March 25, 2021: Curve in the Crosshairs 🎯🔫
Hot Takes Fly as Competitors Take Dead Aim at Curve
There’s some hot new competition for Curve!
The city of Miami wants to “stay ahead of Curve”... oh wait… one second… we meant this one…
It appears Uniswap is throwing in the towel on v2 and pivoting in yet another attempt to take down the battle-hardened Curve v1.
The city of Miami may ultimately prove the fiercer competitor, but let’s dive in and see.
What is V3?
What is Uniswap V3 supposed to do? Make all your wildest dreams come true!
What was announced is indeed an interesting innovation. Uniswap v3 will slice pools into several bins distributed along the target price, like an order book.
Uniswap spreads themselves into a larger number of markets, hoping to generate heightened interest and stimulate greater trading overall. The best analysis thread on the details comes from @n2ckchong:
The Kill Shot
If v3 was intended as a Curve kill shot, Michael was unperturbed.
In fact, the only slaying would be done directly by Michael:
People certainly like to play up the competitive aspects between the leading AMMs.
At this point, the competition appears somewhat overblown. All major AMMs at this point have moved in different directions to cater to distinct markets. The properties of Curve’s like-coin pools are radically different than utility traders derive from speculating on the myriad slippery pairs offered at Uniswap.
Within Curve’s core competency of minimizing slippage, observers tend to agree Curve v1 retains the edge.
Whale Tales
At the end of the day, as go whales, so goes Ethereum. For whales, slippage can be a big deal, amounting to major inefficiencies in transferring large sums quickly.
Sure, one might think a whale couldn’t be bothered to scratch itself for a measly quarter million. But reframe it as nearly 5 BTC and you can see where it’s a “nice-to-have.”
The structure of v3 means smaller pools around the target price could require several simultaneous transactions to move large money. To our knowledge, the service to help whales conduct such large volume trades across several small v3 bins is entirely hypothetical. Whoever builds such a service could be the big winner of this announcement. Solving a pain point for ultra high net worth individuals is always a good business model. The tough part is such a service would compete more directly against bespoke slippage of Curve’s cross-asset transactions, where Curve appears to have a simpler and superior product.
A Heated Twitter War
One saddle-sore Bay Area VC sparked a healthy fight on social media by claiming v3 would “eat Curve”, citing “gas optimization” as the key reason:
Other analysts called this bluff, disputing the “gas optimization” point by observing v3 might actually be less gas efficient in critical cases. One brave analyst looking for a fight interjected himself into the argument thusly:
The flame war really heated up when a third observer jumped into the fray to handwave away gas arguments, claiming them basically irrelevant on Layer 2:
We’ll let these three minds duke it out and let you know who ultimately prevails.
The Lazy Ape Demographic
We’ve taken a large focus on whales. After all, we’ve learned through experience how much Ethereum and DeFi cater to whales.
Lazy apes were central to Uniswap’s initial traction. The v3 release seems to hurt the ability for a small LP to get much traction.
The benefit primarily accrues to the algorithmic trader, which makes sense. At their size, high frequency traders can surely provide a greater punch to Uniswap’s bottom line.
It’s more or less an inevitable evolution of the AMM.
Yet despite the dominance of whales, the lazy ape is not going anywhere. The lazy ape market is enough to launch an entire industry, so it’s impossible to completely ignore the demographic. If leading AMMs move up-market, we’ll no doubt see a bevy of new services emerge.
For more info, check our live market data at https://curvemarketcap.com/ or our subscribe to our daily newsletter at https://curve.substack.com/. Nothing in our newsletter can be construed as financial advice. Author is a $CRV maximalist.