The article compared Ring Protocol and Curve in various dimensions and laid out Ring Protocol’s advantages.
- Price Mechanism: Ring Protocol swap price is guaranteed in extreme cases leveraging the advancement of the Uniswap v3 concentrated liquidity curve.
- Liquidity Provider’s benefits: The Ring Protocol provides all benefits that Curve provides and also preserves capital for utility and trading alternatives.
- Horizontal Scalability: Ring Protocol is built to scale to any ERC20 crypto assets and the extension can be done within minutes. The protocol auto-balances via a build-in mechanism and ‘one ring to rule them all’ asset RUSD.
By analyzing current stats, Ring Protocol will evolve to a critical role in the DeFi ecosystem. RUSD is expected to contribute to more than half of the total Stablecoin TVL and enable multi-billion trading volume on Uniswap v3.
Ring Protocol is the next-generation decentralized stablecoin protocol that builds on top of Uniswap v3. It is designed to provide the deepest stablecoin swap liquidity in the DeFi ecosystem. The stable swap is low slippage, charges no fee.
RUSD is the Ring Protocol’s native stablecoin backed by other stablecoin, and it is designed to connect all other stablecoin like a ring 💍. RUSD provides a highly desirable utility value for use and trading. RING is the native governance token. For more info, check Introducing Ring Protocol.
Curve is a decentralized AMM focused on stablecoins swap, aiming to provide the stablecoin liquidity pool with low slippage swap and little-to-no impermanent loss.
Curve as a product fits into the market where stablecoin swap on Uniswap v2 is costly due to expensive token-to-token trades; trading token A to token B on Uniswap v2 takes two hops — swap A to ETH, then ETH to B, which results in doubled trading fees.
Despite the benefits of low fees and slippage, one might not be familiar with Curve’s several limitations and future scalability challenges. These limitations became more evident the moment Uniswap v3 introduced its customized range that empowered protocols like Ring.
This article will compare several aspects between Curve and Ring Protocol. After the comparison, one will realize Ring Protocol offers a comparative advantage for stable swap similar to Curve and is superior in several dimensions: price mechanism, benefits for liquidity providers, horizontal scalability, and future upside — Ring Protocol is the next generation of stablecoin.
Both Ring Protocol and Curve provide stablecoin swaps of the three most liquid stablecoins DAI, USDC, and USDT. The innovation of Curve’s bonding curve is an equilibrium combining two different curves: Uniswap v2’s xy = constant and constant sum like x + y + z = constant like mStable, quoting from its whitepaper. The combined bonding curve formula is below.
The formula can be simplified as coefficient x constant sum + constant product, where the coefficient (a.k.a A) controls how ‘curve’ the line is. If the assets are unlikely to unpeg, the coefficient can be set to huge where the swap curve is similar to mStable, and one can trade 1 USDT to 1 USDC if liquidity is available.
Suppose we ignore the mathematical thinking behind it and directly examine the graphic representation of the bonding curve from Curve’s whitepaper. The Stableswap invariant has demonstrated that one can swap almost little-to-no slippage between any stable assets within a wide range. However, there is a catch. For extreme cases, the bonding curve reaches almost to x or y-axis. The price becomes huge or nearly infinitely high where the user’s transaction is penalized and results in unfortunate losses.
On the other hand, the bonding curve for Ring Protocol is much more desirable for such cases. Ring Protocol is built on top of Uniswap v3 with a customized range initialized as 0.98–1.02 (updatable by the DAO voting in the future) at the genesis launch. If we look at the bonding curve graph from Uniswap v3 Whitepage for the “real reserves”, the swap price stops at precisely the protocol defined in extreme cases. For example, if the liquidity is dry with only 30 DAI available, Alice wanted to swap 100 USDC for DAI and submitted a transaction without verifying the estimated DAI quantity. The protocol only takes max price 30*1.02 = 30.6 USDC to settle the transaction (assume RUSD is pegged at $1).
With that being said, just like Curve, Ring Protocol provides a competitive stable-swapping rate with low fees and slippage when liquidity is abundant (regular case). In addition, it offers the price guarantee that Curve does not provide. The added price guarantee protects the user’s trading price upper bound in the extreme case (e.g., liquidity is limited or skewed to two of the three stablecoins).
Regarding the trading fees, Ring Protocol does not charge any trading fee. The protocol’s vision is to facilitate stablecoin trading, and removing any extra fee is the first step towards that goal. On the other hand, Curve charges an Admin Fee — 50% of the trading cost (est. 0. 02%)
Liquidity Provider’s Benefits
Providing liquidity to Curve DAI+USDT+USDC pool, one receives yDAI+USDT+USDC LP token in return, which is expected to grow in value from pool staking strategy and fee accruement. Users can also stake the LP token to the Curve pool for the CRV governance token in return. For users, once they deposit the existing stablecoin to the Curve stablecoin liquidity pool, users immediately lose their stablecoin liquidity, simply becoming a Curve LP holder.
The LP and staking flow is illustrated below.
Ring Protocol offers comparable benefits to liquidity providers with extra flexibility and benefits. To provide liquidity, users swap the existing stablecoin (DAI, for example) to RUSD for an approximate 1:1 ratio. At the same time, Ring Protocol adds liquidity for the DAI-RUSD pair to the Uniswap v3 pool. With RUSD at hand, just like Curve, users can choose to mine the RING governance token by staking RUSD to the Ring Pool. RING token is expected to appreciate over time as it reflects value accruement from Ring Protocol network growth and RUSD utility value increase, which will be further boosted by the future feature under incubation by the Ring core team.
Additionally, users can also use RUSD for any trading. This way, Ring protocol provides staking mining for users to grow and earn as the protocol grows and provides additional flexibility to preserve capital to unlock any trading and utility value.
The largest stablecoin pool of Curve is DAI/USDC/USDT (aka 3pool). To scale horizontally to support additional yet less liquid stablecoin like BUSD, PAX, Curve needs to control the balance between the new stablecoin with the 3pool pair. Curve also needs to manually fine-tune the customized coefficient (A) for the new pool to maintain a reasonable liquidity curve. The design itself naturally poses a scalability challenge.
On the other hand, for Ring Protocol, at launch, it supports DAI/USDC/USDT stablecoins. The bonding curve and PCV deposit are all reusable contracts that can be initialized within minutes and are applicable to ANY stablecoin that is an ERC20 token for future scalability. After the reusable contracts are deployed onto the mainnet, the pool is born. What is impressive is that all the stablecoins liquidity are connected by RUSD, link a Ring, one can easily swap or easily tear and pair the stable swap pairs to another. The protocol can also smartly manage and rebalance among stablecoins by the built-in PCV split protocol.
Ring Protocol upside in the DeFi Ecosystem
Curve’s vision was to provide a stable swap that is 10x better on trading cost than Uniswap V2, hence hosting its own pool with its combined price curve specific for stablecoin. However, let us look back from late 2019 till now. The Decentralized Finance (DeFi) ecosystem is shifting from scattered solutions targeting unique problems to interconnected maps that leverage or innovate on top of one or another for the compounding innovation. The innovation growth in DeFi in the past one and half years has been so disruptive that it could be one of the fastest technology accumulation in human’s finance history.
Hosting your own liquidity pool like Curve is against the composability of DeFi, while Ring Protocol leverages the most innovative swap system like Uniswap v3. The Ring Protocol adds value to the Uniswap v3 platform by becoming the ‘routing’ traffic of any swap that provides 10x better trading cost, capital efficiency, and stablecoin liquidity.
As of today, Curve’s TVL is around $2.8B, among which stablecoin TVL is about $1.3B with less than 40K unique LP addresses. Furthermore, the trading volume is around $500M / daily with under 100 daily active users. (data source Dune Analysis Curve Dex)
Uniswap v3 stats
On the other hand, Uniswap V3 was launched on May.5th, 2021, and the first 24hr TVL growth is 2x of the Uniswap v2 in the first month. Today, less than a month after the v3 launch, the total TVL reached $1.1B, among which 500M of them are stablecoin.
What is impressive is the trading volume and active daily users. Uniswap v3 total trading volume is 55% of all Uniswap volume. Moreover, the total trading volume already exceeded $16B from 180K unique traders. Top trading pairs are all dominated by stablecoin pairs and totals up to 70% of the volume of all pairs.
If we look at the stablecoin swap trading volume, USDC/USDT alone contributed an accumulated $1.5B trading volume (avg $100M/daily). DAI/USDC is $651M, while DAI/USDT is $448M. All stable swaps exceed $2B. (data source Dune Analysis Uniswap v3)
Ring Protocol on Uniswap v3
Ring Protocol is bullish about Uniswap v3’s future trajectory, and the Ring Protocol is designed to establish itself as a core player in the DeFi community. Once launched, Ring Protocol will immediately start RUSD/DAI, RUSD/USDT, RUSD/USDC Uniswap v3 liquidity pool with customized range. One can imagine that with RUSD at hand, trading any ERC20 token on Ethereum naturally has a reasonable liquidity depth. Furthermore, any stable swap has a second path (via RUSD) for better price discovery. We expect that once successfully bootstrapped, RUSD will contribute to more than half of the total Stablecoin TVL and enable multi-billion trading volume on Uniswap v3.
Ring Protocol is launching soon, please subscribe to our medium channel and twitter for mainnet launch announcement.