In the ever-evolving realm of decentralized finance (DeFi), a fascinating proposal has emerged, bringing forth the concept of DeFi supporting DeFi. Marc Zeller, the ingenious mind behind Aave Chan, has put forth an audacious suggestion to bolster the Aave Treasury. The idea involves the purchase of $2 million worth of CRV tokens in USDT from none other than Michael Egorov, the founder of Curve.
Aave stepping up for Curve wars
By acquiring 5 million CRV tokens at the current price, this proposal seeks to send a powerful signal of solidarity within the DeFi space. Additionally, it would strategically position the Aave DAO in the ongoing “Curve wars,” while also bolstering the liquidity of Aave’s decentralized multi-collateral stablecoin, GHO.
The genius of this proposal lies in its foresight. The purchased CRV tokens would be smartly locked as veCRV for a considerable four-year period. This move grants voting rights on the Curve platform, affording users the opportunity to provide liquidity for token pairs involving GHO.
However, as with any innovative idea, the Aave community has responded with a diverse range of opinions. Some skeptics within the community argue for caution, suggesting that reducing exposure to the risk of CRV liquidation should be a priority. They question whether this move is truly aligned with the principles of decentralized finance.
On the other side of the spectrum, supporters of the proposal sing its praises. They see it as a prudent step to de-risk the existing CRV over-leverage and stimulate growth in the GHO stablecoin. Clearly, there are differing perspectives, reflecting the vibrant and dynamic nature of the DeFi community.
Interestingly, Jun Du, co-founder of Huobi, has made a parallel move by acquiring 10 million CRV tokens for $4 million directly from the Curve Finance founder himself.
Speaking of Michael Egorov’s own situation, he currently carries outstanding loans totaling over $100 million from various lending protocols. Among these, a substantial $70 million loan in USDT is secured through CRV collateral on Aave v2. According to Aave’s risk parameters, CRV faces the risk of liquidation if its price plunges to approximately $0.32.
With CRV presently trading at $0.59, any steep drop approaching 60% could lead to the liquidation of Egorov’s borrowed assets, resulting in the unfortunate consequence of bad debt. To mitigate such risks, Egorov has been actively selling millions worth of CRV tokens via over-the-counter trades since the exploit on the Curve protocol.
This unfolding drama underscores the fast-paced and high-stakes nature of the DeFi ecosystem. Bold proposals like Zeller’s and the subsequent reactions from the community demonstrate that the DeFi space is a cauldron of innovation and lively debate. As the saga continues, only time will reveal the ultimate outcome of these intriguing maneuvers.