Editor's note: This article and its headline were updated after publication to provide additional details regarding the early launch of CRV and its distribution.
The next big thing in DeFi governance is out in the wild—a little sooner and in a lot more dramatic fashion than the team at Curve Finance initially planned.
Someone deployed $CRV based on smart contracts we had published on github, front-running our efforts.
While we initially were skeptical, it appeared to be an acceptable deployment with correct code, data and admin keys.
Due to the token/DAO getting traction, we had to adopt it.
— Curve (@CurveFinance) August 14, 2020
The CRV token officially, yet unexpectedly, launched at 6:25 PM EST today after an anonymous user, apparently unilaterally, deployed the open-source CRV token and CurveDAO contracts on the Ethereum mainnet earlier in the day. After a couple of hours reviewing the code to check for changes or inserted exploits, the CRV team confirmed the contracts as authentic.
Though the contract had been deployed, users subsequently discovered that wallets had been staking Curve assets and earning CRV tokens ahead of the official launch announcement. Which was not a good look, and to led to allegations of an unfair "pre-mine" among Curve users.
A set number of CRV tokens get awarded in each block; if you're the only person competing, you get all the tokens for the block. That resulted in roughly 20,000 CRV tokens being awarded to early stakers before Curve's official announcement. Presumably, one of those wallets or more belonged to the dev who prematurely launched the token, whom the community has dubbed "Chad."
It was a rocky launch to a highly anticipated release from Curve Finance, one of the most respected projects in DeFi.
The craziness kicked off earlier in the afternoon when the anonymous "Chad" let the world know that the CRV token would soon be launched. It took 19.9 ETH (around $8,000) for the unknown dev to deploy the contract.
Yo, @CurveFinance ! Saw your DAO is ready to rock and I gots to MAXIMIZE MY ALPHA ! So I went ahead and deployed it for you. Get at me in DM to verify and lets get this party started!! pic.twitter.com/D0KqEg4Ldr
— 0xc4ad (@0xc4ad) August 13, 2020
Doesn’t get much more “decentralized” than that.
“I think it’s kinda cool personally,” Curve’s project lead Charlie said of the dev's handy work on the team’s Discord channel. That was, however, hours before tempers flared and the "pre-mining" accusations got thrown around. "People can't do maths so they think 20k CRV mined out of 2billion to be distributed to [a liquidity provider] is a 'premine,'" he wrote in response in the Discord chat.
Earlier in the day, Curve’s project lead implored Curve users not to begin depositing funds into the unconfirmed token address until the team did its due diligence. “Please wait until due diligence is complete, nothing is confirmed. Do not post contract addresses until everything has been looked into,” he wrote.
How Curve's CRV will be distributed
But now that the hotly anticipated CRV token has been officially released, any users that have provided liquidity to the protocol are entitled to CRV distributions retroactively calculated since the launch of the platform.
The release of the new governance token for the stablecoin swap Curve Finance DeFi platform signals another step in the propagation of distributed governance schemes throughout the DeFi ecosystem, and reveals growing expectations that such events also bring huge returns for liquidity providers.
The CRV token release will begin the transition to distributed governance administered via the CurveDAO, also launching today. Both the CRV reward mechanism and CurveDAO were previously audited by blockchain security firm Quantstamp.
“This is likely to be a landmark event for DeFi. It will have a ripple effect on YFI, 1inch, and other projects integrating into Curve,” Quantstamp CEO Richard Ma told Decrypt.
“I think the way Curve handled the contributions of previous Liquidity Providers is also informed by the experience of [Compound’s] COMP, which came before them,” said Ma. “This way, the [liquidity providers] who bootstrapped Curve in the early days are also rewarded retroactively.”
Curve Finance was launched in January 2020 by NuCypher CTO Michael Egorov, author of the protocol’s whitepaper released November 2019. In their examination of Curve, The Defiant also spoke with early investor Julien Bonteloup, who indicated the platform had raised a private seed round among industry insiders sometime after launch. These early shareholders will receive 30% of CRV distributions, but their exact identities are not publicly known.
Curve has become one of the most popular decentralized exchange protocols in recent months, capturing more than 20% of all DEX volume in June and July according to data gathered via Dune Analytics. Curve is also intertwined with yEarn.finance, Andre Conje’s DeFi brainchild whose YFI governance token has grown wildly in value following its release. yEarn.finance liquidity pools leverage Curve smart contracts to deliver high annual returns.
The breakdown for the token distribution goes as follows: Users who have provided liquidity to the CRV platform at any point since launch will receive a proportional share of 5% of the initial distribution of 1.3 billion CRV tokens with a one year vesting period.
An additional 57% of all CRV tokens will be distributed to liquidity providers from the 3.03 billion total supply, while shareholders (whoever they are) and employees will receive 30% and 3%, respectively, with vesting periods between two and four years. The remaining 5% of CRV tokens will be added to a community reserve.
The DeFi market cap recently crossed $14 billion. If other recent governance token launches are any indication, the CRV launch could be about to send it even higher.
That is, if today's wild ride hasn't turned off any would-be CRV entrants.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.