Curve Finance Proposes Increasing AMM Fee to 1.9%
A new proposal has been put forward in the Curve Finance community to raise the Automated Market Maker (AMM) fee in LLAMMa (crvUSD), a popular liquidity pool on the decentralized exchange (DEX). The fee increase, suggested by a Curve team member, would raise the fee from 0.6% to 1.9%. If approved, this change would benefit borrowers leveraging the protocol by mitigating “soft liquidation losses” during spikes in Ethereum gas fees, ultimately enhancing the overall user experience.
Gas fees on Ethereum
Like other public ledgers, Ethereum relies on a community of validators to approve transactions and secure the network. These validators charge a fee, payable in ETH, which varies based on the level of demand. Gas fees tend to rise whenever there is a surge in prices and on-chain activity. According to YCharts data, the average gas fee on Ethereum was 63.68 GWei as of March 11, an increase from around 22 GWei in early January.
Rising gas fees and their impact
With Ethereum prices approaching $4,000 and the total value locked (TVL) in decentralized finance (DeFi) reaching nearly $100 billion, gas fees are expected to expand further. These rising fees directly affect user experience and can potentially lead to more soft liquidations for LLAMMa borrowers.
Borrower Benefits from Fee Increase
The proposal to increase the AMM fee in LLAMMa aims to create a buffer that reduces losses incurred by arbitrage traders who must pay high gas fees to execute their trades. By increasing the fee, borrowers leveraging Curve Finance will benefit from:
- Reduced soft liquidation losses during Ethereum gas fee spikes
- Enhanced user experience on the platform
It is important to note that the adoption and execution of this proposal are not guaranteed. The voting process is currently open and will close on March 16.
Curve Finance’s position in DeFi
According to DeFiLlama data, Curve Finance is one of the largest players in the decentralized finance (DeFi) space. It manages over $2.9 billion in assets and ranks as the 13th largest DeFi platform, trailing behind others like Uniswap and EigenLayer. While most of its assets are on Ethereum, a significant portion is managed on Arbitrum, a layer-2 scaling platform.
Hot Take: Curve Finance’s Fee Increase Proposal
The proposed increase in the AMM fee for LLAMMa on Curve Finance has the potential to benefit borrowers and improve the user experience on the platform. By creating a buffer against soft liquidation losses during periods of high gas fees, borrowers will have more stability when leveraging the protocol. However, it remains to be seen whether the proposal will be adopted and implemented. The voting process is ongoing, and community members have until March 16 to cast their votes.
Overall, this fee increase proposal reflects the dynamic nature of the crypto space, where stakeholders continuously seek ways to optimize protocols and address challenges like rising gas fees. As DeFi continues to grow and evolve, it is crucial for platforms like Curve Finance to adapt and innovate to meet the changing needs of users while maintaining a sustainable ecosystem.
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