Curve DAO's $60M Yield Basis Push Divides Community on Risk vs. Innovation

Curve DAO has approved a $60 million credit line in its crvUSD stablecoin to fund the launch of Yield Basis, a new protocol developed by Curve founder Michael Egorov. The initiative aims to introduce Bitcoin-focused liquidity pools designed to eliminate impermanent loss—a common risk in decentralized finance (DeFi) where assets in a liquidity pool lose value compared to simply holding them—and to generate yield opportunities for Bitcoin (BTC) holders. Three pools—WBTC, cbBTC, and tBTC—will be launched on Ethereum using Yield Basis’ automated market maker (AMM) architecture, with initial caps of $10 million per pool Curve DAO supports $60M in crvUSD credit for new protocol^[1]. The move seeks to deepen crvUSD’s integration into DeFi and boost fee revenue for veCRV token holders, who control governance via vote-escrowed CRV tokens Will the crvUSD Credit Line Boost Curve DAO and Yield Basis?^[2].

The approval has sparked significant debate within the Curve community. Critics, including pseudonymous member Small Cap Scientist, have raised concerns about the lack of third-party risk assessments for Yield Basis and the absence of caps tied to crvUSD’s total value locked (TVL). They also highlighted potential liability for Curve in the event of a protocol exploit and questioned the transparency of Yield Basis’ tokenomics and seed investor disclosures Curve DAO supports $60M in crvUSD credit for new protocol^[1]. These concerns echo broader skepticism about Curve’s governance model, which grants the DAO extensive permissions to mint crvUSD and manage key contracts .

Egorov defended the proposal, emphasizing that Yield Basis has undergone six audits with a seventh ongoing and includes an emergency stop mechanism managed by Curve’s Emergency DAO multisig. He assured the community that Yield Basis would bear responsibility for any exploits and clarified that investor allocation details were included in the governance proposal. Egorov also argued that inviting prominent figures from the DeFi ecosystem as investors is a natural strategy to strengthen the project Curve DAO supports $60M in crvUSD credit for new protocol^[1]. The proposal passed with over 97% approval, driven by support from major voting blocs like Convex and StakeDAO, though smaller holders and individual wallets also contributed to the 80% voter turnout .

Yield Basis’ technical approach to impermanent loss involves compounding leverage to maintain 200% overcollateralization of positions using borrowed crvUSD. This mechanism adjusts liquidity providers’ exposure to track the price of BTC directly, rather than the square root of its price, which is the root cause of impermanent loss . Egorov explained that this design allows LPs to behave like directional traders while earning yield, though critics argue that leverage introduces new risks, such as rebalancing costs and slippage, which could erode profits in low-volatility markets .

The decision reflects Curve’s broader strategy to expand its DeFi footprint while balancing innovation with risk management. However, the $60 million credit line represents a significant portion of crvUSD’s circulating supply—nearly 60% of its $113 million total—and raises concerns about systemic risks. Past issues, such as the June 2025 Resupply exploit that drained $10 million from a crvUSD-adjacent vault, underscore the need for robust safeguards . Egorov acknowledged these challenges, stating that “emergency measures” remain a critical focus for the community .

The outcome of this initiative will hinge on Yield Basis’ ability to generate sustainable yields while maintaining the stability of crvUSD. Success could enhance Curve’s ecosystem and attract more liquidity to BTC pools, but failure risks reputational and financial damage. The DeFi community will closely monitor the protocol’s performance, particularly its capacity to handle market volatility and execute on its promise to neutralize impermanent loss .