Benefits and Trade-offs in using Curve Basepool with Metapools
In curve stableswap an existing pool itself can be an asset of another pool. Then the pool is called a basepool and the pool who uses the basepool as asset is called a metapool. A basepool is a normal stableswap pool, over governance every pool can be turned into a basepool.
An Example:
USDC/USDT is the basepool, now we create a new metapool with USDC/USDT/crvUSD. To make it visible in the pool naming, I write this in (USDC/USDT)/crvUSD.
A video which explains this with the old interface: https://www.youtube.com/watch?v=VwJKioaAq_o
Existing basepools
3pool / 3crv DAI/USDC/USDT: https://www.curve.finance/dex/ethereum/pools/3pool/
Curve.fi Strategic USD Reserves / crv2pool : USDC/USDT https://www.curve.finance/dex/ethereum/pools/factory-stable-ng-355/
Some metapools, based on 3pool (DAI/USDC/USDT):
(DAI/USDC/USDT)/MIM https://www.curve.finance/dex/ethereum/pools/mim/deposit
In a perfectly balanced market 50% are in MIM and 16.6% each in DAI, USDC, and USDT.
(DAI/USDC/USDT)/gusd https://www.curve.finance/dex/ethereum/pools/gusd/deposit
To see all of them: https://www.curve.finance/dex/ethereum/pools?search=dai%2520usdc%2520usdt
One metapool, based on crv2pool:
MUSD/(USDC/USDT) https://www.curve.finance/dex/ethereum/pools/factory-stable-ng-518/deposit
In a perfectly balanced market 50% are in MIM and 16.6% each in DAI, USDC, and USDT.
A swap in this pool: https://etherscan.io/tx/0xb8858c1a31eca79033162c0e8830d8a5525b7e844ef628e39ba7a9401b75ab69
This is how a trade works in a metapool: USDC->MUSD
- USDC is deposited into the metapool
- The metapool deposits the USDC into the crv2pool and mints a crv2pool LP token with (USDC/USDT)
3.The crv2pool LP (USDC/USDT) token is swapped for MUSD in the metapool - The MUSD is sent to swapping address
Gas used is 317'793, native swap on USDC/USDT pool uses 205'497 GAS
Swap on USDC/USDT pool:
https://etherscan.io/tx/0x3469da6a80e944def9f2af7c777e51bbd1166805c90bdc64083164e961e3428c
This takes 50% more gas!
Benefits
- 50% of the token in the metapool is paired to 2 or more assets. Example: 1 $M TVL, so 0.5 $M in MUSD and 0.25 $M each in USDC and USDT. In two pools: 0.5 $M TVL = MUSD/USDC (0.25 $M each) and 0.5 $M TVL in MUSD/USDT (0.25 $M each). UX is better, as only one pool has to be managed, not two. On big swaps routing cost is better, as a bigger swap would go over both pools. (33% more gas with two pools)
- The basepool gets more TVL every time a metapool is created.
- The metapool earns the trading fee of the basepool, but this is not shown in the UX. (Can be fixed)
- The basepool LP token in the metapool always has the true market price, the same ratio of coins are the ones from the current price, even if not traded in the metapool itself
Neutral
- On a depeg of the base pool asset or metapool the risk for liquidty provider stays the same
USDM/(DAI/USDC/USDT) with depeg: https://www.curve.finance/dex/ethereum/pools/factory-v2-23/deposit
USDM is not related to MUSD, these are different stablecoins.
Trade-Offs
- To seed the pool, you need either the basepool LP token (Bad UX) or have all assets of the LP token.
- The basepool LP token cannot be staked in the gauge, and is not getting rewards. basepool LP tokens are added to the metapool and then only the metapool LP token can be staked and earn rewards. If the basepool is rewarded, this makes it economically discouraged to use it in the metapool.
- Confusing for asset issuers as they have more options to choose from.
- If a metapool exist, but the dominant route is always USDC<->MUSD, then USDT is iddle and takes the place at the cost of the USDC
- A swap over a metapool costs ~50% more in gas
Conclusions
Make basepool LP stakable to earn rewards from gauge in a metapool looks not feasible
It can't be fixed with current reward system. (stake in gauge). We would need to change how basepool works, basically autostake. But even then, as the metapool owns the basepool LP token, the reward is owned by the metapool. We hit the limits of staking.
For new chains with strong stablecoin preferences this could be a good solution
1) If they have a strong two USD stablecoins then it would make sense, as the base pool profits.
2) For the L2 who have their own stables and strong preference for USDT or USDC.
Example, garden chain has strong preference for USDC, so they make
gardenUSD/USDC as basepool, and encourage the the other stablecoins to pair as metapool. The basepool profits from this in growing TVL and so does the chain.
Link to docs around basepool and metapool:
https://docs.curve.finance/stableswap-exchange/stableswap-ng/pools/metapool/
https://docs.curve.finance/stableswap-exchange/stableswap/deposit_contracts/metapool_deposits/
The Ideal DeFi Lending Market
Has following properties:
User centric design
Borrowers should not need to interact directly with markets
Users don't care what market they use. They have one single goal: Bringing a collateral and borrow another asset for the lowest possible rate. They don't care on what underlying market they are using as long as the risk in them is comparable.
Lenders should not need to interact directly with markets
Pure lenders are optimizing for the highest returns, it's not their task to move assets from market to market to get that.
Can help migrate users position to new markets
Existing positions should be migrated to new markets, collateral and borrowed asset should be changed anytime with the lowest amount of transactions possible and without the need to pay back and recreate them.
Risk Management
Risk is to isolate
While cross lending protocols have no isolated risk, I assume that this design is hindering overall growth. The bar of entry for new assets is high. Economically this makes sense, as a few assets have the far biggest share in the market, but in a world where on-chain lending markets are the norm, this model does not scale. I don't have numbers, but I suspect cross lending is not used that often either. And in a system where shifting position is easy the same kind of market could be achieved with isolated risk.
Has an insurance fund
Over-optimizing parameters for outliers who do happen only once a year at cost of capital efficiency and reputation risk is reducing the potential of lending markets. As nobody can see the future better to have optimistic parameters and use an insurance fund.
Gives you time to react
On deteriorating health of position the market gives the user time to react by either having reaction time and partial liquidation. Many users have the funds to back up their positions, but these funds should be automatically allocated if such a system exists.
Market Operations
Markets need to be curated
As no single entity is able to monitor risk and have the expertise in all assets. This is why we need market experts who have a deep understanding of the assets they curate. Curated markets also help to attract users as the curators are incentivized to attract new users.
Curators need skin in the game
If curators have no skin in the game, they will optimize for revenue and not for safety. In a risk embracing market no skin in the game is very dangerous.
Technical Parameters
LTV is adjusted to the volatility of the asset
Many lending markets set max Loan to Value value at the time of creation. Desired is a high, but still safe LTV, because the higher the LTV is the less capital is needed for the same size of borrowing. But markets change and volatility too. LTV should be lowered if volatility is growing.
IRM model should be adjustable
Interest Rate Model (IRM) should be simple, yet adjustable. Quality of assets changes over time and markets too. As liquidity is sticky adjust the IRM helps to react to changing market conditions over time.
Parameters should be adjusted to position size
Different assets have different target groups and distribution. The supply buffer in the IRM should be adjusted to that position size.
User Interface & Information
Inform users
Users should be informed by push communication on changing conditions on markets they use or positions with deteriorating health. To expect users to monitor their positions actively is not enough.
Inform users on asset risk
Asset risk and compounding asset risk should be shown in a clear metric which is easy to understand. These metrics need to be updated on changing market conditions and users informed
Historical positions
Users need to be able to see historical positions, their yield earned and paid interest. After liquidation events they should be able to see why they happened and how much they lost.
What you see is what you get
APY should be shown to the fact and APY calculation needs to be public, so anyone can recalculate them. Historical APY on assets should be shown to give the users a feeling what they can expect. Absolute yield earned and paid interest rate and a calculated average APY should be visible for every position.
A metric to calculate Price for Liquidity for stablecoin pools, based on aave base rate
Things to take into account:
- Bridging time to a deep liquid market (mostly this is ethreum mainnet)
- Current overall liquidity on the chain
- Base rate on aave (ethreum mainnet), average between USDC and USDT
- Risk premium of the DeFi Project holding the liquidty
- Speed of the chain (Block-Time)
- Reputation of the chain
- Can the farmed token be sold on-chain?
- Whats it the max size to move APR down 10% (say from 15% to 13.5%), this size is 10% of the TVL!
Real life numbers (2025-04-01)
USDC/USDC pool on Taiko currently pays 14%, while base rate on AAVE today is 3.27 % (USDT) and 2.85 % (USDC) average is 3.06%.
Multiplier: 14 % / 3.06 % = 4.57!
- Risk premium for bridge and bridge speed is above normal. (bridge back is 4h)
- Current overall liquidity on the chain is small/mid size
- Risk premium for curve, close to 0
- Taiko has a block time of 0.5-2 min (slow)
- chain is exotic
- reputation is good
- Can the farmed token be sold on-chain? Not good, liquidity of $TAIKO on chain is low.
- Max size to bring down TVL 10% 119K!
Liquidity in DEX on Sonic
From Coingeckoterminal
Volume to Liquidity Ratio by Pool
| Pool | Assets | Volume | Liquidity | Volume/Liquidity Ratio |
|---|---|---|---|---|
| USDC.e/wS | Bridged USDC (Sonic Labs) | $6.21M | $207.61K | 29.9119 |
| scUSD/wS | Sonic USD | $1.74M | $101.46K | 17.1496 |
| USDC.e/wS | Bridged USDC (Sonic Labs) | $15.94M | $1.12M | 14.2321 |
| SHADOW/wS | Shadow | $1.80M | $144.14K | 12.4879 |
| EGGS/wS | Eggs | $1.84M | $427.75K | 4.3016 |
| USDC.e/wS | Bridged USDC (Sonic Labs) | $22.99M | $6.89M | 3.3367 |
| USDC.e/WETH | Bridged USDC (Sonic Labs) | $2.87M | $891.16K | 3.2205 |
| stS/wS | Beets Staked Sonic | $6.23M | $2.18M | 2.8578 |
| USDC.e/wS | Bridged USDC (Sonic Labs) | $7.96M | $2.91M | 2.7354 |
| USDC.e/WETH | Bridged USDC (Sonic Labs) | $3.07M | $1.23M | 2.4959 |
| USDC.e/stS | Bridged USDC (Sonic Labs) | $1.65M | $747.50K | 2.2074 |
| stS/wS | Beets Staked Sonic | $9.90M | $5.73M | 1.7277 |
| WETH/wS | Wrapped Ether on Sonic | $5.01M | $3.62M | 1.3840 |
| x33/SHADOW | Shadow Liquid Staking Token | $1.70M | $1.36M | 1.2500 |
| USDC.e/bpt-isb / scUSD | Bridged USDC (Sonic Labs) | $2.66M | $2.28M | 1.1667 |
| USDC.e/scUSD | Bridged USDC (Sonic Labs) | $1.77M | $6.07M | 0.2916 |
Liquidity in DEX on optimism
On Curve
Volume to TVL Ratio by Pool
| Pool | Assets | Volume | TVL | Volume/TVL Ratio |
|---|---|---|---|---|
| HAI/sUSD | HAI sUSD | $30,141 | $11,291 | 2.669471 |
| 3pool | DAI USDC USDT | $830,367 | $414,479 | 2.003399 |
| HAI/LUSD | HAI LUSD | $13,744 | $16,637 | 0.826110 |
| TriCRV-OPTIMISM | crvUSD OP CRV | $162,617 | $387,041 | 0.420154 |
| crvUSD/USDC | crvUSD USDC | $122,153 | $347,233 | 0.351790 |
| FRAX/MONEY Curve | FRAX MONEY | $16,965 | $60,339 | 0.281161 |
| crvUSD/USDT | crvUSD USDT | $123,633 | $445,098 | 0.277766 |
| USDT/MONEY Curve (1) | USDT MONEY | $12,149 | $52,664 | 0.230689 |
| USDT/MONEY Curve (2) | USDT MONEY | $12,149 | $52,664 | 0.230689 |
| USDC/MONEY Curve | USDC MONEY | $8,990 | $44,523 | 0.201918 |
| Tricrypto-crvUSD | crvUSD WBTC WETH | $5,966 | $49,496 | 0.120535 |
| crvUSD/MONEY Curve | crvUSD MONEY | $37,770 | $389,517 | 0.096966 |
| crvUSD/USDC.e | crvUSD USDC.e | $22,942 | $262,833 | 0.087287 |
| sUSD Synthetix | sUSD DAI USDC USDT | $32,056 | $377,939 | 0.084818 |
| USDC/USDM | USDC USDM | $180,007 | $2.20M | 0.081821 |
| crvUSD/sUSD | crvUSD sUSD | $1,157 | $14,994 | 0.077164 |
| sETH/ETH | ETH sETH | $2,889 | $39,151 | 0.073791 |
| sBTC/wbtc | sBTC WBTC | $5,096 | $237,448 | 0.021462 |
| wsteth | ETH wstETH | $1,181 | $140,931 | 0.008380 |
| MIM | MIM DAI USDC USDT | $152 | $254,009 | 0.000598 |
| 2BTC | tBTC WBTC | $958 | $12.00M | 0.000080 |
Filterd after pools containing these assets
Volume to TVL Ratio by Pool (Filtered by ETH/WBTC/USDC/USDT/wstETH/OP)
| Pool | Assets | Volume | TVL | Volume/TVL Ratio |
|---|---|---|---|---|
| 3pool | DAI USDC USDT | $830,367 | $414,479 | 2.003399 |
| TriCRV-OPTIMISM | crvUSD OP CRV | $162,617 | $387,041 | 0.420154 |
| crvUSD/USDC | crvUSD USDC | $122,153 | $347,233 | 0.351790 |
| crvUSD/USDT | crvUSD USDT | $123,633 | $445,098 | 0.277766 |
| USDT/MONEY Curve (1) | USDT MONEY | $12,149 | $52,664 | 0.230689 |
| USDT/MONEY Curve (2) | USDT MONEY | $12,149 | $52,664 | 0.230689 |
| USDC/MONEY Curve | USDC MONEY | $8,990 | $44,523 | 0.201918 |
| Tricrypto-crvUSD | crvUSD WBTC WETH | $5,966 | $49,496 | 0.120535 |
| sUSD Synthetix | sUSD DAI USDC USDT | $32,056 | $377,939 | 0.084818 |
| USDC/USDM | USDC USDM | $180,007 | $2.20M | 0.081821 |
| sETH/ETH | ETH sETH | $2,889 | $39,151 | 0.073791 |
| sBTC/wbtc | sBTC WBTC | $5,096 | $237,448 | 0.021462 |
| wsteth | ETH wstETH | $1,181 | $140,931 | 0.008380 |
| MIM | MIM DAI USDC USDT | $152 | $254,009 | 0.000598 |
| 2BTC | tBTC WBTC | $958 | $12.00M | 0.000080 |
On Uniswap:
Most traded assets are:
ETH/WBTC/USDC/USDT/wstETH/OP
Stablecoin Trinity Unlocked – Curve Finance as example
The Stablecoin Trinity: A New Framework for Stable Asset Success
Introduction to Frameworks
The stablecoin space has long been analyzed through the Stablecoin Trilemma framework, which examines their fundamental challenges.
In this text, I propose a new framework—the Stablecoin Trinity —to understand what makes successful stablecoins thrive. This Trinity encompasses three essential monetary functions of stablecoins: means of speculation, medium of exchange, and store of value. The fourth function—medium of account—comes naturally to vanilla stablecoins as they mirror existing fiat currencies. The Trinity framework focuses instead on the positive monetary properties that make stablecoins successful in the long term.
DeFi Innovation and the Trinity
DeFi's innovation lies in how CDP (Collateralized Debt Position) stablecoins can craft unique economic models to achieve this Trinity, while fully fiat-backed stablecoins cannot serve as means of speculation themselves. Curve Finance's crvUSD exemplifies this through having crvUSD as means of speculation and medium of exchange and savings crvUSD (scrvUSD) as store of value.
The Three Pillars of crvUSD
Means of Speculation
Users can mint crvUSD against collateral to leverage crypto assets up to 9x. Curve Finance's soft liquidation mechanism generates premium fees from this speculation, earning higher interest rate than other stablecoins. This speculative aspect is crucial for generating the excess fees to reward savings crvUSD holders. Unlike fully-backed fiat stablecoins, CDP stablecoins like crvUSD can integrate speculation directly into their economic model, creating value for all participants. While most early-stage CDP stablecoins function as a means of speculation by rewarding holders with project tokens that are sold on the market and farmed extensively, Curve Finance stands apart. Its unique position comes from generating native cashflow through minting fees, rather than relying on subsidies from the CRV token.
Medium of Exchange
crvUSD serves as a reliable medium of exchange across numerous Curve pools, facilitating efficient trading and liquidity provision. Its stability and deep liquidity make it an effective trading pair for various crypto assets, enabling smooth market operations within the DeFi ecosystem. The reliable peg maintenance, combined with widespread integration across DeFi protocols, establishes crvUSD as a trusted medium of exchange.
Store of Value
Through the savings crvUSD (scrvUSD) mechanism, conservative holders can earn yields generated from the system's speculative activities. These yields, derived from minting fees, transform crvUSD holdings into a productive store of value, rewarding long-term holders while maintaining stability. This creates a unique proposition where the most risk-averse users benefit from the system's speculative activities without directly participating in them.
The Virtuous Cycle
This virtuous cycle completes the Trinity: speculation generates fees, fees reward conservative holders through scrvUSD, and the base token maintains its role in exchange. Without crvUSD's speculative properties, this system would be less efficient, as there would be no excess fees to sustain scrvUSD holders. The Trinity framework demonstrates how these three monetary functions can reinforce each other, creating a sustainable economic model for stablecoins in DeFi.
Aave/Morpho: A clash of different worldviews. Both design have their pros and cons.
Aave as an entity manages all the risk and also covers any loss. Aave needs deep expertise on all coins and the dynamic of their corresponding markets. You trust the brand, Aave, and they did a very good job of shielding users from risk.
Does it scale?
It has limits, as many different assets, crypto native and non crypto native ones come into existence. It's a jungle, and how should one entity have deep expertise about all assets?
Aave chose their risk parameters always on the safe side, and if they don't have the expertise, they don't list assets. Having risk parameters on the safe side also lowers the capital efficiency.
Morpho has dedicated, independent risk managers, which manage metamorpho vault and and create or attached markets to it, if it fits their risk profile. Risk managers can be specialized in markets and if you know markets well, you can choose more risky parameters for your markets, which makes it more capital efficient.
The pure Morpho way, would be that they only manage the protocol, maybe with a costume white label front end, where the risk managers use the infrastructure, but any hiccups do not affect the Morpho brand.
Now Morphos brand suffers from spill over of quality issues from one of the risk managers.
Does it scale?
It may scale better than Aave, but has reputation risk for Morpho, even if they are not risk manager. And: In an easy markets, users may flock to the risk manager who takes more risk, the same risk manager who are whipped out if the markets are in turmoil.
What out of questions: Aave and Morpho are both highly professional teams, Aave is battle tested over more than one cycle, while Morpho and risk managers on Morpho are still in the learning phase.
Curve has a lending market too, but Curve has always chosen the path to try to solve issues with technical solutions.
The benefit of soft-liquidation for users allows us to set conservative LTV values, because we don't compete to be the most capital efficient markets, but compensate users with the benefits of soft-liquidation which helps save their position in rough markets.
As tweet:
https://twitter.com/martinkrung/status/1783092537353248972
The forever cyclic nature of crypto
A nice version of this with some memes:
https://twitter.com/martinkrung/status/1746284429750730799
Or just as a wall of text:
The base of crypto is tokenization of for profit projects, in fact very early stage ventures, some are only ideas put on a sheet called whitepaper.
In a normal economy this kind of ventures never have tradable shares in the public. Most don't have investors at the stage, and if, only fools, friends and family.
In addition most tokens of these ventures don't have a use-case in that project, the token is only a virtual share of that project, in a sense like a NFT collection.
BUT: As the tokens have no fundamentals, no tokenomics and no use-case they are a perfect place for everyone's projections of how successful that venture will be.
Tokens are the perfect vehicle for speculation, where the mere narrative of a possible success is enough for others to buy and invest.
If the cycle is started, every player in this market: founders, teams, investors and early token buyers fuel the hype by telling the outsiders how their venture is changing the world and how big the potential will be.
Normies have close to zero chance to value this venture rationaly, they invest left and right, attracted by the gains early token buyers have made and brag around.
We all know how crazy these bull markets are, it's a form of collective euphoria and my bet will be for this cycle that the craze will be the same or maybe even bigger than all we have seen until now.
My personal top: if I start believing that this time everything will be different and numbers will never go down again, at that time I feel an urge to call all my friends and tell them they should invest and everyone will be a millionaire with me. This is the time myself and maybe you should sell everything, but it's so damn hard to do.
Then the wave breaks, first the multi-cyclers start to sell, the latecomers still filled with greed and hope for the next 10x.
BAM: suddenly it's 4 o'clock in the morning, the music stops and somebody turns on the light. At this point, even the most stupid participants in that cycle understands that the whitepepper he did read from that copy cat of a copy cat is worthless bullshit and the next bera with bloody infights and people losing the last shirt and more, has started. As the pile of bullshit is so big, it takes a long time to get rid of it.
To end the forever cycle tokenization of early stage projects would have to be banned, which will never happen and is impossible.
May be the zupercycle with you!
Introducing ‘Means of Speculation’ as a Core Characteristic of Early Stage Stablecoins
Tweet here, to comment: https://x.com/martinkrung/status/1706655567589101926?s=20
The Unique Characteristic of Stablecoins
Stablecoins possess a property that traditional cash doesn’t: they can serve as a means of speculation.
Traditional Cash and Commodities
Traditional cash acts as both a medium of exchange and a store of value. While gold primarily serves as a store of value, cash performs a dual role. Although various commodities such as food, oil, or art can also serve as both a medium of exchange and a store of value, cash is superior due to its relatively stable value, which erodes gradually, depending on the inflationary environment.
Stablecoins as Means of Speculation
In crypto, cash isn’t limited to being a store of value or a medium of exchange; it can also be used as a means of speculation, a characteristic not typically associated with traditional cash.
In the crypto world, equivalents to cash are represented as stablecoins, typically pegged in various ways to the USD. These stablecoins are in competition with each other for market dominance.
Speculative Asset and User Behavior
When viewed as a speculative asset, on-chain cash is neither a store of value nor a medium of exchange but rather serves as a means of speculation. Users often hold stablecoins primarily for the rewards they offer; once these rewards diminish or cease, users typically opt for a different stablecoin.
Adoption Trajectory and Ultimate Goal of Stablecoins
The adoption trajectory for on-chain stablecoins typically progresses from a means of speculation to a medium of exchange, and finally, to a store of value. The ultimate goal for any stablecoin is to achieve recognition as the preeminent store of value, as this represents the ultimate demand sink. While acting as a medium of exchange does create a demand sink, it is inherently more volatile. Stablecoins used primarily as a means of speculation risk becoming obsolete as soon as the rewards cease.
Current Stablecoin Market
Currently, in the crypto space, many stablecoins are primarily used for speculation, albeit exhibiting some characteristics of a medium of exchange. Progressing from these initial stages to attain recognition as a reliable store of value represents the top for most, if not all stablecoins.
What do you think about this view? Which stablecoin in the market has which state and which one have a chance to be store of value?