Curve’s Egorov Proposes a New Solution to DeFi's Pain

On September 17, 2025, Curve Finance founder Michael Egorov unveiled Yield Basis, a new product seeded with a $60 million crvUSD credit line. The launch marks the first real-world iteration of the idea Egorov first outlined in his June 2025 whitepaper, which proposed a way to eliminate impermanent loss and reposition Curve’s token model around direct income for CRV holders.

Michael Egorov’s Curved Path

Curve has long been the backbone of stablecoin liquidity, powering much of DeFi’s “plumbing.” Launched in 2020 as a decentralized exchange optimized for low-slippage stablecoin swaps, it quickly became the settlement layer for stablecoin trading and lending protocols. During the 2021 DeFi summer, Curve pools were among the deepest liquidity venues in crypto, reaching over $20 billion in TVL at their peak. Later, however, the bear market and governance spats dragged CRV down from a top-20 token into a troubled asset.

Founder Michael Egorov has also been a central character in the drama. His heavy use of CRV as collateral for loans left him exposed when market conditions turned. In December 2023, he was liquidated for around $882,000, and in June 2024, he faced a much larger wave of forced liquidations — about $140 million in CRV positions unwound across lending protocols. These episodes dented both his reputation and the market’s trust in CRV as a reliable store of value.

Curve’s positioning as a stablecoin DEX gave it a natural angle on one of DeFi’s biggest unsolved problems: Impermanent Loss. In stablecoin pools (USDC/DAI, USDT/USDC, etc.), Impermanent Loss is negligible because the tokens are designed to hold parity.

This allowed Curve to market itself as “Impermanent Loss-free” for stablecoins — a sharp contrast to Uniswap or Balancer pools that pair volatile assets. But once Curve moved outside of stablecoins into volatile pairs like ETH/USDC, the Impermanent Loss problem reappeared.

Example: Suppose you deposit 1 ETH at $2,000 and 2,000 USDC into a pool. If ETH doubles to $4,000, traders will buy ETH from the pool (since it lags the market), and the pool will rebalance your share. Instead of 1 ETH and 2,000 USDC, you may end up with 0.7 ETH and 2,800 USDC. Together, that’s worth $5,600 — less than the $6,000 you would have had just holding the assets outright. In short: Impermanent Loss is the “hidden cost” of being a liquidity provider.

Yield Basis: From Impermanent Loss to Predictable Yield

In June 2025, Egorov released the Yield Basis whitepaper, introducing a product designed to tackle the impermanent loss problem that has long plagued liquidity providers. While his framing is mathematical — impermanent loss stems from the square-root relationship between pooled assets and their prices, so the fix is to eliminate it with compounding leverage — the bottom line is simple: the risk of pool rebalancing must be priced in, not left to eat away at Liquidity Provider (LP) returns.

Yield Basis does this by requiring every position to be 200% overcollateralized. In practice, an LP deposits their trading asset (say BTC/ETH), and the system pairs it with crvUSD drawn from a protocol credit line. The LP pays the cost of that crvUSD borrowing, but in return the position is continuously re-leveraged so that LP's exposure always tracks twice the value of the original deposit. The extra collateral acts as a buffer, absorbing the distortions that normally cause impermanent loss when traders rebalance the pool.

But who really benefitted from those rebalances in the old model? Traditional DEX designs were effectively built for arbitrageurs, who made risk-free profits by keeping pool prices aligned with the market. Yield Basis doesn’t eliminate that role — arbitrage is still essential for price discovery. What changes is who pays for it. In this model, the cost of arbitrage is front-loaded by the LP through the extra capital they lock up. Instead of arbitrageurs siphoning value away with every price swing, the overcollateralized structure funds those payouts in advance.

The First Yield Basis Pool

The first Yield Basis pool proposal was approved by Curve governance in September 2025, seeding the product with a $60 million crvUSD credit line. The initial rollout focuses on three Bitcoin pools — WBTC, cbBTC, and tBTC — each capped at $10 million in deposits. The credit line supplies the crvUSD needed to pair against LP deposits, ensuring every position remains 200% overcollateralized.

What makes this launch more than just a technical fix for impermanent loss is the profit-sharing twist. Up to 65% of Yield Basis revenues will be distributed to veCRV holders, reviving Curve’s original governance lock model. Another 25% of YB tokens are allocated directly to the Curve ecosystem, ensuring that the protocol itself captures value alongside its community. LPs, meanwhile, share the remaining pool fees and emissions.

This structure changes the flow of value compared to traditional AMMs:

• LPs get protection from impermanent loss plus a choice of payout structure.
• veCRV holders see a direct income stream — a sharp departure from the past, where CRV relied mostly on inflationary token incentives.
• Curve DAO benefits from higher stablecoin swap volumes, since arbitrage routes through crvUSD pools generate extra fees.

On top of that, Yield Basis introduces a dual-yield option: users can take rewards in tokenized Bitcoin/Ether, or in the new YB token. This flexibility creates a market-driven mechanism for emissions. In bull markets, providers may stake YB for upside; in bear markets, they might prefer Bitcoin-denominated yield for safety. Egorov argues this structure “self-regulates” inflation and keeps incentives aligned across different market cycles.

Yield Basis’s $60 million crvUSD credit line proposal was approved on Curve’s governance forum after debate over both its potential and its risks. Supporters argued it could scale demand for crvUSD and finally turn CRV into an income-bearing asset, while skeptics warned about the design’s complexity and the precedent of pre-minting stablecoins.

Going forward, the market will be watching whether the pools attract meaningful liquidity, whether veCRV holders actually see a sustainable revenue stream, and if Yield Basis can deliver on its promise to neutralize impermanent loss without destabilizing Curve’s broader ecosystem.