

The lending market on LlamaLend is created with no permission required—anyone can deploy a new market to borrow (note: it is borrowing, not minting) crvUSD.

LP tokens as collateral

The new market will soon support the use of liquidity provider (LP) tokens as collateral to borrow crvUSD (not minted!). For example, users will be able to use Tricrypto LP tokens (which include a pool of BTC, ETH, and USD) for lending. This mechanism will be adopted by the YieldBasis protocol, which plans to maintain leveraged positions by borrowing crvUSD against LP token collateral.

Note: This refers to borrowing crvUSD from the lending market, not minting new coins. However, an increase in borrowing demand will indirectly drive the minting of more crvUSD.

Expansion of Resupply Mechanism

The Resupply mechanism continues to develop and grow, which helps efficiently manage the circulation distribution of crvUSD in various lending markets.