The Curve community is presently engaged in voting on a proposal aimed at increasing interest rates for its decentralized stablecoin, CrvUSD, in an effort to restore its peg. CrvUSD is currently the 16th biggest stablecoin with a $156 million market cap.
A stablecoin is a cryptocurrency whose value is supposed to be pegged to a reference asset, which could be fiat currency, exchange-traded commodities like precious metals, or another cryptocurrency.
Increasing interest rates
The proposal, initiated on November 21st, suggests elevating the interest rate multiplier of the protocol for both ETH and BTC tokens as well as for staked ETH. The anticipated outcome is a range of borrowing rates between 0.1% and 15% for staked ETH and between 0.07% and 11% for ETH and BTC.
This adjustment is intended to counteract crvUSD's price decline that CrvUSD has been experiencing when it headed towards $0.99 earlier in November, with the goal of pushing it back to $1. The recent trading value of the token was $0.9927. The voting process began two days ago and will continue until November 28th. As of now, the proposal has received unanimous support, although the number of votes is limited.
The proposal coincides with changes in the decentralized stablecoin sector. DAI, previously the third largest stablecoin with a $5.3 billion market cap, has faced criticism for its reliance on centralized collateral assets, creating opportunities for other stablecoins with decentralized backing. Curve introduced CrvUSD back in May, allowing users to mint the token against assets deposited in the protocol.
Aave also entered the arena with its GHO stablecoin in July, enabling users to mint the token against deposits. However, any chances of adopting GHO were hindered by poor price performance, trading near $0.96 in recent weeks. Other stablecoins like FRAX, LUSD, mkUSD, and ALUSD are also part of the decentralized stablecoin landscape, each facing unique challenges and opportunities.