The Unusual Origins of CRV

  • Commentary
  • September 5, 2020

As discussed last week, the surge in DeFi usage throughout 2020 may prove one of the year’s defining narratives. Though not directly analogous, parallels can be drawn between the industry’s current interest in open finance and its embrace of initial coin offerings in mid to late 2017. And, as with the latter, the former brings with it its share of questionable new cryptoassets. The apocryphal justifications for COMP and its similarly mainstream peers aside, tokens such as YAM, HOTDOG, and other so-called DeFi meme coins seemed to readily embrace their suspect brand, which arose from a demonstrable and often unabashed lack of meaningful utility. This dispatch explores the origins of CRV, a DeFi governance token deemed “shady”—most explicitly by Flipside Crypto—for other, more unusual reasons.

Curve, as a project, was a hitherto tokenless decentralized exchange focused primarily on stablecoin trading and liquidity. However, according to IBM executive Matthias Funke, the protocol recently gained a native governance cryptoasset following a curious sequence of unprecedented events:

  • A Curve user, without direct assistance from or knowledge by the Curve team, set out to develop the Curve DAO Token (CRV). Curve had reportedly been planning on developing such a token in the future, but had not achieved significant progress on its development at the time.
  • The user, identified only by the Twitter handle @0xc4ad, began by sending 20 ETH to a “deploy from” address.
  • The user then created and deployed the CRV token contract and a CRV DAO using existing code from the project’s pubic GitHub and deposited gas therein.
  • Once live, the CRV token contract began depositing CRV tokens into eight unique addresses, with the initial distribution as follows:
    • 30% of the total supply to existing shareholders
    • 3% to employees
    • 5% to a DAO-controlled reserve
    • 5% reserved for early users
    • 57% allocated for future inflation based on a liquidity mining program.
  • Individuals began receiving yields based on activity on the Curve platform.
  • The user announced their actions and the results therefrom via Twitter. Users began to interact with the contract and DAO, and on-chain CRV-related activity increases.
  • The Curve team premined 80,000 CRV tokens before seemingly warily announcing in a thread of tweets that it has decided to officially adopt the user-created CRV token and DAO, saying: “While we were initially skeptical, it appeared to be an acceptable deployment with correct code, data and admin keys. Due to the token/DAO getting traction…we had no choice but to adopt it.”
  • Major exchanges including Binance, OKEx, and Huobi listed CRV.

The blockchain industry’s current state is one in which DeFi protocols can be created by teams considered reputable by no reasonable standard, see their market capitalizations skyrocket and subsequently plummet in a matter of days and/or hours, all the while enjoying—albeit ephemeral—adoption and attention from the broader crypto community. Even so, it comes as a surprise that a sole individual would be able to effectively deploy a token on behalf of a protocol with which they are wholly unaffiliated such that it sees significant and notable adoption. More unexpected is that such a protocol, whose governance was hitherto controlled by a centralized team of developers, would choose to adopt such a token and, moreover, a governance DAO.

Developments related to Curve and its adopted token are ones our research team intends to follow closely. Questions we’re asking include: did this approach to initial and ongoing token distribution capture the spirit of decentralization, or were elements unfair? Will the arrangement prove feasible beyond the immediate term? In light of recent security breaches and the implicit trust being placed in the user of unknown identity, affiliation, and motive, does this present an ideal use case for decentralized smart contract insurance protocols? We await inquisitively for the implications of this development to become clearer.