The Curve DAO Approves $60 Million Credit Line for Yield Basis
The Curve decentralized autonomous organization (DAO) has taken a significant step by approving a $60 million credit line in crvUSD stablecoin for Yield Basis, a new protocol founded by Michael Egorov. This funding will support the upcoming mainnet launch of Yield Basis, which aims to deploy liquidity pools centered on Bitcoin, designed to mitigate the issue of impermanent loss that often impacts liquidity providers.
Impermanent loss refers to the potential decline in asset value when compared to simply holding those assets. By introducing these pools, Yield Basis seeks to create additional yield-generating opportunities within the Bitcoin landscape and broaden its footprint in decentralized finance (DeFi).
Liquidity Pools and Strategic Goals
Under the initiative, three distinct pools—consisting of Wrapped Bitcoin (WBTC), cbBTC, and tBTC—will be established on the Ethereum blockchain utilizing the automated market maker (AMM) framework of Yield Basis. Initially, each of these liquidity pools will have a cap set at $10 million.
This move is strategically aimed at strengthening the Curve ecosystem by integrating its native stablecoin more deeply into the DeFi landscape, while also potentially increasing fee revenues for holders of veCRV tokens, which are the vote-escrowed variant of Curve’s governance token, CRV.
Community Concerns and Responses
Despite the enthusiastic backing from some members, the proposal faced pushback from parts of the Curve community. On September 18, a prominent anonymous figure known as Small Cap Scientist voiced concerns about the inherent risks associated with this financial maneuver. In a post on social media platform X, the individual described the proposal as
“extremely extractive”
and highlighted that there had been no third-party assessment of the economic risks tied to Yield Basis.
Furthermore, he noted that the $60 million credit lacked limits related to the total value locked (TVL) of crvUSD, which raised alarms about the potential liability Curve could face should a hack occur in the new protocol.
In response to these criticisms, Michael Egorov defended the proposal, asserting that Yield Basis had undergone six security audits, with an additional audit currently in progress. He emphasized the existence of an emergency stop mechanism managed by Curve’s Emergency DAO multisig as a precautionary measure against unforeseen circumstances.
Egorov reassured stakeholders that Yield Basis would bear the brunt of any liabilities arising from exploits. He also mentioned that details about the breakdown of investor allocations had been included in the governance proposal.
“It’s standard for us to bring in recognized figures from the ecosystem as investors,”
he stated, reinforcing that collaborations with partner projects represent a key strength for Curve.
