Curve and YieldBasis: A Pioneering Partnership Shaping the Future of DeFi Amid Market Volatility

Curve and YieldBasis have established a groundbreaking partnership, demonstrating resilience and growth during a period of heightened market volatility in decentralized finance (DeFi). YieldBasis leverages Curve's robust liquidity infrastructure to tackle impermanent loss (IL), one of the most persistent challenges faced by automated market makers (AMMs). Through this collaboration, users can provide liquidity using wrapped Bitcoin assets such as cbBTC, tBTC, and WBTC without experiencing impermanent loss, earning transaction fees and bolstering the ecosystem.

YieldBasis' Innovative Approach: Double Compounding Leverage with crvUSD

YieldBasis employs a unique mechanism that pairs deposited BTC with an equivalent amount of crvUSD to maintain double compounding leverage. This model hinges on Curve's advanced AMM framework, particularly the FXSwap functionality, combined with a crvUSD credit line authorized by Curve's decentralized autonomous organization (DAO). Together, these components ensure seamless scalability and enhanced liquidity.

Curve DAO Gains New Revenue and Incentives

Curve DAO stands to benefit significantly through this initiative, with 75 million $YB tokens allocated over a multi-year vesting period. These tokens will be used to incentivize crvUSD pools, driving increased liquidity and generating substantial revenue for the DAO. Governance votes determine how these funds are utilized, allowing the DAO to adapt and optimize strategies as market conditions evolve.

Governance Milestones That Shaped the Partnership

Several pivotal governance votes have accelerated the integration of YieldBasis into Curve’s ecosystem:

• September 24, 2025: The DAO approved up to 60 million crvUSD credit for YieldBasis, enabling the launch of BTC-backed pools like cbBTC, WBTC, and tBTC with individual caps at $1 million. Demand surged, and pools filled within minutes.
• October 2, 2025: A subsequent vote raised pool caps to $10 million per market, again reaching capacity almost instantly.
• October 7–14, 2025: The DAO expanded the crvUSD credit line to 300 million, increasing pool caps to $100 million per pool. All pools were quickly filled, showcasing robust demand.
• October 15, 2025: YB token emissions commenced, coupled with inflationary vesting for the DAO. A YB/crvUSD pool was created, and veCRV holders instrumental in governance votes (#1206, #1213, #1222) were rewarded via token airdrops.

Measurable Success: The Quantitative Impact of YieldBasis

The integration of YieldBasis into Curve's ecosystem has delivered significant quantitative benefits, driving growth across multiple metrics:

1. Surging Total Value Locked (TVL): YieldBasis’ use of crvUSD double leverage has dramatically amplified Curve’s TVL. Each BTC deposit effectively doubles TVL, elevating it from $6 million to $60 million, and subsequently to $300 million after pool cap expansions.
2. Increased Trading Volume: YieldBasis pools have driven high trading activity, generating $1.32 in adjacent trading volume for every $1 transacted. BTC trades via pathways like “USDC → crvUSD → BTC” have contributed $33,600 in fees, shared among liquidity providers and the DAO.
3. Higher PegKeeper Revenues: The PegKeeper mechanism, designed to stabilize crvUSD’s value, accrued $35,000 in fees due to intensified arbitrage activity during volatile periods at the $300 million pool cap. YieldBasis provided incentives totaling 200,000 YB tokens (valued at $90,000) for the pyUSD/crvUSD pool to offset short-term volatility.
4. Performance of YB Pools: The main trading pool for YB tokens boasts a $1.4 million TVL and has generated over $30,000 in revenue since its inception.

Altogether, YieldBasis activities have yielded an estimated $188,000 in revenues for liquidity providers and the DAO, highlighting its transformative impact. Secondary effects, such as crvUSD issuance growth, further reinforce this upward trajectory.

Future Initiatives: Scaling crvUSD Liquidity for Sustainable Expansion

Scaling crvUSD liquidity is critical for further growth in YieldBasis and Curve’s collaboration. Current liquidity levels support a $300 million pool, but deeper liquidity is needed to ensure stability as credit lines expand.

The next step involves Proposal #1238, which outlines the transfer of vested YB tokens to the "DepositPlatformDivider" smart contract. These tokens will serve as "gauge vote incentives" distributed via platforms like Votium and VoteMarket to attract higher CRV emissions to crvUSD pools, enhancing their competitiveness and liquidity appeal.

Additionally, Michael Egorov, founder of Curve and YieldBasis, has presented a strategic package to responsibly manage scaling efforts:

1. Utilization of DAO-held YB tokens for bribing crvUSD stablecoin pools such as crvUSD/USDC and crvUSD/USDT, capped at 360,000 YB weekly emissions.
2. Expansion of the PegKeeper mechanism’s capacity, raising the limit from $180 million to $300 million.
3. Allocating up to $1 billion in crvUSD liquidity to YieldBasis pools, with $500 million reserved for future capacity demands.

Key governance proposals (#1238 and #1241) are under active discussion, with decisions expected to shape Curve’s liquidity infrastructure for sustained growth.

Conclusion: Forging a Resilient and Scalable Liquidity Ecosystem

Through its strategic partnership with YieldBasis, Curve is charting a path toward sustainable growth and innovation in the DeFi landscape. By addressing impermanent loss, utilizing advanced liquidity models, and driving crvUSD expansion, both protocols are laying the foundation for robust scalability and stability. Upcoming governance votes and liquidity initiatives signal an exciting future, solidifying Curve's position as a leader in decentralized finance.