Proposal to Further Secure CRV Market by Reducing CF to 60%


This proposal is a continuation of our ongoing efforts to bolster the CRV market’s security in the wake of the ongoing weakened liquidity environment. With insights gained from the recent CF reduction from 75% to 65%, Inverse Finance’s RWG is now recommending a further reduction from 65% to 60%. The latest RWG-authored risk assessment can be found here.


On July 30th, 2023, a series of exploits targeted certain Curve pools due to a bug in older versions of the Vyper compiler. The attack and the ensuing panic left CRV’s on-chain liquidity to levels below where Inverse can safely operate its CRV and CRV-derivative markets on FiRM, prompting a swift and decisive response executed via DAO governance in Proposal 124. These changes have shown to stabilize the markets to a degree, as shown in the market snapshot section for the CRV market below. Our continuous analysis indicates that a further CF reduction to 60% would optimize the market’s resilience against potential future liquidity concerns.


With FiRM we strive to accommodate long-term lending with peace of mind. The RWG acknowledges the sensitive nature of such changes. Parameter changes to markets, especially CF, should ideally be rare and when they occur are done in a manner that minimizes risk of bad debt and user liquidation. We feel this is an opportune time to recommend such a change.

Despite strong public support shown for Curve Finance in the immediate aftermath of the exploit by DAOs, competing protocols, market makers, and funds alike, the CRV market continues to pose a significant risk for FiRM. While the current collateral factor of 65% has improved our security posture, the RWG deems we are still excessively exposed to risks in the face of continued low on-chain CRV liquidity.

CRV Market-related proposals passed through Inverse Finance Governance are presented in the table below. Liquidity figures are from DeFiLlama.

Proposal # Date Action On-Chain Liquidity
95 March 15 CRV Market Launch $25M
108 May 14 CRV Market Parameter Increases $32.9M
110 May 27 CRV Market Parameter Increases $35.5M
124 August 9 CRV CF Reduction $33M
127 August 23 CRV Market Pause $27M
Present Day October 2 CRV CF Reduction $26.3M

Reducing the collateral factor from 65% to 60% represents our proactive approach, ensuring that we remain ahead of potential risks. We aim to strike a balance between maintaining sufficient collateralization for borrowers and reducing the protocol’s exposure to CRV’s price fluctuations.

Market Snapshot:

Current (Oct 2nd, 2023)

CRV (#) Total Collateral Debt Collat. Ratio Avg Borrow Limit Positions (#)
47,143,760 $23,548,308 7,689,209 DOLA 306.25% 50.24% 1

Past (August 4th, 2023)

CRV (#) Total Collateral Debt Collat. Ratio Avg Borrow Limit Positions (#)
27,096,228 $15,440,000 7,689,209 DOLA 200.78% 66.41% 1

Proposed Changes:

Current Proposed
CF 65% 60%
Liquidation Incentive 10% unchanged
Liquidation Factor 20% unchanged

Subject to successful community governance voting, the CF for the CRV market will be decreased to 60%. Following this adjustment, a reassessment phase will determine any further necessary alterations based on real-time data to the CRV market. Consistent with the earlier policy, no fresh liquidity will be introduced to the CRV market unless there’s a positive shift in the liquidity landscape.

Risk management remains our utmost priority. By learning from past events and making informed adjustments, we actively strive to foster a secure environment for our users. The community’s involvement, insights, and feedback have been invaluable in these efforts.

On Chain Actions:

  • Set FiRM CRV Market CF to 60%.

I’d like to know what the backwards looking TAS would be for CRV when it was originally added.

I honestly don’t see this reduction in CF as necessary but perhaps I’m missing something.

1 Like

Answered here:

Additional data points to consider:

From this we draw the following:

  • CRV liquidity levels have improved since exploit, and are back to yearly highs
  • CRV distribution has improved/ Total Asset Score has remained the same since initial market launch
  • User A fully exited AaveV2 and Abracadabra, joined Silo Finance and C.R.E.A.M. Actively manages their position.
  • CRV remains a highly leveraged asset, Despite total debt from User A is down from highs of $80M to ~ $43M, CRV remains a highly leveraged asset and is vulnerable to liquidation cascades.
  • User A has $9.56M (20.2M CRV) in dry powder to add to positions were they to become unhealthy.
  • At current price ($0.473), CRV would have to drop ~48% for avg liquidation price to be hit. Highest Liquidation price (CREAM position) is ~41% drop away and has potential to cause the liquidation cascade.

All the above is meant to inform the community on why we hold our current stance. However, we acknowledge that different opinions and conclusions can be drawn from this information.

I believe this would be more detrimental to the protocol than it could be good.

In general I’m not a fan of changing market parameters after they’re launched. I fully understand that the situation for a given asset does and will change. But we should be looking to account for that upon market launch.

Overall, I don’t think the change in TAS reflects the need to make this change in parameters, likely it would only result in capital flight

1 Like

For this proposal. While I agree that parameters shouldn’t be changed ideally and shoud be thought of carefully beforehand, I believe in this situation it’s better to be safe than sorry. The bear market might be far from over and if liquidation were to occurs for CRV it is paramount that FIRM should liquidate in priority. If the protocol where to occur bad debt again it migth be game over.

furthermore I do not see too much negative impact from this action. If we lose capital from this market, then it could free up some for other as we are in any case close the limit of DOLA liquidity.

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Appreciate the feedback @mason @ratchet. We’ll continue to monitor the CRV liquidity situation and user A’s overall position and for the time being hold off on pushing forward with the recommendation. Were this stance to change, we’ll use this forum post to notify our community. If CRV on-chain liquidity continues to improve and user A continues to deleverage his position, we would be satisfied with recommending no change (continuing with current market parameters).

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