Ethereum News Today: Curve Finance to Halt L2 Development After Ethereum Outperforms by 98.4% in TVL

Curve Finance, a leading decentralized exchange (DEX) for stablecoin swaps, is reconsidering its strategy on Arbitrum and other Layer 2 (L2) networks due to declining performance metrics. Recent governance discussions suggest a move to halt all future L2 developments, reflecting growing concerns over low returns and diminishing user engagement across these platforms.

Arbitrum, one of the most popular Ethereum L2s, has seen its total value locked (TVL) in Curve drop to just $52.6 million as of August 4, representing less than 1.6% of Curve’s total TVL of over $3.1 billion on Ethereum [1]. This trend is not unique to Arbitrum; other L2s like Base, Fraxtal, and Sonic are also underperforming, with combined TVL accounting for less than 3% of Curve’s Ethereum TVL. The data highlights a broader challenge for Curve’s L2 strategy, which has failed to sustain significant liquidity or user activity [2].

Trading volume further underlines the limited success of Curve’s L2 deployments. On August 4, Curve’s 24-hour DEX volume on Ethereum reached $304 million, while Arbitrum managed only $3.6 million. Even newer chains like Sonic contributed just $2.1 million in the same period [3]. Over 30 days, Ethereum accounted for nearly all of Curve’s $7.7 billion DEX volume, leaving L2s with negligible contributions. This stark disparity has led some to argue that Arbitrum’s role as a trading hub for Curve is becoming increasingly irrelevant [4].

The governance proposal titled “Cut all further or ongoing L2 developments” has gained traction in response to these underwhelming results. Curve token holders use veCRV, its governance token, to vote on such proposals. The case for cutting L2 efforts is bolstered by the fact that 24 L2s combined generate only $1,500 in daily revenue, or roughly $62 per L2 [5]. In contrast, Ethereum’s slow days still yield $28,000 in revenue. These figures suggest that the resource intensity of maintaining multiple L2 deployments is not justified by the returns [6].

Revenue data for the past 30 days reinforces this conclusion. Curve generated $2.72 million in fees and $1.67 million in revenue, with Ethereum as the primary contributor. Over the platform’s lifetime, Ethereum has generated over $319 million in fees, while Arbitrum and Polygon have brought in just $4.8 million and $11.5 million, respectively [7]. These numbers highlight the imbalance in Curve’s revenue distribution and underscore the limited economic incentive to continue investing in L2s [8].

The broader implications of this shift are significant. While existing liquidity pools on Arbitrum and other L2s will remain operational, there will be no new developments, added incentives, or expansion efforts. Instead, Curve is likely to refocus its resources on Ethereum, where it continues to be a dominant force in the DeFi space. Governance discussions are already emphasizing deeper integration of Curve’s stablecoin, crvUSD, into the Ethereum ecosystem [9].

In summary, Curve Finance appears to be phasing out its L2 experiments. With Arbitrum and other L2s failing to meet expectations, the platform may gradually scale back its presence on these networks. Unless a dramatic shift occurs, Curve’s swaps on these chains are likely to fade into obscurity, while Ethereum remains the backbone of its operations.

Source: [1]Curve Finance TVL by chain- Source: DeFiLlama (https://e.thsi.cn/img/47180639cf181909)

[2]Curve finance DEX volume- Source: DeFiLlama (https://e.thsi.cn/img/46667a061968b616)

[3]Curve community talks about discontinuing L2 development- Source: Curve Finance (https://e.thsi.cn/img/3d4d9718d44afe6c)

[4]Ethereum leads- Source: DeFiLlama (https://e.thsi.cn/img/4932764e9ac23aeb)

[5]Curve fees by protocol- Source: DeFiLlama (https://e.thsi.cn/img/ad2e0e2cef57804b)

[6]Curve finance fees- Source: DeFiLlama (https://e.thsi.cn/img/df229a25e3a78c9)

[9]Curve Finance Swaps on Arbitrum Could Vanish in Coming Months: Here’s Why (https://coinmarketcap.com/community/articles/6891424cdb840933c477af71/)