Yield wars behind Curve Finance

Launched in February 2020, Curve Finance is an automated market maker (AMM) optimized for trading between pegged assets. It constitutes around 7% of the trading volume among decentralized exchanges (DEXes).

The reasons behind its popularity are threefold. First, there exist many wrapped or synthetic tokens that track the value of the same asset (e.g., USD, BTC), and they create a disaggregated market with fragmented liquidity. For example, there has been explosive growth in the USD stablecoin market, and it is getting more diverse in recent months, with USDT gradually losing its dominance to other stablecoins such as USDC, BUSD, DAI, TUSD, etc. For a detailed review of different types of stablecoins, see this research piece.