# Yield Bearing Stablecoins: Balancing Returns, Risk and Sustainability - Martin Krung | Curve Finance

- Speakers: Martin Krung
- Channel: [ETH Belgrade Community](https://streameth.org/eth-belgrade-community)
- Date: 2025-10-07
- Duration: 29:13
- Topics: People & Blogs
- Watch: https://streameth.org/watch/yt-4zVIHmWyip4
- YouTube: https://www.youtube.com/watch?v=4zVIHmWyip4

## Description

Yield Bearing Stablecoins: Balancing Returns, Risk, and Sustainability - Martin Krung | Curve Finance

## Transcript

So happy to be here. Um I'm from Curve. I work for Curve currently as a BD. That's my role. But I have a history in blockchain and since more than a decade I was playing around with all the the the protocols have been showing up on Ethenet and since two years uh I'm doing BD for curve. I have a technical background too and I did think a lot about money and I talk about money less here too. So um yeah so that's about me. So now I'm doing I'm a DI have a D5 brain basically I would say basically so I don't know how well you know curve this is like the overview I will shortly speak about curve then the history of yield in crypto and then how stable coins are different from cash what's the quality of a stable coin because underlying of every um yield beering token is like a stable coin then we go in a short example then I talk about the different nature field in stable coin and also what's missing in this space currently and then we I will have an outlook. So yeah so first question who who did like farming for rewards or tokens here who's using like uh onchain capital and getting some yield. Okay a few and you still do it you still do it actively. Okay. Okay. So you don't Yeah, that's good only a fool. So you don't know the world very well. So yeah have a lot to tell. So curve basically is one of the it shortly after the first iteration of unis swap curve our founder uh he invents like the stable swap and stable swap is just still the leading AMM for correlated assets basically and it doesn't have any position like unis swap v3 just has one LP token and we still like improving this one. It also has a crypto like for non um corated assets and then uh two years ago we made a collateral deposition stable coin called curve USD so we have our own stable coin and we also have a saving version of this stable coin called serving curve USD we also have a lending market so basically it's it's a whole suit defy suite we have uh um for curve so but this talk is about yield So uh yeah this is like the the sentence from the past if you don't know the source of yield you are the yield basically because if you go historically back as the defi summer happening people have been forced farming these times you use basically a token of a project and you paired it to ETH or to a USD stable coin you put it in a liquidity pool because the goal of this project was having trading liquidity So basically you you bought the token or you got the pot airdrop you put it in the pool and then you got crazy API and the API has been paid in this project's token and of course this is a is a project uh I don't name it but you see the price of the token is constantly going down so most of the time uh yeah you lose lost money or only short time you could make a lot of money you have to sell constantly by like hourly you had to withdraw and sell but normally the price was dropping constantly And at the end the token is just going to yeah close to zero. So this was like yeah everyone played these games but at the end was like okay well I'm losing money. So somehow then was like the next step was okay yield being stable coins. So if you can uh make farm revenues uh with the stable coin then you don't have the issue that basically your pool is getting less and less worth. So most of the team started then a lot of stable coins have been popping out. So project made especially spa stable coins which you could form they also had like a token and this is a stable coin token. It's a token from a stable coin project who is that now basically and then everyone was like cheating yes yield being stable coin it's cool. So basically you can have a stable coin who then pays your interest rate and then you don't lose the value uh in the inflation because you get at least some kind of uh payment back. So you get yield on your stable coin to offset the inflation. The issue with this is so you have to pay taxes on the income. So it's a hedge but otherwise you at the same time if you do your taxes you have to pay um yeah some income tax on this one. So somehow it was solution. It worked and it's still like a dominant uh dominant um way to farm. Basically people want to have stable coins to farm because then you don't lose um yeah the the token value is not constantly going down. It's stable and if you are doing it well then you shift your position from one farm to another one. So this leads me to the talking about moness of stable coins and the issue is it's not an issue but if you look into stable coins stable coins are not cash. Some people think it's cash because you can directly send it to someone. It's a replacement of cash on chain. That's true. But it's much more because there's like a special special stable coins have a property which uh normal um fiat or cash doesn't have. So if you look like in money it's like every money should be stable money should be unit of account. So you yeah calculate in this then it's a medium of exchange. You can buy things with it. It's a store of value. You can basically yeah store value over time. And the new thing is with stable coins it they are also a means of speculation. So stable coins have another properties they just are mean of speculation. And if you think about many of these stable coins who popping up and they're there for a moment and then they disappear. And the reason why it's so shortlived is because people just hold them as a means of speculation not as medium of account and not of a store of value. It's just like yeah it's it's a you hold it short time you you make the the project and then you move on. So also this is a side note on curve we did think as we has like curve USD we did think a lot about yeah money but how can you make curve USD uh create a demand and it's already unit of account because it's dollar based it's a medium of exchange and a good position about curve because we are an exchange an onchain exchange we can basically work in the in the property of the medium of exchange because as the more pools we are create with curve USD the more it gets like uh it gets used as a meaningful exchange. So basically you can hold curve USD short time and then trade for another token and it's it's quite okay. But the store of value part and you see in different stable coins the store value part is very hard to reach because store of value basically it's only reachable with trust. So at the point people are trusting your your coin that it doesn't like go down the next days or fail then people over some time they're not going back to another stable coin who is more dominant. But you also see the most dominant stable coins. They have the reason why they're so dominant is basically because they are like a store of value in a sense. People really use it to yeah to just have cash basically on chain. And the means of speculation is not like in in a way you can say we also have like a SI curve. We have a saving C curve USD. And there you see this is kind where we play the means of speculation part in this. And uh the thing is yeah we'll explain this later. So if you go in the mean of speculation if you if you remember the first uh project token is constantly going down. This is the stable coin who is like uh this is stable coin which it produced and it's highly volatile. Even this you know the most deviation it has like was like 30%. So it was heavily at some point had some ups. Yeah, maybe that's fine as a whole. The down parks are much worse, but it should not down peg basically up package should be stable. And this is uh over here. And then if you compare this to curve USD, it looks like very unstable because of the scale. So I I did put it to scale and if you if you overlap the two graphs and put it to scale, then you see curved is very stable if you compare it to the to the other one. And it even got much more stable right now. So it's it's it's it's very good. And the reason why I'm showing this if you use if you farm a token and you want to produce a yield of the token, the peg of the token basically is the highest signal of the quality of the token. So if a if a stable coin can hold the pack very close, you can assume the quality is good. And this is like very simple to find out. you just look at the stable coin, you see what's going on. This is the reason why um yeah the quality bas basically is is the pack and this is uh everyone tries to have a very close pack and if you achieve have able to achieve this then you see the quality. So if you look at different stable coins and you want to judge them by the quality even also if you farm you see a little bit of history then you see what's the quality and the reason why this is the case is because stable coins CDP stable coins are mostly talking about people and the way they you work you have a collateral at ETH so you take your ETH you lend out the stable coin and then it's like a special lending protocol in a way it's special in a way because you lend a stable coin coin. In other lending points, you can have a collateral and you can lend other assets. But in a stable coin protocol, basically you lend the stable coin. And the the thing is every issue with the collateral, you see in the quality of the stable coin. So if a stable coin use collateral who has not a good quality or it has issues, it's very volatile or it fails or it gets hacked, then you you may see it in the pack basically because then you have a trust issue with the stable coin. stable coin basically and I guess this also true for um like treasure pack stable coins um the quality is always visible in the pack or long term and you we did CT packs of some some of recovered of course like some of them recovered but many of them go down and never recover basically so next I'm going to go in an example because yeah I see not everyone is like in this world so I show you how you can basically what's the wheel being stable coin and how you can make reward out of this and I'm using uh what the scurved we have and this is uh the token the saving curve USD is the curve USD who gives you a kickback of the income um curve generates and it's real income so now it's 7% I did this like two days ago it was like uh 4% basically but now it's like 7% and it's real yield In the sense what we do is basically if people mint curve USD out of Ethereum then you pay a rate for this and we take part of the rate. So you pay interest rate and we take part of the rate and we forward it to the S-curve to USD holders and what we do here is also like connected to the medium of speculation because curve USD is mostly used to go long. So this means people basically they you take the ETH they uh lend curve USD and then they use the curve USD to buy more ETH basically. So they speculate on the price going up of their collateral or or or other like crypto um uh tokens. And what we do here is basically we use the income from the most uh degenerate users. They do they take risk. We take the income and we forward it to the like the most conservative fund and then you can just basically hold the scurve USD and then you get like uh yeah you get paid an interest rate for this. So we do we shift basically from the part we have income from the most uh risk-taking ones we shift to the one who want to have it with way less risk and just the stable rate. So this is an example which uh currently this is the rate who is currently on. So this is how you basically can make reward of stablecoin how you can farm stablecom or take uh generate some income. So you take curve USD you pair it with s dollar s is another collateral depth stable coin you put it into a stable um uh pool on curve and for this you get different uh rewards. So first you get like the asset yield of the two tokens. So it's like at this calculation it's uh five six six% you get like the base yield of these two tokens who are in the pool and you still own them so you get rewards then you get on top you get the trading fees trading fee is quite high here so uh you take 6% over year it's not like this is a weekly rate so it's like this adds up to 11% and then on top you get the curve reward because curve basically pays you for providing liquidity into this one. So you make like 16 uh% here. Now it's even more because as you see jumped to 7% so it's like almost 18 or 19% right now. So which kind of risk you're uh taking if you do this. So you have of course you have asset risk basically you have the risk of scarf USD and you have the issue of S dollar and if one of them fails you exposed to the you both are exposed to them because at this point the pool will get um yeah has issue and the the the value of the pool go down then you have the pool risk. So you assume curve is safe and curve is very safe because it's very battle tested. So uh yeah it's quite safe. So you have this kind of risk plus you have the risk of the curve token risk in the sense because part of your reward is basically in curve and curve is a volatile asset. So you either can basically compound and this means you have to withdraw the curve and sell it every day every week or you basically can speculate that the price will go up of curve who is yeah it's not unlikely in this case but in many other stable coins we did see the price basically going constantly down stable coin projects which had a token so the price constantly down so you have to compound because otherwise you will not have these rewards and the thing is also you also have like uh a risk who is like a timing risk and this is more related to taxes because in a way you have to pay taxes on this and there there are stories of people who did heavily farm in DeFi summer and they made a lot of income on the books they had a lot of income because the time you get the token basically that's the taxable event in many countries then it's income but they did hold the token the hold token has been going constantly down and so they have like more tax depth than they uh have money on the other side So but that's not not the case anymore. I just say in a way the it it changed the the industry changed a little bit in the sense that now yeah you can farm stable coin and then you have uh more like sustainable rewards who also in the future um you have the same value. So the question is first do you do you need the so if you don't know the source field you are the yield. I'm not sure if this is completely true. It's more much more that you need to understand the nature of your yield and the different nature of yield. One is uh real yield is real revenue from a from a project and the other one is speculative yield and the real yield is more sustainable long-term and speculative field is more short-term basically and if you look into real yield there is like of course there from US treasuries there are token rounds where you get a kickback so these are not like curve USD or these are like um treasury back tok stable coins like uh USDM was a project but now it was like it it it got acquired but the way there was like basically you gave them you send them fiat they buy um US treasury for it as a backing of the stable coin and you get a part of the interest rate you get uh forwarded to the stable coin so basically you get the treasury yield on the stable coin um then they're like stable coin yield who are like they are more like a reward on provided capital. Athena for me is like this category. It's like a stabilized uh capital. Give them capital. It shows up as a stable coin but at the end they use your capital as a uh yeah for the protocol to work with basically and you get a router for that. Then there's yield from predatory revenue. I just said USD similar s dollar is like this. So in a way yeah you this project they take the income they generate from the most speculative users to the to the last uh uh speculative users and then you have the trading fees as located prior is also like sustainable descent it's real business income basically and if you look into speculative yield it's like this so speculative is very different because what's advised is basically the 10% APR or even more and people think oh that's that's awesome that's a lot me sometimes 20 but the issue with this is it's only a week or two so I calculate this for a week is it's it's not it's like a fraction of a person so if you have a thousand dollars in this forund 10% you get $10 $100 this is money but for a week you only get $2.70 so the question is is it worth to shift your capital around if you just make $3 on $100,000. So it's you need quite some capital to to do speculative yield because after two weeks or three weeks it's not there anymore. So you have to shift your position. It takes time. You have to research. Uh yeah it's work basically. And so this also why you always see this high API in the interface and some of them they are true most of the calculations are right but the issue with them is they're just therefore very shortlived basically. And for the real um yield it's not the case. Most of them are built on like sustainable business cases. So it's much more uh sustainable. Yeah, this I already told about um yeah there's other yield. It's like yield from from future air drops basically where you speculate on future airdrops and then uh yeah there's on new chains. This is similar to airdrops but you move your capital or stable coin to to new chains. You farm the chain you compound and take note. So this is the speculative side. It's just more shortlived. It also have another risk. It's it's it's more risky. Yeah, it's more risky because it's untested project. So you need much more knowledge to go in the speculative field basically. And then uh I'm coming to the end. So, so yeah, welcome to the jungle. Basically, this is a scans song. Welcome to the jungle. So, the I got the questions from as preparing this. I asked somebody, yeah, what do you want to know? How can we do it based on and that the feedback has been yeah the UIX of this far of this stable uh yield being stable coin is not very good in the sense that you don't see the risk and I think it's true. So there's no of course they're like uh projects who send you mails and they show you where you can get which interest rate but there's no page where you can basically go and see all the compounded risk you take by using this uh by by doing this um um holding or doing this uh displays basically. though I think the UIX is still not very good and the the main reason is I think that as a project you don't have the incentive to show the re the risk or as soon as you start showing risk people people also get the wow of risk. So projects they don't show you which kind of risk you compound and can it can be substantial. So if you do different gent some what they also do they leverage up. So you take the liquidity somewhere and then you you you even leverage up your position you get more reward of this but you also have like another risk in this. So it's like at the end yeah this is what what helps is you should understand a little bit what you're doing or you should just go something who is like test over time basically but then you won't get this high WS that's just how it is. You can of course you can just follow the trend of people and and and uh yeah that's how I do it. But if I if I I have like an inside view of this industry so I know the players I know their past. So if somebody makes a new project I know there like are good people they are like they do serious work or you know these guys more like for optimizing short term. So it's like it's not easy to find out if you're coming from outside then uh so one thing is like that basically so regulation killed it mika and also the genius act so in the genius act it's not allowed to have yield beering stable coins so government doesn't government doesn't like that you basically can hold it dollar somewhere onchain and you get constantly um revenue from uh yield being uh from treasury from US Treasury basically or for for for European treasury. So in a way the stable coin the the fullback stable coins they're not allowed to do uh these games anymore. Some do it you know circle with circle you could I think on Coinbase you could could have USDC and you got like a um a yield on this but this is then framed you get basically rewarded by circle and not from C uh from Coinbase and not from Circle directly. So what's the future and also I guess the if you look longer I guess yields will go down as the industry will get more major I think he will go down over time because what also is an issue this creates an issue as us as an AMM is that um you know this is the yield of uh USDC on a very very high at some point it was very high and the issue with this is if you are an AMM like us and people provide liquidity in stable coin pools and you suddenly get like 16% interest rate somewhere they move out their liquidity. So if you have a project or stable coin you want people to provide liquidity for you your project you have to match this kind of of prices and that's very high. So it means for million of liquidity on the you pay um 120k a year just for one million of liquidity if this is like over a year and this is a hefty price basically for liquidity. So in my opinion, okay, we like to play these games, but in a way it's also it's it's like a chicken and egg chicken and egg problem somehow because every new stable enter in the market depends on the cycle you enter. But if you enter in a high price environment, you have to need a lot of cash to bootstrap your system and it doesn't help the overall like industry. this volatility is basically I think it it limits growth basically and what would be natural is how the what's still the case why don't you get offchain onchain you get these kind of rates but offchain not so it's a high information asymmetry or yeah I I don't think it's also about risk but the risk is not like uh this is not about risk this is about market cycles basically and uh Yeah, that's stand. So over long term many projects uh look like this. This is a chain I yeah I don't say the name but this is a chain ging. So this is like most of the projects are like this. This is speculative field. So as long as it lasts you can enjoy enjoy but I guess over time it will go down over like yeah it has to and maybe it will help to to our growth in the future. So that's it. Uh yeah questions and then I' like info about curve and myself. Okay. [Applause] >> Hey Marian, thank you for the talk. Um it was pretty comprehensive on all the different risks that we can have on chain. Um be it from the protocol itself or the kind of yield that we're getting from. Um, one question that I wanted to ask. I feel like something we take kind of for granted in the stable coin space is that everything has to be pegged to the US dollar. We see this with curve USD, we see with USDC. Um, so I just wanted to make a bit of an open question like do you feel that um in the future this USD position is going to be staying? Um, are we going to be seeing other non-USD denominated stable coins? And how do you see this playing out in the future? >> The the thing is you know the dream market of curve is FX basically. So we would like to have all the stable coins with tide we tie uh with big pools and traded but we did what we did see is some kind of hyperolization. So always every cycle we think yeah maybe now it will arrive you know a fix will arrive but somehow uh my take is and I did see it you know many we have yeah I'm from Switzerland our currency is pretty stable but many people living in a high interest rate environment basically they hedge to dollars and because it has the highest liquidity they hedge to USDT basically and yeah that's the that's the short answer because it gots much more accessible you know Before basically you had to go somewhere and now you can do it onchain you can do it with small price you can basically go with your local currency back to to onchain USD so we see some kind of hyperolization I'm not sure about because now the dollar is under yeah is under attack I would say currently the dollar has issues and it changed a lot of the picture last few months basically uh maybe it will if like Trump is not anymore in the US maybe we'll change back it will get more into stable um territory but somehow I guess so it's really unclear right now I guess it has it's attractive to make a stable coin non US dollar ones but you need a lot of of uh of uh uh trading on this to make money and the thing is um yeah it's more happening in latam counties or counties with not so good uh um uh yeah not very stable stable coins basically And I guess there is some adoption who is not coming from D5. We talked to some of the players and they do more they use D5 as an intermedator area basically and it's just basically sending money from one country to another and then they do the the swap they do onchain but basically they go from a bank uh onchain and then they they go again with the bank to the local um um yeah uh currency basically. And I think there there will be adoption but it's somehow we not there there yet bas do we have time? No. Okay. Thanks.