How It Works
Users deposit collateral (ETH, stETH, WBTC, etc.) into Curve's LLAMMA market to mint crvUSD. Unlike Maker's sudden liquidation, LLAMMA continuously adjusts the collateral ratio by trading in and out of the collateral. When the collateral price falls toward the liquidation threshold, LLAMMA gradually converts collateral into crvUSD (soft liquidation). When prices recover, it converts back (de-liquidation). This means borrowers lose some value to LLAMMA trading fees during volatile periods instead of facing sudden liquidation. The Monetary Policy contract dynamically adjusts the borrow rate to maintain the peg: rate increases when crvUSD trades below $1, encouraging repayment.
Backing Type: Crypto-Collateralized
Crypto-collateralized stablecoins are over-collateralized by on-chain assets such as ETH, WBTC, or other tokens. Users lock collateral in smart contracts to mint stablecoins, and automated liquidations maintain solvency if collateral values drop.