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Curve Finance Liquidity Provision Guide

Curve Finance is a specialized Automated Market Maker (AMM) tailored for stablecoins and assets with similar value, enabling extremely low-slippage swaps and efficient fee generation for liquidity providers (LPs). With its smart invariants and low-risk design, Curve stands apart from generalist DEXes like Uniswap.

What Makes Curve Unique?​

Curve Finance revolutionized DeFi by recognizing that not all trading pairs are created equal. While Uniswap and other general-purpose AMMs use constant product formulas designed for any two assets, Curve developed specialized mathematics optimized for assets that should trade at similar values. This fundamental difference makes Curve the go-to platform for stablecoin trading and correlated asset pairs.

StableSwap invariant: Curve's custom bonding curve, known as the StableSwap invariant, is specifically designed for assets with similar values. Unlike constant product AMMs where price impact increases as you trade larger amounts, Curve's formula keeps slippage extremely low for stablecoins and correlated assets. This means traders can execute large swaps with minimal price impact, which attracts high-volume traders and generates more fees for liquidity providers. For LPs, this design also significantly reduces impermanent loss compared to traditional AMMs, since the assets in the pool are designed to maintain similar values.

Low fees: Curve pools typically charge swap fees well below 0.1% (often 0.01% to 0.04%), which might seem low compared to Uniswap's 0.05% to 1% tiers. However, this low fee structure is intentional-it's designed to attract high-frequency traders, arbitrageurs, and large volume that wouldn't be profitable on higher-fee platforms. The result is that Curve pools often generate more total fees despite lower percentages, because the volume is so much higher. For LPs, this means consistent, reliable fee generation from real trading activity.

Composable yield: One of Curve's most powerful features is its composability with other DeFi protocols. Many Curve pools integrate with lending protocols like Compound and Aave, or yield aggregators like Yearn, allowing LPs to earn multiple layers of yield simultaneously. For example, you might earn trading fees from Curve, lending interest from Compound, and additional token rewards from Yearn-all from a single position. This composability has made Curve a cornerstone of the DeFi yield farming ecosystem, with strategies built on top of Curve pools generating some of the highest sustainable yields in the space.

🧩 How to Add Liquidity on Curve​

Adding liquidity to Curve is designed to be simple, but understanding the different pool types will help you choose the right strategy. The process is straightforward, but the strategy behind which pool to choose requires some thought.

Select a Pool: Curve offers several types of pools, each optimized for different asset classes. Stablecoin pools (like the 3pool with USDC/DAI/USDT) are the most popular, offering low risk and consistent yields from high trading volume. Crypto derivative pools (like wBTC/renBTC) allow you to provide liquidity for wrapped versions of Bitcoin while earning fees. Lending-integrated pools (like y3pool) combine Curve's liquidity provision with yield from lending protocols, offering multiple layers of returns. When choosing a pool, consider your risk tolerance, the assets you want exposure to, and whether you want additional yield from composability.

Connect Your Wallet: Curve is available on multiple networks including Ethereum mainnet, Arbitrum, Polygon, and Fantom, giving you options based on your gas budget and preferences. The interface supports all major wallets including MetaMask, WalletConnect, and hardware wallets. If you're just starting out or managing smaller positions, consider using Arbitrum or Polygon where gas fees are much lower, allowing you to experiment and learn without high transaction costs.

Deposit Tokens: One of Curve's most user-friendly features is its flexible deposit system. You can deposit a single token or multiple tokens, and Curve's invariant will automatically handle the internal swaps needed to balance the pool. This means if you only have USDC but want to provide liquidity to a USDC/DAI/USDT pool, you can deposit just USDC and Curve will handle the rest. The system is designed to minimize slippage during these internal rebalancing swaps.

Receive LP Tokens: After depositing, you'll receive Curve LP tokens (often prefixed with "crv" like crv3pool), which are ERC-20 tokens representing your share of the pool. These tokens can be held, transferred, or most importantly, staked in gauges to earn CRV token rewards on top of the swap fees. Staking in gauges is where many LPs find additional yield, as CRV rewards can significantly boost overall returns, especially in pools that the Curve DAO wants to incentivize.

💰 How You Earn​

  • Swap Fees: Collected with each trade, added to the pool.
  • CRV Token Rewards: Stake LP tokens in gauges to earn additional yield.
  • Composability Benefits: Certain pools generate income through yield aggregation (Compound, Yearn).

⚠️ Risks & Considerations​

1. Impermanent Loss​

  • Curve/s focus on similar-value assets significantly reduces IL compared to constant-product AMMs.
  • However, options like TriCrypto pools (e.g., wBTC/ETH/USDT) can still experience divergence losses.

2. Stable Peg Risks​

  • If a stablecoin de-pegs, LPs could take on substantial loss. Always assess pool composition and asset stability.

3. Smart Contract Risk​

  • While audited, pool logic-plus integration with external protocols-adds complexity and risk. Exercise caution.

4. Admin Key Centralization​

  • Curve retains some control via multisig keys, though those are subject to DAO governance. Liquidations or parameter changes are possible.

📌 Practical Example: stETH/ETH Stable Pool​

  • Pool Type: Stable Pool for ETH and stETH
  • Advantages:
    • Near-zero slippage
    • Low IL due to correlated assets
    • Earn swap fees, CRV incentives, and staking rewards
    • Ideal for stETH holders who want flexible liquidity access
  • Steps:
    1. Deposit ETH + stETH
    2. Claim crvLP tokens
    3. Stake in gauge
    4. Monitor earnings on swap fees + CRV

🔧 Tools & Tracking​

🧠 Key LP Takeaways​

  • Curve is a stablecoin- and yield-optimized AMM-perfect for low-risk LP strategies.
  • Ideal for LPs focused on capital efficiency and stable yield, especially grouped with lending strategy.
  • Watch for peg stability, pool composition, and reward schedules.

⏭ Next Steps​

  • Learn about impermanent loss mechanics to compare Curve vs. Uniswap:
    See our Risks guide
  • Prefer concentrated liquidity? Check out Uniswap V3
  • Prefer Solana-based strategies? Go to Solana guide