Terraform Labs CEO Do Kwon has revealed a new alliance with Frax Finance and the redacted cartel, a move aimed at winning the so-called ‘curve wars’, while potentially dealing a fatal blow to the DAI stablecoin .
DeFi Protocol OlympusDAO Is Also Joining ‘4pool‘ coalition, according to Kwon’s April 2 tweet.
“The curve wars are over, with all emissions going into 4 pools,” he claimed, referring to the often heated race between protocols competing for higher rewards on Curve Finance, the popular DeFi platform built on Ethereum.
What is 4pool?
Composed of USDC and USDT stable coins, 4pool There is a new four-token liquidity pool curve Including Terra’s decentralized stablecoin UST and Frax Finance’s Frax. It aims to dominate Curve’s stablecoin market and has over $21 billion in assets under management.
To accomplish this, Kwon intends to move investors away from 3pool, an existing stablecoin pool on the curve, which provides them with an incentive to bring more liquidity towards their new alliance pool.
“In the future, we will also direct the emissions of other stablecoins that are paired against 4pool, not just 4pool itself,” Kwon said. “The goal is to starve 3pool. [It] Won’t be long,” he said.
Kwon is also hoping that Terra, Frax, Redacted and Olympus will use their significant stake in Convax’s CVX, a token that gives holders the power to vote on key decisions on Curve, in order to provide deep liquidity across the 4 pools. Can come
Convex allows users to access liquidity and earn fees on the curve. According to some analysts, the protocol holds about 40% of the voting power. Other Say it’s too low, just 14 percent.
“I call every CVX holder and Curve user on 4pool,” the Terra CEO urged. Ultimately, this gives Convax Finance a significant advantage in terms of deciding the pool to receive more liquidity and, therefore, a higher reward on the curve.
So far, 3pool has received over $3.3 billion, which is dominated by DAI. However, according to observers, the 4pool alliance may change that.
“If UST and FRX become more liquid than DAI, it means that their utility as stablecoins increases compared to DAI,” said crypto analyst Erica Wall, wrote on Twitter.
“Each of these tokens still has its own native stabilization mechanism, but being able to drive shape through Curve Finance is a big deal.”
Analysts say the new alliance could see DAI lose its US dollar peg, as liquidity moves out of pool 3 and into pool 4. Conversely, the scenario could boost the stability of UST, which has faced serious risks with its pegs in the past.
Kwon, fantasizing about the demise of DAI in the past, declared, “[b]y My hand DAI will die.”
‘DAI will not die’
While this sounds promising for Terra’s founder, there are others who question his beliefs.
DeFi investor and analyst Korpi It’s logic That 4pool won’t “flip 3pool”, even if the cartel grows “substantially”, drawing more liquidity.
“I don’t think the drop in liquidity in 3Pool, which might happen, could make DAI lose its peg,” Korpi said.
“DAI is a debt-based stablecoin. In order to shield DAI, users must lock collateral in a MakerDAO vault that is far greater than the issued DAI. [exceeds the] DAI issued, DAI will not lose $1 peg. It could be more volatile with less liquidity but dpeg is highly unlikely.”
Continuing, Korpi says, “There are examples of over-collateralized stablecoins that have been pegged for some long periods, but this is not because of their low liquidity, but because of low utility in DeFi. In many projects DAI is used as the first DeFi stablecoin and the risk is very low. DAI will not die.”
However, Frax Finance founder Sam Kazemian is planning to issue additional incentives to bring liquidity providers into 4 pools while starving DAI-related pools.
“Any stablecoin that uses 4Pool for its core liquidity will have direct support from both Terra and Frax,” he said. said in a tweet, “Frax will immediately offer a VFXS gauge that will emit additional FXS tokens on top of your pool’s CRV + CVX tokens.”
As of press time, FXS, the native token of FX, has doubled in price over the past 48 hours, up 3% in 24 hours to $40. Redacted Cartel’s BTRFLY fell 6.6% to $302, but the token gained more than 300 percent in 30 days. Terra’s LUNA and Olympus’ OHM fell 2.2% and 1.2% to $112 and $35, respectively.
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