What is a Tricrypto Pool?
On Curve Finance, the tricrypto pool solely hosts Ethereum-based digital currencies, including ether (ETH), wrapped bitcoin (WBTC) – a DeFi-friendly version of the foremost asset, and the USDT stablecoin.
The pool is Curve Finance’s innovative strategy to break away from the “like-minded” assets (DAI/USDC) framework.
Instead, it provides access to non-stablecoin-based liquidity pools where investors can deposit capital and pull funds for trading. This initiative is part of Curve V2’s range of products introduced two years ago.
LPs deposit equivalent amounts across the three supported cryptocurrencies. The smart contract then automatically readjusts the asset’s price internally based on the current amount in the liquidity pool. This reduces the potential of creating losses within the pool.
Much like every other DeFi pool offered on the Ethereum-based decentralized exchange (DEX) platform, the tricrypto pool provides investors with an appropriate level of yields.
At the time of writing, LPs earn a daily base annual percentage yield (APY) of 1.86% and 0.51% weekly.
The rewards are also payable using Curve Finance’s native CRV token, with LPs getting between 1.92% and 4.8% in the digital token.
For its fees, Curve Finance charges 0.04% to 0.4% for each swap executed.
History of Tricrypto Pool
Unlike other liquidity pools, the Tricrypto pool is a novel concept explored by the Curve Finance team.
The pool officially kickstarted in August 2021 following the launch of Curve V2, and it quickly gained immense popularity within the DeFi community.
The core reason for its launch was to offer more use cases for the entire Curve Finance ecosystem.
In just two weeks, the DeFi liquidity pool garnered over $400 million in deposited funds. By the end of that month, it boasted an impressive $530 million in assets under management (AUM).
However, its growth slowed significantly over the years following a decline in the broader crypto market.
On 9 October 2023, the tricrypto pool held $64.7 million plus in total AUM. The digital asset is split almost evenly, with the USDT stablecoin controlling 33.43%, WBTC holding 33.31%, and the ETH token closing with 33.26%.
The total value in the pool is largely impacted by the current price of the individual asset (especially WBTC and ETH).
WBTC is the DeFi version of the Bitcoin asset. It tracks the value of the original crypto asset and can be used in buying and selling in the DeFi landscape.
In its original form, bitcoin (BTC) is rigid and cannot be traded on the DeFi ecosystem due to the absence of a smart contract functionality on its base network. WBTC solves this challenge by wrapping the asset in a smart contract format.
Hence, the value of the BTC asset is perfectly in sync with the WBTC, given that they are the same but operate in different ecosystems.
While Curve Finance calls Ethereum its home, the AMM protocol has also extended its tentacles to other DeFi-oriented networks.
What Makes Tricrypto Pool Unique?
The Tricrypto pool stands out by offering users exceptional value for their deposited funds.
Below, we highlight some of its unique takes:
- It grants exposure to three of the most valuable cryptocurrencies in the market. Beginning from WBTC, ETH, and USDT, liquidity providers have direct access to three high-value assets with enough liquidity to keep afloat.
- It maintains a strong slippage tolerance between 1% and zero, meaning investors can easily swap their digital assets without losing a part of the exchanged value during the exchange process.
- Thirdly, the tricrypto pool allows users to earn sizable yields by providing liquidity for some of the biggest crypto assets. The figure borders between 1.86% daily and 0.51% weekly. This is quite sizable and allows investors to earn trading fees and yields from idle cryptos.
Generating More Yields as LP with Convex Finance
Convex Finance supports the tricrypto pool, making it even better for LPs. Investors who have deposited their assets into the tricrypto pool through the Ethereum network can utilize Convex Finance to earn even more substantial yields.
Also operating a liquidity pool on Curve Finance, Convex Finance enables users to convert their CRV tokens into cvxCRV, its native token.
Once this conversion is completed, users can stake their cvxCRV tokens to earn annualized rewards from the primary Curve Finance protocol and the Convex Finance dApp.
On Convex Finance, the tricrypto pool rewards users with a 7.18% variable annual percentage rate (vAPR). Its projected vAPR, however, stands at 6.49%.
These yields are separate from the standard 50% of the trading fee paid to all CRV token holders, making it a great passive income stream for DeFi investors.
The expected yield is variable due to the pool’s trading activity dynamics, the value of deposited crypto assets, the value of the rewarded asset, and the current market reward rates.
How to Deposit Into a Tricrypto Pool
Depositing into the tricrypto pool is straightforward and follows the same process as all other liquidity pools.
Below, we provide quick steps on how to get started.
Step 1: Choose a Blockchain Network
While Ethereum is often a top choice, it is not viable for deposits below the $100,000 price tag due to the high gas fee (transaction charge for verifying transactions on the network) it incurs.
Hence, using a low-fee protocol like Arbitrum or Polygon is advisable to provide liquidity into the tricrypto pool.
To do this, take the following actions:
- Head to the top right side of the screen and click on the ‘Select Network’ icon.
- Click on ‘Arbitrum/Polygon’ to switch from ‘Ethereum.’
Step 2: Download Crypto Wallet
Curve Finance supports 14 cryptocurrency wallets. However, Metamask is the recommended software crypto wallet to use here due to its native support for all Ethereum-facing protocols. Others like Trust Wallet can also be used.
Once the software is downloaded, follow these steps:
- Head to the top right-hand of the screen and click on the ‘Connect Wallet’ icon.
- Select a preferred one and click ‘Connect Wallet’ to complete the accessibility process.
Step 3: Fund Wallet
- Transfer an equivalent amount of the three cryptocurrencies to the selected crypto wallet.
For instance, if a user wants to fund their wallet with $600 worth of cryptocurrencies, they will need to deposit $200 in USDT, $200 in WBTC, and $200 in ETH.
Step 4: Complete Deposit
- Once the wallet is funded, type in ‘WBTC’ in the search bar and click on the relevant result.
- On the subsequent page, click the ‘Deposit’ button and follow the on-screen prompts to grant access to the crypto wallet.
- Then, the funds will be duly withdrawn from the wallet and deposited in the tricrypto pool.
Tricrypto pool is a unique blend of stablecoin and native cryptocurrencies, providing a three-headed yield to DeFi investors.
While it comes with huge upside potential, the liquidity pool is also risk-prone due to cyberattacks by malicious actors.
A succinct instance is the hacking exploit that drained the Arbitrum tricrypto pool of $70 million in late July 2023.
As a result of an issue in Vyper compiler in versions 0.2.15-0.3.0, following pools were hacked:
Another pool potentially affected is arbitrum’s tricrypto. Auditors and Vyper devs could not find a profitable exploit, but please exit that one
— Curve Finance (@CurveFinance) July 31, 2023
Hence, DeFi investors are strongly urged to exercise caution within the DeFi landscape, given the heightened susceptibility to security breaches.