RESEARCH REPORT ABOUT SWERVE FINANCE

16 min readSep 23, 2020

Author: Gamals Ahmed, CoinEx Business Ambassador

ABSTRACT

This research report will introduce The Swerve Finance. Swerve Finance, developed by an anonymous user or team, announced plans to release a 100% community-owned fork of the popular stablecoin swap platform Curve Finance. Its website claims the forked protocol will be free from numerous issues that have allegedly occurred since launch, among them pre-mining and centralized control by founders.

1.INTRODUCTION

Open source contracts in the Ethereum ecosystem are fueling the yield farming boom, but a new fork of Curve Finance claims to be giving back to the community after a series of questionable decisions by the original developers.

Swerve Finance, developed by an anonymous user or team, announced plans to release a 100% community-owned fork of the popular stablecoin swap platform Curve Finance. Its website claims the forked protocol will be free from numerous issues that have allegedly occurred since launch, among them pre-mining and centralized control by founders.

In an environment where scams and “rug pulls” are becoming more common (recent examples include ymd.finance and TRUAMPLE) as yield farmers deposit money in increasingly obscure food-themed ventures, Swerve could represent a more mature, benevolent turn for open source DeFi development. Or, it could just be the latest crypto offshoot claiming to be purer than its forebears.

Curve Finance launched in January 2020 and has grown to lock over $1 billion in user value according to DeFi Pulse, making it the second-most popular decentralized exchange behind Uniswap. For comparison, it has about twice the locked value of Balancer, which sits in third. But it’s also incredibly new, meaning its place near the top of the DEX rankings is hardly secure.

Curve claims that it allows consumers to make trades between stablecoins like DAI, Tether with the lowest slippage in the industry, meaning the liquidity users provide is used more efficiently, and traders stand to lose less marginal profit on large trades.

However, Curve has stumbled into multiple negative incidents with its user base and even the larger community of crypto users. The first was right out of the gate when its token went live this August.

Though it planned to give liquidity providers 24 hours notice before making the initial distribution of the CRV governance token, an anonymous crypto user instead used open source code posted to Curve’s Github page to launch the protocol without warning. Therefore, at least one person was able to farm CRV for hours while others waited for confirmation from the Curve team that the contracts were safe. Some skeptical users assumed an illicit pre-mine.

Since then, the controversy hasn’t lessened, as it emerged that the development team owns a majority of governance tokens. Other grievances include so-called unfair voting rights and pool offerings.

Swerve says it will distribute 33 million SWRV governance tokens over six years, with nine million distributed in the first two weeks to kickstart liquidity. Swerve has not yet launched

and no official date is set, but all announcements will come from the Swerve Finance Twitter account.

The Swerve Finance announcement combines two emerging trends in DeFi. The first is the forking of existing open source protocols to launch tweaked versions of the original product. The second is the radical experimentation in full community governance in projects like Yearn Finance.

Whether Swerve is a success or can overtake its parent protocol is yet to be seen, but the Cambrian-explosion style development for decentralized protocols is truly becoming something to behold.

1.1 OVERVIEW ABOUT SWERVE FINANCE

Swerve Finance is the latest ‘hot’ destination for yield farming today. Swerve is:

An unaudited fork of the Curve finance protocol (the leading stable coin AMM at the time of writing this article) AND
100% community-owned & governed, which means that there was no pre-mining or vested allocations of the swerve native governance token (SWRV). i.e the only way for anyone (including the developers) to get SWRV tokens is to provide liquidity! This is an example of the fair launch phenomenon, which is rapidly emerging in #Defi.

Swerve launched on Sept 5, and has $520M locked up (TVL) in 4 days time ! This is about 50% of the TVL locked up in Curve, which launched in Jan 2020.

A fork of Curve Finance that’s 100% community-owned and governed. Curve is an exchange liquidity pool on Ethereum (like Uniswap) designed for extremely efficient stablecoin trading low risk, supplemental fee income for liquidity providers, without an opportunity cost.

SWERVE FINANCE is described to be a fork of Curve, owned 100% by the community. It’s a simple 33,000,000 supply owned entirely by holders, the community of liquidity providers and users. If holders provide liquidity to Swerve, they get ySWRV tokens which can be staked in the Swerve DAO to earn $SWRV. To kickstart the protocol and encourage users to try out Swerve, the first two weeks will have a larger distribution of $SWRV awarded.

Swerve is a community fork of curve.fi designed for efficient stablecoin trading, with platform/developer fees removed.

Swerve Finance token: $SWRV.

Curve Finance — the leading stablecoin AMM with $2.77B in cumulative volume — got swerved.

Swerve Finance, the latest in the series of ‘community-owned’ forks, has aggregated farmer’s liquidity with a stripped, IPFS-hosted version of Curve.

Swerve Finance, an unaudited fork of decentralized finance (DeFi) protocol Curve Finance,

This project allows consumers to trade between stablecoin with the lowest slippage thanks to high liquidity allowing users to lose less marginal profit. While growing, the protocol continues to face grievances in the form of control over the project and unfair voting rights.

Yearn Finance creator Andre Cronje found Swerve Finance’s design “very intriguing” stating, “What Swerve did was add a proxy pattern, so the implementation is the copyright curve contract. But the storage is Swerve. This abides by the copyright, but also allows a full feature fork. Both from a legal and technical perspective, this is really smart.”

The information posted through these social media channels may be deemed valid. Accordingly, the public should monitor these accounts and the blog, in addition to following company press releases, conference calls, and webcasts. This list may be updated from time to time and these channels may be updated without notice.

1.1.1 BASIC PROFILE OF SWERVE

1.1.2 COMPETITIVE ADVANTAGE

As a protocol, Swerve has the ability to swap between stablecoins at a far better rate than other exchanges and venues.

1.1.3 SWERVE & CURVE

The decentralized finance (DeFI) market is witnessing an ongoing battle between two new decentralized exchanges namely Curve Finance (CRV), and it’s very recent fork dubbed Swerve Finance (SWRV). Curve is by-far one of the most popular DeFi protocols with more than $1 billion in total value locked (TVL), but it looks its fork is catching up really quickly.

Launched just weeks ago, Swerve finance is attracting a lot of investors and has quickly managed to garner more than 40% of Curve’s total value locked in just four days from launch.

The battle of TVL between Curve and Swerve is getting exciting as DeFi enthusiasts seem to be betting big on the unaudited protocol as the amount of Swerve deposits have hit $415 million. However, in terms of volume the competition isn’t too tough.

Swerve’s daily trading volumes are just about 9% of Curve’s, standing at around $13 million, while Curve boasts a daily trading volume of nearly $160 million.

The competition is going to be quite interesting to watch considering the fact that both of these protocols are quite similar to each with the only difference being that Serve finance is “100% community-owned and governed.” This means that investors started earning SWRV tokens from the moment they made their deposit.

Meanwhile, Curve did not deploy its CRV tokens on day one and was rather forced to launch CRV ahead of its planned launch after an anonymous user deployed the open-source CRV token and CurveDAO contracts on the Ethereum mainnet before the official launch.

It was also discovered that wallets had been staking Curve assets and earning CRV tokens ahead of the launch event and this resulted in several allegations of unfair pre-mining coming from the Curve community.

Despite all this, one thing to be noted is the fact the Swerve still remains an unaudited protocol, making it quite a risky investment. The DeFi market has previously witnessed how one bug can bring an entire project down.

On the other hand, smart contracts audit firm Trail of Bits has audited Curve, but this could all change in the future if Swerve manages to provide better liquidity with minimum slippage or the difference between the expected price and the execution price of a trade.

The total value locked (TVL) or the total amount of Swerve deposits has hit $415 million. Curve’s TVL, on the other hand, stands at a little over $1 billion.

has amassed over 40% of Curve’s deposits within four days of its launch.

While the TVL game between Swerve and Curve is heating up, the volume game isn’t as strong yet. Swerve’s daily trading volumes are only about 9% of Curve’s, at around $13 million, compared to Curve’s $160 million, But that could change in the future if Swerve provides better liquidity with the least slippage or the difference between the expected price and the execution price of a trade.

Both Swerve and Curve are decentralized exchange protocols for trading stablecoins. The key difference between the two protocols is that Swerve is “100% community-owned and governed,” meaning its users started generating SWRV tokens with their deposits from day one. Curve, on the other hand, did not launch its CRV token on day one.

To reiterate, Swerve is an unaudited protocol, making it riskier than Curve, which is audited by smart contracts audit firm Trail of Bits.

Sverve TVL (Sept 9)

Curve TVL (Sept 9)

1.1.3.1 CURVE MESSED UP

Swerve is the result of a controversy around Curve finance regarding ‘Pre-mining’. Curve finance had planned a 24 hours notice period for liquidity providers before the initial distribution of the CRV governance token.

However, an anonymous user deployed the open-source CRV token and CurveDAO contracts on the Ethereum mainnet before the official launch.

Even though the CRV team confirmed that the contracts were completely authentic, it was later discovered that wallets had been staking Curve assets and earning CRV tokens ahead of the official launch announcement.

This led to several allegations of an unfair “pre-mine” among Curve users and was the foundation upon which Swerve was launched.

So far the project has received positive responses from the community but the project had some troubles of its own. The protocol launched with a UI bug that wouldn’t let users interact with its contracts, but the bug was addressed.

DeFi Pulse, in its report, has mentioned that since the day of its launch, Curve Finance has locked the value of more than $1 billion in user. Currently, it is considered to be the second-most popular decentralized exchange, after Uniswap, in the market.

The report further mentions that the locked value of Curve Finance is twice the locked value of Balancer and that is the reason it falls behind Curve.

1.1.3.2 CURVE FINANCE ALLOWS TRADING OF STABLECOIN

According to the report, consumers on the Curve platform are allowed to trade between DAI and Tether. It is to be noted that at the time of trading stablecoins the liquidity offered by the users is used efficiently so that the consumers do not lose large marginal profit.

Recently, it has been found that there were multiple negative incidents for which Curve fell and along with it, its whole user base and a crypto larger community suffered.

The very recent negative incident happened in August 2020, when its token was released without any information.

Earlier, Curve mentioned that it would be releasing a notification before issuing the CRV governance token, but recently an anonymous user introduced it and that too without giving any warning. He just used an open-source code to do so.

1.1.4 MISSION AND VISION OF SWERVE

There’s no fake-out deployment, no questionable pre-mining, no founder controlling majority of the governance vote, no suspect team proposals, no 30% allocation to ‘shareholders’, no team allocation, no decades long distribution, none of it.

The strongest and healthiest ecosystems are built from fair fundamentals. The goal with Swerve is to build a community that survives after the incentives dry up. Swerve is owned by its users and farmers, not the founding team and its investors.

1.1.5 WHY SWERVE?

Swerve features just one pool — yEarn’s Y pool — with no premine and no earlyLP rewards. The native governance token — SWRV — is used for adding new pools alongside extra LP rewards.

In addition to a fair launch with no premining, Swerve has launched only 1 pool (swUSD) and is incentivizing liquidity providers with the Keep in mind that the Swerve smart contracts are unaudited at this time, and the developer (John Deere) is anonymous. Please proceed at your own risk.

As described, the first two weeks feature a much higher issuance rate, equal to one year’s worth of rewards in just 14 days. Here’s a look at how it breaks down.

Total Supply: 33,000,000 SWRV

9,000,000 $SWRV [2 weeks]
9,000,000 $SWRV [year 1]
3,000,000 $SWRV [year 2]
3,000,000 $SWRV [year 3]
3,000,000 $SWRV [year 4]
3,000,000 $SWRV [year 5]
3,000,000 $SWRV [year 6]

To earn SWRV, farmers deposit DAI, USDC, USDT or TUSD to the swUSD pool.

Once deposited, farmers will need to stake their position via the swUSD liquidity gauge to start earning SWRV rewards.

1.1.5.1 SWERVE FINANCE ACCUMULATES MORE THAN $380 MILLION IN JUST 12 HOURS

Just when the users thought that the Decentralized Finance (DeFi) market couldn’t get any crazier, new projects continue to surface and pump. Right now it feels investors would bet on anything that has DeFi written next to it. This also seems to be the case with Swerve (SWRV), a new and unaudited decentralized finance protocol.

Within just 12 hours of launch, a new fork of Curve Finance (CRV), the popular stablecoin-to-stablecoin decentralized exchange, managed to accumulate $380 million in total value locked in it.

Developed and launched by an anonymous individual or team, Swerve claims to be a completely community-controlled fork that will give back to the community.

From day one, Swerve protocol would allow users to begin generating SWRV tokens with their deposits with no allocation to early investors or team members.

The project’s website states:

“There’s no fake-out deployment, no questionable pre-mining, no founder controlling majority of the governance vote, no suspect team proposals, no 30% allocation to ‘shareholders’, no team allocation, no decades-long distribution, none of it.”

While nothing has been allocated to the developers, it must be noted that the smart contracts for Swerve look like it has been directly copied from Curve. On this matter, Swerve notes:

“We have written independent Solidity code that interacts with Curve’s contracts essentially as an on-chain API via delegation. Any reused software in Swerve is MIT licensed.”

1.1.5.2 CURVE FORK SWERVE FINANCE (SWRV) LOCKS IN OVER $400 MILLION WITHIN A DAY OF LAUNCH

After the Uniswap forks, it’s time for another hot DeFi project, Curve, a stablecoin-to-stablecoin DEX.

Curve’s clone Swerve Finance is an unaudited decentralized finance protocol that has over $410 million locked within 12 hours of its launch and a volume of $55.4 million.

Swerve Finance has amassed over 40% of Curve’s deposits within four days of its launch.

The protocol aims to be “100% community-owned and governed,” allowing users to generate SWRV tokens with these deposits.

“It’s a simple 33,000,000 supply owned entirely by you, the community of liquidity providers and users. If you provide liquidity to Swerve, you get ySWRV tokens, which can be staked in the Swerve DAO to earn $SWRV.”

With “no questionable pre-mining,” which means the team members or early investors won’t be allocated any tokens, Swerve refers to Curve’s token CRV’s forced launch last month.

Swerve’s launch, however, wasn’t issue free either as the protocol launched with a bug, now addressed, that prevented users from interacting with contracts.

1.1.6 SWERVE FORKS FROM ‘UNFAIR’ DEFI EXCHANGE CURVE

After allegations of pre-mining and centralized control at Curve Finance, a new fork of the stablecoin swap protocol aims to increase fairness in governance distribution.

In brief

Swerve Finance is a soon-to-be launched fork of stablecoin swap protocol Curve Finance.
Curve users have alleged that the platform has been guilty of pre-mining tokens and centralizing power.
Swerve aims to make token distribution and governance more equal with a 100% community-owned governance token.

1.1.7 SWERVE AMASSES $600 MILLION IN DEPOSITS; OVER 60% OF CURVE WITHIN A WEEK OF LAUNCH

Swerve Finance, an unaudited fork of DEX Curve Finance, has amassed more than $600 million in deposits or the total value locked (TVL) in the protocol.

In under a week, this decentralized finance protocol has gotten about 60% of Curve’s deposits, which currently stands at just under $1 billion.

In the first week cryptocurrency exchange Poloniex also listed the SWRV token against USDT. Currently, the token is trading at $4.88, down 87.5% from its all-time high hit on the launch day itself.

“Swerve has the best rate out of any exchange for USDC, USDT or TUSD to DAI by both exchange rate and transaction fee! Get some stables and collect your comfortable APY,” boasts the decentralized exchange.

Swerve is fast catching up to Curve. However, volume on the former platform is not strong enough, yet The daily volume recorded on Swerve Finance is just about $15 million compared to Curve’s $135 million.

Curve is the second biggest DEX after Uniswap, which registered $1.3 billion of volume in the past week, accounting for 22% of the market share, compared to Uniswap’s nearly 65% share.

Overall, DEXs are seeing huge growth in 2020, recording $11.6 billion in total trading volume in the month of August. Now in September, already $10.9 billion in combined volume has been seen, as per data source Dune Analytics.

Swerve cloned Curve, a decentralized exchange protocol for trading stablecoins, with the key difference of the latest project being “100% community-owned and governed,” which means users with deposits right from the beginning generate SWRV.

Curve’s token (CRV’s) launch, however, was a botched one. Before the planned schedule, an anonymous developer front-run it and deployed the smart contract with some accusing the protocol of pre-mining the tokens.

2 SWERVE FINANCE TOKEN

Swerve Finance token: $SWRV.

2.1 TOKEN PROFILE

2.1.1 PROJECT TYPE

Tokens were initially available and currently obtainable in the following methods:

Additional Token issuance or minting conditions, including implemented natural inflation.
Trading practices after the Token Sale by Company
Method of allocating tokens during Token Sale

Token allocation percentage based on Total Supply immediately after Token Generation Event.

2.1.2 TOKEN HOLDER RIGHTS

A. Receive payments or other consideration under the following circumstances If you provide liquidity to Swerve, you get ySWRV tokens which can be staked in the Swerve DAO to earn $SWRV.

B. Tokens give holders ownership or contractual interest or rights in the following circumstances The Swerve protocol is governed by a Swerve DAO and will issue 100% of its governance tokens to liquidity providers as reward incentives, instead of the 62% allocated in Curve.

2.1.3 TOKEN DISTRIBUTION [awarded entirely to LPs]:

9,000,000 $SWRV [2 weeks]
9,000,000 $SWRV [year 1]
3,000,000 $SWRV [year 2]
3,000,000 $SWRV [year 3]
3,000,000 $SWRV [year 4]
3,000,000 $SWRV [year 5]
3,000,000 $SWRV [year 6]

Total: 33,000,000 $SWRV

On top of a fair and 100% token distribution and no pre-vesting or allocations, Swerve is launching with just one pool to start, using DAI, USDC, USDT and TUSD. This cuts gas costs down dramatically for interactions vs using Y tokens. The DAO can decide to vote in additional pools they want. They don’t want LPs initially forced to provide liquidity for additional pools they may not want to actually participate in just to chase rewards. Voting will be enabled within the DAO in about 24 hours.

The whitelist for smart wallets on the voting contract is removed, smart contracts like the YFI ecosystem should be able to participate. Lastly, the voting boost for $SWRV takes effect after one hour instead of 2 weeks, so you can start right out of the gate.

They believe the strongest and healthiest ecosystems are built from fair fundamentals. The goal with Swerve is to build a community that survives after the incentives dry up. Its users and farmers, not the founding team and its investors own swerve. They hope to represent all fair and honest farmers and invite you join us on this journey and experimentation in protocol price discovery.

3 YIELD FARMING ON SWERVE FINANCE: A GUIDE

Starting Wallet

Make sure you have your stablecoins in your Metamask wallet along with some ETH (for gas fees) before starting.

Step 1: Go to Swerve.fi

Click in the Swerve Finance app and click on swUSD. You’ll see only 1 pool with 4 stablecoins (DAI, USDC, USDT and TUSD) which is identical to the curve Y pool.

Click on Deposit

Step 2: Connect your Metamask wallet

Step 3: Deposit your Stable Coins

Select the amount of coins you want to add.

Click on Deposit

Step 4: Approve (Sign) the Transactions

You will now see 3 different metamask windows asking you to allow swerve to move your stablecopins and to execute the smart contract.

Click on Confirm!

Step 5: Head to the DAO to stake the swUSD tokens

Now, if we stopped at step 4, we will earn a 0.04% fee on transactions in the pool. In order to see the large returns, we’ll need to stake our liquidity pool tokens.

4 THE SWERVE FINANCE COMMUNITY

Company Website: https://swerve.fi

Twitter: 8.5k followers: https://twitter.com/SwerveFinance

Discord: https://discord.com/invite/vkhw8Av

Github: https://github.com/SwerveFinance Reddit

Telegram: 2.9k subscribers: https://t.me/swervefi