Staked ether (stETH) holders can now use their tokens to mint curve usd (crvUSD), a decentralized stablecoin issued by stablecoin swapping protocol Curve Finance.
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A proposal to allow crvUSD minting via stETH was passed by 100% of Curve DAO community members in a vote that ended Thursday morning. Users can put up their stETH holders as collateral, and Curve shall automatically mint crvUSD whose value will be a portion of the value of the stETH.
Users currently have to pay a 6% borrowing rate and will be automatically liquidated if the value of the lent stETH slides below the intended $1 peg value of crvUSD.
As of Thursday, there is a maximum limit of $150 million worth of cvrUSD that can be issued using stETH as collateral.
Curve deployed its much-awaited crvUSD stablecoin on the Ethereum mainnet last month after stating its intention to issue a dollar-pegged stablecoin last June. The token is backed by a basket of tokens and controlled via smart contracts – ensuring it is fully backed at all times in a move that hopes to prevent a repeat of TerraUSD disaster.
Some market observers have previously weighed in on the impact of crvUSD in the broader crypto ecosystem once it is issued.
“The crvUSD could be a very interesting development, as we haven’t yet seen a stablecoin that is issued by a major DEX,” (decentralized exchange) Daniel Zlotin, senior DeFi developer at Orbs, said in a Telegram message to CoinDesk.
“Connecting a stablecoin with a viable [decentralized finance] platform could open up some interesting possibilities in terms of new models (such as using LP tokens as part of the backing system),” Zlotin added, cautioning that there would “definitely be some challenges” in implementing such a concept.