Curve Founder Michael Egorov Tackles Impermanent Loss with New DeFi Strategy

Founder Michael Egorov of Curve Finance has introduced a new Decentralized Finance (Defi) strategy that has been designed to eliminate perishable loss, one of the largest and most persistent challenges for liquidity providers. The proposal was detailed in detailed in a new paper published by the proceeds on the social media platform X, with the subtitles of “proceeds base”.

The proposed model uses a new combination of stable leverage and interest rate balancing, which gives liquidity providers the benefits of earning automated market maker (AMM), while only exposed to a single active, which gives the risk of perishable loss.

Strategy focuses on one of Defi’s biggest challenges

Permanent loss occurs when liquidity providers earn less than by holding their tokens. It is the result of price diving between the two assets in an AMM pool. Egorov’s solution neutralizes this risk by maintaining a constant leverage between the deposited and borrowed assets.

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Instead of re -balancing on the basis of price, the model adapts due to interest rates. Providers deliver one token and borrow the other, where they retain the exposure of a single one, while they still earn trading costs. The model provides predictable income without the disadvantage of token price volatility.

How it works: lever and interest rates

The approach is based on AMMs that are configured to automatically manage leverage. A special “Re-Leverage-Amm” adjusts positions as the market conditions change. Liquidity providers are only exposed to one token, while the borrowed actively fluctuates. Interest rates are shifting to maintain the market balance, to replace the need for reducing price -based price.

Egorov presents a formula to estimate net Apr, to make up for earned costs, loan costs and herbalance losses. The paper consistently shows positive returns by simulating different market scenarios, including volatile BTC/USD conditions.

Simulations show promising returns

In Backtests of six years, the strategy performed better than traditional AMM setups. Under Curve’s crypto -wap configuration, the model achieved up to 20% Apr. It performed best when the token prices remained within a modest reach, so that the income of the reimbursement could borrow and covers costs in balance.

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This model suggests a way to earn yield without active trade or multi-asset exposure passively. If successfully implemented, the model can change the way in which liquidity is provided into decentralized financial protocols.