Contents

Curve DAO: Four years of securing a DEX with Aragon governance contracts

Security and trustlessness are paramount when it comes to managing a decentralized exchange—even more so for one holding $2.3 billion in TVL. Curve, one of the pioneering DEXes, chose an Aragon DAO in 2020 to secure their protocol, and still uses it today. The Curve DAO was carefully designed and fine-tuned for protocol governance, and is a great example of how to build a secure, well-scoped DAO that runs efficiently for years.

What can your project learn from a DAO that’s been operating since the early days of DeFi? We’ll break down how Curve governance works, the learnings you can garner from it, and how to implement a similar model today using Aragon OSx.

Curve is one of the most used DEXes—pioneering gauges, liquidity pools, veTokens, and more

Curve is a decentralized exchange on Ethereum that creates deep onchain liquidity using advanced bonding curves. Ranking among the top DEXes in trading volume, Curve remains one of the most valuable protocols in DeFi.

Users can swap tokens and provide liquidity to earn yield from trading fees. Curve is unique because its bonding curve is optimized specifically for stablecoin trading, reducing price variation when swapping between stablecoins. They also built liquidity gauges. If you vote for a gauge, the liquidity provider token that’s staked in the gauge receives future CRV emission. Since its inception, a thriving ecosystem has been built on top of Curve, spurring tons of DeFi innovation.

Founded in January 2020, Curve is one of the most battle-tested DeFi projects today. They launched the CRV token in August 2020, and with that their governance on Aragon. Let’s dive into how their DAO works, what it governs, and what you can learn from it for your own project.

Scope of the Curve DAO

Curve is a decentralized exchange with no middlemen. But, some protocol activities require decisions to be made. To keep the protocol decentralized and trustless, Curve gave control over certain decisions to the DAO. So, the Curve DAO has purview over the areas where humans need to intervene: protocol ownership changes, parameter adjustments, and emergency situations.

Curve’s Aragon DAO is tightly scoped—governance token holders can propose and vote on onchain ownership and parameter changes, but nothing more. The DAO only has domain over the protocol itself. This keeps governance simple, while reducing the security risks that come from one-size-fits-all, expansive governance.

veTokens

Curve is known for pioneering vote-escrow tokens (vetokens), which incentivize long-term alignment by requiring users to lock their tokens to receive non-transferable tokens with voting power in return.

‍CRV, the native token of Curve, has three uses: reward distribution, reward boosting, and voting power. These uses can only be accessed by locking your CRV tokens in the vote escrow contract and receiving vote escrow CRV (veCRV) in exchange.

When you lock your CRV tokens, you specify the lock period, ranging from one week at a minimum to four years at a maximum. The longer timeline you choose to lock your tokens for, the more veCRV, and therefore voting power, you receive. Your voting power linearly decays over time until the locking period ends, so you have less voting power at the end of the timelock than when you started.

veCRV tokens are non-transferrable, and you can’t reverse or undo your lock before your timeline is up. This theoretically prevents the tokens from being sold on a secondary market and reduces the risk of an attacker buying up voting power.

Other protocols have been built on top of Curve using veCRV tokens. For example, on Convex, CRV holders can deposit their tokens to receive boosted rewards. Convex then converts the CRV into veCRV and gives the depositor cvxCRV in return, which the depositor can stake. Convex then passes on the voting power to holders of staked cvxCRV. This is just one example of how governance tokens can be used by more than just voters.

There are many incentives around veCRV in the Curve protocol itself. A significant slice of Curve’s fees are distributed to veCRV holders, with 50% of all trading fees and 100% of all interest accrued on Curve’s stablecoin (crvUSD) going to veCRV holders.

Curve DAO Proposals and Voting

The Curve Voting app is a fork of the Aragon Voting App, which is built on the Aragon legacy stack. Proposals are discussed on the Curve governance forum and voting occurs on dao.curve.fi.

To create a proposal in the DAO, you need a minimum of 2,500 veCRV. Proposals fall into one of three categories:

‍Ownership votes: controlling the ownership of the protocol and activating a new gauge. This includes most protocol functionalities. Requirements: 30% minimum participation and 51% pass rate.

‍Parameter votes: modifying pool parameters, such as changing the fee settings. Requirements: 15% minimum participation with 30% pass rate.

‍Curve Emergency DAO votes: For added security, there’s a Curve Emergency DAO with 9 members. This group can remove pools—done by calling the kill_me function of Curve gauge contracts—if there is a risk of funds being lost. This pauses all functions except withdrawls. Proposals in this emergency DAO must reach 59.999% support and 51% quorum. The Curve DAO can add and remove members from the Curve Emergency DAO and override the decision to kill a pool.

Curve DAO Security

Security for such a large DEX is paramount. Curve has taken many steps to ensure extensive security for the protocol. This includes:

Governance tokens are non transferable, reducing risks of a malicious actor buying tokens to attack governance.
Gaining governance power requires locking tokens for a long time horizon.
Proposal creation is gated to 2,500 veCRV.
Different proposal types have different governance parameters.
An Emergency DAO with a fast proposal timeframe of 24 hours sits as a backstop.
The Curve DAO can add or remove members from the Emergency DAO, and override the Emergency DAO’s decisions.

All of these decisions work together to create a secure DAO designed to make it difficult for an attacker to compromise it.

Takeaways

Project founders and DAO operators can apply many of Curve DAO’s practices to their own governance design. Here are a few:

Incentivizing token holders to play the long game creates stability

Curve’s non-transferrable token makes it harder to financialize governance tokens, and requires DAO members to have strong enough conviction to lock their CRV tokens. The longer you lock, the more governance power you receive. This makes it harder for economic attacks to occur on the DAO, and for an attacker to get tokens quickly. Slowing down processes creates more security, as many governance attacks are a result of high speed and a lack of visibility.

Fine-tune your governance with different parameters for different proposal types

Curve uses different minimum participation and pass rates for different types of proposals. Ownership votes require a 30% minimum participation and a 51% pass rate, while parameter adjustments require a 15% minimum participation and 30% pass rate. So, the parameter votes can pass even if 70% of voters vote against it. This is an example of how different types of proposals need different levels of consensus from members.

A security backstop increases trust

Curve’s Emergency DAO is a necessary security backstop that can halt actions on a gauge if there’s an attack, therefore increasing trust in the protocol. Crucially, the Curve DAO still has the ability to reverse the decisions of the Emergency DAO, and add or remove members. This reduces the risk of the Emergency DAO itself being compromised by malicious actors.

Minimizing governance reduces complexity and increases security

Governance at Curve is mostly contained to onchain ownership and parameter adjustment, with a few rare exceptions. This governance minimization means that governance cannot expand to fill more space—it has a clearly-defined function, and it is good at what it does. It’s a good example of the principle to design systems that do a few things well, rather than many things poorly.

Secure your protocol for years to come with onchain governance from Aragon

Curve is an extremely successful protocol for many reasons—its bonding curves designed for efficient stablecoin trading, its large amounts of liquidity, and its trust from the industry. But these qualities could not endure for all the years that it has if there wasn’t a secure DAO backing them.

Take the important step that Curve did early on to secure your protocol with onchain governance. In less than a year from launching, Curve had a DAO. Don’t wait to design your permission management structure until it’s too late.

Aragon OSx is a modular governance framework for securing your protocol and governing your assets. DeFi projects like Steakhouse Financial’s MetaMorpho vaults trust Aragon OSx for mission-critical functions like permission management and access control. Join industry-leading DeFi projects by building your DAO on Aragon OSx.

There are two ways to get started with Aragon OSx.

‍

Build it yourself: Launch your onchain governance using our open-source stack. Build your own custom plugins or install existing ones using our resources. Start here.
Co-build with our team: Our experienced team will work with you to create a bespoke solution that fits your needs. From the smart contracts to the governance design to the UI, we will build your governance end-to-end. Reach out.

‍

Aragon has been building onchain governance infrastructure for over 7 years, with its tech securing billions of assets. Govern your protocol onchain with Aragon OSx: the secure and modular DAO framework with customization built in. Or, launch a DAO in 10 minutes or less without writing any code on the Aragon App.

‍