Yearn Finance, Alchemix, Curve Finance in DeFi Clash

Key Takeaways

  • Three of DeFi’s leading projects are in dispute after Curve Finance proposed removing CRV rewards from Alchemix’s pool in the protocol.
  • The proposal argues that Alchemix already generates yield from Curve Finance via Yearn Finance’s vaults.
  • Alchemix recently launched its latest alETH product with Saddle, a Curve Finance fork.

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Some of DeFi’s best-known protocols are debating the impact of their yield farming strategies. The discussions center on Alchemix, Yearn Finance, and Curve Finance.

DeFi Projects in Conflict

A group of DeFi’s leading protocols has come to blows as Alchemix, Yearn Finance (Yearn), and Curve Finance (Curve) discuss Alchemix and Yearn’s yield farming strategies built on top of Curve’s liquidity pools.

To get an understanding of why this conflict is taking place, it’s necessary to explain how these DeFi protocols interact with one another. Curve is a decentralized exchange specializing in stablecoin pools and pools between assets of the same value.

Curve incentivizes liquidity provision by distributing CRV tokens on top of the fees made by the liquidity providers. One of Curve’s most substantial liquidity providers is Yearn. As covered in Crypto Briefing’s Project Spotlight feature on the protocol, Yearn allocates the funds it gets from individual users into Curve pools (amongst other strategies) and sells part of the CRV rewards to provide users with better yields than they would normally receive on Curve.

Alchemix is a DeFi protocol built on top of Yearn’s flagship vaults feature. In Alchemix, users lock a certain amount of DAI and can borrow up to 50% of the deposit in alUSD, Alchemix’s stablecoin. The locked DAI is used to collect yield through Yearn’s vaults to reimburse the original loan. Alchemix’s alUSD also has its own Curve pool, which is incentivized with CRV rewards.

On Tuesday, the Curve team opened a proposal to remove CRV rewards from the alUSD pool, arguing that Curve…

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