Curve vs Fluid
Different Paths to DeFi Liquidity
Decentralized exchanges (DEXes) are the lifeblood of DeFi, but not all DEXes play the same role. Two notable models have emerged in the stablecoin trading arena: Curve - the long-standing stablecoin liquidity pioneer, and Fluid – a newer capital-efficient upstart. Both aim to facilitate large, low-slippage trades (especially for stable assets), yet their approaches and philosophies diverge significantly.
This post breaks down each protocol’s value proposition, compares how they handle liquidity and efficiency, and discusses where each shines depending on context. We’ll also explore how viewing a DEX as infrastructure vs. a product changes the debate around “dominance,” and what these competing models suggest for the future of decentralized liquidity.
Curve DEX: Stablecoin Liquidity Pioneer
Curve Finance emerged in 2020 as a specialized DEX for swapping like-assets (primarily stablecoins and pegged tokens) with minimal slippage. Its value proposition was simple but powerful: concentrate deep liquidity in a few pools (e.g. the famous 3pool for DAI/USDC/USDT) and use a tailored stable-swap curve formula to enable efficient trades. At its peak, Curve’s 3pool held around $6 billion across DAI, USDT, and USDC, making Curve the key venue for stablecoin liquidity and a barometer for stablecoin health. For a time, Curve captured over 40% of all stablecoin-to-stablecoin trading volume on Ethereum – a testament to its dominance in that niche.
How Curve works
Liquidity providers (LPs) deposit assets into Curve pools and earn low trading fees plus CRV token incentives. Curve’s veCRV model (vote-escrowed CRV) encourages long-term thinking: users lock CRV for voting power to direct liquidity incentives. This mechanism lets projects effectively “bribe” veCRV holders to boost rewards for specific pools, attracting deeper liquidity. The philosophy is that Curve acts as a base layer infrastructure – the protocol itself is the product, and the CRV token’s main purpose is to govern and support an ecosystem built atop it. In other words, Curve wasn’t designed to maximize its own profit in a traditional sense; it was designed to maximize liquidity and utility for other protocols.
Over the years, Curve became deeply integrated into DeFi. Stablecoin issuers and DAO treasuries sought to accumulate veCRV to secure liquidity for their tokens. Yield aggregators like Yearn built strategies on Curve pools, and other protocols (Convex, StakeDAO, etc.) grew around optimizing Curve’s incentive system. Many decentralized stablecoins (Frax, LUSD, MIM and others) used Curve pools as their primary liquidity hubs, leveraging its deep liquidity to maintain pegs. In short, Curve turned into public infrastructure: a liquidity highway where protocols could plug in and benefit from network effects.
Fluid DEX: A New Capital-Efficient Liquidity Hub
Fluid is a newer entrant (launched late 2024) that takes a novel approach: it blurs the line between a DEX and a lending market. Built by the Instadapp team, Fluid’s design introduces Smart Collateral and Smart Debt – mechanisms that allow liquidity to be used for multiple purposes at once (blog.instadapp.io).
In Fluid, assets supplied by users don’t just sit idly in an AMM pool; they also act as collateral in an integrated lending layer, and borrowed assets can double as liquidity for trading. This “DEX-on-lending” architecture unlocks extreme capital efficiency through leverage (via specialized vaults that amplify LP positions).
How Fluid works
Under the hood, Fluid operates a unified liquidity layer that connects a money market (lending/borrowing protocol) with the DEX. When you provide liquidity on Fluid, you’re essentially depositing into a lending pool and making those funds available for swaps. Smart Collateral means a pair of tokens (e.g. USDC-USDT, ETH-wstETH) can be deposited as a single position that earns both lending interest and trading fees simultaneously. Smart Debt means if you borrow assets from Fluid’s lending side, those borrowed tokens are not just a liability – they are deployed as liquidity in the DEX to earn fees that offset your borrowing costs. In essence, every asset – whether supplied or borrowed – is put to productive use in Fluid’s DEX. This is like turning the typical AMM liquidity model on its head: rather than needing separate capital for providing liquidity and for lending, Fluid makes them one and the same.
The result is dramatically higher capital utilization. For example, advanced Fluid vaults let liquidity providers take on leverage to scale up their position. One scenario described is using a wstETH-ETH pair as both collateral and debt at 95% loan-to-value; this yields a 20× leverage, creating an effective LP position ~39× the original capital, earning 39× the fees. While such leverage entails risk, it demonstrates Fluid’s focus on maximizing output from every dollar of liquidity. As the Instadapp team puts it, Fluid’s DEX “generates up to $39 in liquidity per $1 in TVL, making it the most capital-efficient and scalable decentralized exchange”.
Fluid has quickly found a strong niche in stablecoin trading, directly challenging Curve’s historical turf. In fact, several stablecoin projects have chosen Fluid as their main liquidity hub in this market cycle – examples include Aave’s GHO, Resonate’s wstUSR, and others. These projects are drawn by Fluid’s ability to offer LPs higher combined fees (trading + lending) and even the ability for market makers to borrow liquidity to deploy, thanks to the Smart Collateral/Debt design. By mid-2025, Fluid had surged to become the top DEX for stablecoin-to-stablecoin swaps on Ethereum, handling roughly a third of such volume and surpassing Curve’s share by a wide margin. In other words, Fluid demonstrated that pure volume dominance can shift when a new model offers greater capital rewards.
Liquidity & Capital Efficiency: Different Approaches
Both Curve and Fluid aim to concentrate liquidity for efficient trading, but they achieve this through very different means:
Curve’s Liquidity Model: Curve relies on attracting large pools of stable assets and optimizing how those pools are used for swaps. Its stable-swap algorithm gives low slippage for trades around the peg, meaning LPs’ capital goes further than it would in a normal constant-product AMM. However, Curve’s capital efficiency is mainly from the math of the curve, not from re-using the assets elsewhere. Assets in a Curve pool sit there to facilitate swaps (aside from some pools that integrate lending protocols like Compound, those are separate optional designs). To grow liquidity, Curve uses token incentives: by distributing CRV rewards (augmented by projects’ bribes), it ensures LPs are compensated to keep large amounts deposited. This has proven effective at achieving deep liquidity – e.g. billions in 3pool as noted – but much of that capital is idle in between trades, earning only modest fees most of the time.
Fluid’s Liquidity Model: Fluid pursues active capital utilization. Liquidity in Fluid is not idle; it doubles as collateral or debt in a lending engine. This means a single dollar can support trading liquidity and simultaneously earn lending yields or fuel additional borrow-driven liquidity. In practice, Fluid can offer comparable or better swap depth with far less TVL, because each asset is effectively present on both sides of the market. For example, if you supply USDC-USDT on Fluid, you’re effectively providing liquidity and lending those stablecoins out; if a trader swaps USDC for USDT, behind the scenes Fluid might shift some USDC to the lending pool and draw out USDT from the other side, using its mirrored “smart” pools (mixbytes.io). The system rebalances using Uniswap-like invariants to keep prices in line. The upshot: higher capital efficiency. Fluid’s own data highlights extreme examples (20× or 9× amplification in special vaults), but even for normal users, the promise is that you don’t need $1B TVL to get the depth that historically required $1B on Curve. This efficiency can make it easier for newer projects to bootstrap liquidity – they can lure LPs with the promise of stacked yield (trading fees + interest), rather than having to emit huge amounts of incentive tokens.
Trade-offs: Curve’s traditional model is simpler and arguably more battle-tested. LPs on Curve face mainly impermanent loss and smart contract risk, but not margin liquidation risk. Fluid’s model, while boosting returns, introduces complexity and potential new risks – for example, highly leveraged positions could be liquidated if markets move adversely (though Fluid minimizes slippage on liquidations by performing them on its own DEX liquidity (research.nansen.ai). Fluid LPs need to understand they are effectively also lenders/borrowers in some cases. For many participants, these risks are manageable and worth the reward, but it’s a different risk profile than passively market-making on Curve.
In calm market conditions, Fluid squeezes more juice from the orange; in stress scenarios (e.g. a stablecoin depeg or a rapid price move), Curve’s plain pools might behave more predictably, whereas Fluid’s interwoven system must manage lending health as well. Context matters – if you want maximum efficiency and are comfortable with complexity, Fluid shines; if you prioritize a simple, time-tested pool with huge liquidity at rest, Curve remains attractive.
Incentives and Sustainability
Curve’s Incentive Structure: Curve’s sustainability has long been tied to the veCRV incentive model. By design, Curve continuously mints CRV tokens (with a diminishing schedule) to reward LPs. This dilutive reward is made sustainable by creating demand for CRV: projects lock CRV (reducing circulating supply) to gain voting power, so they can direct more rewards to their favored pools. It’s an equilibrium where various protocols (and yield farmers) compete in “gauge wars” to ensure their pools stay liquid. While this model doesn’t yield traditional “profit” for Curve as a company, it has proven resilient in maintaining liquidity over multiple years. In essence, Curve bootstraps liquidity via inflation, then relies on network effects to keep that liquidity around. Fees from trades are relatively low (Curve typically charges 0.04% on stablecoin swaps, with half going to veCRV lockers as a kind of dividend), so fee revenue has been a secondary motivator compared to token rewards. This led some analysts to note that Curve’s on-paper market share or volume might not translate into high protocol revenue, but again, Curve’s community might counter that the protocol is serving its purpose if others are profiting on top of it.
One could question how sustainable it is to rely on token emissions long-term. Indeed, CRV’s price and the ROI for LPs can fluctuate with market cycles. However, Curve’s team and community seem content with the model of DEX as public infrastructure, where success is measured by usage and integration rather than profit.
Fluid’s Incentive Structure: Fluid, by contrast, leans into direct value capture. It is still early in its lifecycle, but Fluid has a native token (FLUID/INST) and a more conventional view toward revenue. Because Fluid earns a cut of trading fees and interest before distributing the rest, it can accumulate a treasury (or potentially buy/burn tokens, pay stakers, etc., depending on its token economics). Fluid did use token incentives too – for example, allocating some token supply to bootstrap liquidity on new chains – but broadly it seeks to be self-sustaining by design: the idea is that high capital efficiency will attract organic usage (traders and borrowers come for the good rates, LPs come for stacked yields), generating fees that make the system worthwhile even without massive token emission. An early sign: Fluid’s lending market reportedly reached $800M in size within 3 months of launch, and its DEX volumes accelerated after the introduction of Fluid v2. This traction suggests the model can stand on its own merits if it continues.
Of course, Fluid is not entirely removed from token incentives or external factors – it still has governance, and its token price can influence how attractive its yields are (for instance, if part of LP reward is in tokens). Interestingly, as of mid-2025, Fluid’s TVL was climbing while the token lagged, indicating that users were using Fluid for its features (yield, leverage) regardless of token speculation. If Fluid’s revenue streams start translating into token holder value (e.g. via buybacks or dividends), it could strengthen the feedback loop of sustainability. But if not, there’s a risk that liquidity might chase the next high-yield venue (just as it moved from Curve to Fluid). Fluid will need to prove that its higher yield is sustainable – i.e. that lending interest and trading fees remain robust enough to keep LPs around after any initial incentive programs taper off.
Integration and Ecosystem Impact
Curve and Fluid also differ in how they fit into the broader DeFi stack and how other projects utilize them:
Curve as DeFi Infrastructure: Curve’s greatest strength is its entrenchment in the DeFi ecosystem. It’s not just a venue, but a foundational layer for other protocols. For example, when Terra’s UST stablecoin rose to prominence, its Curve pool (4pool) was considered critical infrastructure; similarly, Lido’s stETH found a natural home in Curve’s stETH-ETH pool, which became a reference point for staked ETH liquidity. Many DeFi strategies use Curve LP tokens as yield-bearing “money lego” pieces – you can deposit Curve LP tokens into lending platforms or vaults to earn extra yield on top of Curve’s yield. In short, Curve has become a public good in DeFi: widely used, composable with almost everything, and governed by a wide set of participants.
Fluid as a Unified Liquidity Layer: Fluid, being newer, is quickly expanding its integrations but in a different fashion. Rather than other protocols building on Fluid in the same way, Fluid is itself an aggregator of functions (DEX + lending + soon “on-chain credit” for protocols). This unified design means a project can plug into Fluid and get a one-stop solution: liquidity + borrowing capacity in one. For instance, stablecoin issuers that choose Fluid as their main pool not only gain a trading venue but also allow their coin to be used as lending collateral and borrowed asset from day one. This can be attractive – a project might look at Fluid and see an opportunity to maximize capital use: if their token or stablecoin can be listed in a Fluid Smart Collateral pair, liquidity providers could earn multiple revenue streams, reducing the need to pay high incentives. In contrast, integrating with Curve might require to acquire veCRV or pay bribes continually to attract liquidity – a more indirect and potentially costly route. On the other hand, the project might also consider risk and control: Curve’s model is straightforward and time-proven, whereas Fluid’s complexity might be harder to model and could introduce systemic risks that are tricky for an external project to manage. It really depends on the project’s design philosophy: do they want the highest efficiency and don’t mind complexity (Fluid’s appeal), or do they prefer robust simplicity and existing networks (Curve’s appeal)?
Both Curve and Fluid are extending across multiple chains, recognizing that being omnichain liquidity infrastructure is key to future growth. Curve has deployed on several L2s and alternative chains (Polygon, Arbitrum, Avalanche, etc.), usually as separate instances of its pools with new gauges. Fluid has also launched on L2s (and is planning expansions to ecosystems like Solana via partners), using some token incentives to seed those markets.
Over time, it’s likely that builders and investors will evaluate these protocols not just in isolation but as part of a cross-chain liquidity strategy. A DAO treasurer or DeFi builder might ask: “On which platform will my liquidity be most useful and accessible to users across chains?” Curve’s long history and broad adoption make it a safe bet for reliability and integration. Fluid’s momentum and innovation make it compelling for those who want cutting-edge efficiency and are willing to be early adopters of a newer system.
Infrastructure vs. Product: Two Mindsets on DEX Dominance
The recent discussions around Curve vs Fluid have highlighted a philosophical split: Should a DEX be viewed as public infrastructure or as a profit-generating product? This viewpoint can drastically change how one measures “dominance” or success in the DEX space.
From the infrastructure mindset (which Curve exemplifies), a DEX’s success is measured by how much others build on it and benefit. Market share in volume can be a misleading metric if taken alone. For example, Curve’s share of stablecoin swaps has fallen as Fluid’s has risen – on the surface suggesting Curve is “losing.” However, volume doesn’t equal value captured given that a protocol may have a lot of volume but not generate any money. In Curve’s case, making swaps ultra-cheap was a deliberate strategy to attract volume, even if that means lower fees. The real value of Curve is in enabling other protocols (like stablecoins, yield vaults, etc.) to operate efficiently on top of it. In this mindset, a DEX is more like a public utility – it should prioritize sustainable liquidity and reliability over extracting profits.
From the product mindset (which Fluid leans toward), a DEX is judged by competitive performance metrics: user growth, volumes, revenue, token value, etc. If a new DEX captures users and maintains tight liquidity (and can do so profitably), it should be considered superior. Fluid’s rapid ascent in volume share and its deep stablecoin pools would, from this view, indicate that it is outcompeting Curve on liquidity quality (spreads) and attracting order flow. Mercenary capital can leave if rewards dry up, and traders will route to wherever spreads are lowest and execution is most capital-efficient. If Fluid offers a better experience (lower slippage, potentially better rates due to its blended yield for LPs), then it will earn the order flow. In this mindset, a DEX is more like a business in a free market, and if it “falls behind” on key metrics like volume or liquidity depth, that is a sign of waning competitiveness.
The truth likely lies in between. Even a public-good protocol needs some economic sustainability, and even a revenue-driven protocol needs community and builder buy-in. The dominance debate between Curve and Fluid illustrates this balance: Curve dominated as an open infrastructure (to the point that new protocols had to conform to Curve’s system via gauge wars), and now Fluid is dominating by operating as a high-efficiency product that optimizes every angle to attract usage.
It’s worth noting that these approaches aren’t mutually exclusive – Curve has been innovating (e.g. launching its own over-collateralized stablecoin crvUSD and exploring new AMM designs), and Fluid’s team openly acknowledges building on ideas from predecessors like Uniswap and Curve. In DeFi’s lego-like world, today’s “competitor” can become tomorrow’s integration partner.
Future Outlook: Coexistence and Convergence in DeFi Liquidity
The rise of Fluid against the backdrop of Curve’s established presence is a microcosm of DeFi’s evolution. What might this mean for the future of decentralized liquidity?
Specialization vs. Unification: Curve exemplifies specialization – a focus on doing one thing (stable asset swaps) extremely well, and then expanding gradually. Fluid exemplifies unification – combining multiple financial primitives (AMM + lending + leverage) to create a super-powered platform. Moving forward, we may see convergence: specialized protocols adding more features, and unified protocols refining specific use cases. For builders and investors, this means more choice. A project might use Curve for one aspect (e.g. a reliable stablecoin pool) and Fluid for another (e.g. leveraging that stablecoin liquidity), or vice versa. We’re likely moving toward a landscape of “liquidity layers”, where protocols like Fluid provide general-purpose liquidity that can flow into various uses, while others like Curve provide rock-solid pools that everything can plug into. The lines could blur as each tries to capture the best of both worlds.
Impact on Builders: For DeFi builders (say launching a new stablecoin or an LSD project), the strategies for bootstrapping liquidity are broader now. One path is the Curve route: participate in gauge wars or partner with Convex/others to direct emissions to your pool – effectively renting liquidity via incentives on an established platform. Another path is the Fluid route: create a Fluid Smart Collateral/Debt pair with your asset – effectively integrating your asset into a lending+trading market from day one, attracting liquidity by offering multi-layer yields. The best choice depends on context: If your priority is quick depth and you’re comfortable with Fluid’s novel mechanics, you might lean that way. If you value predictability and existing integrations (or if your asset doesn’t fit Fluid’s current model), Curve might be safer. Some projects may even pursue both, using Curve for one market (e.g. mainnet liquidity) and Fluid for leveraged markets or cross-chain expansion. The key for builders is that liquidity is becoming more dynamic – it’s not just about pooling tokens anymore, but about how those tokens can be utilized across protocols.
Impact on Investors: For investors and LPs, these developments highlight the importance of understanding protocol design behind headline APYs. Curve’s yields come largely from token emissions and modest trading fees – which can be sustainable if you believe in Curve’s long-term role, but are subject to token value fluctuations. Fluid’s yields come from real economic activity (trading fees, interest), amplified by leverage – potentially more “organic,” but also involving complex risk (liquidation, smart contract layers). The future may favor models that generate real yield and align incentives sustainably. Fluid’s out-of-the-box revenue generation is appealing here, though Curve’s model has proven resilient through multiple cycles. Investors might also look at the tokens differently: CRV as a governance power play (and indirect claim on ecosystem growth), FLUID (or INST) as a growth play with eventual fee capture. The debate around value capture vs. value creation will continue to play out in token valuations. If Fluid continues to rake in fees and volumes, one would expect its token value to eventually reflect that – unless the market believes those fees won’t accrue to holders. Meanwhile, if Curve maintains its position as indispensable infrastructure, CRV’s influence (even if not traditional profit) could maintain value due to the control it grants over DeFi’s plumbing.
Sustainable Decentralized Liquidity: The contrasting models also spur questions about what truly sustainable liquidity looks like. Curve’s model could be seen as sustainable in a decentralized sense – it doesn’t rely on any single profit motive, and if CRV emissions eventually taper off, the hope is that by then enough value is built on top that liquidity remains. Fluid’s model aims for economic sustainability – if it consistently makes money, it can potentially self-fund incentives or reward participants without incessant inflation. The future may show which approach holds up better: perhaps a blend, where protocols treat liquidity as a long-term utility (not over-extracting fees), yet also ensure that those providing liquidity are compensated from actual usage.
In conclusion, Curve and Fluid each perform better in different contexts – and that’s a great thing for DeFi. Curve offers stability, trust, and an ecosystem of integrations that make it a go-to base layer, especially when you think of a DEX as common infrastructure. Fluid offers innovation, efficiency, and an all-in-one toolkit that make it compelling when pushing the envelope on capital productivity and revenue generation. Rather than a zero-sum fight, their coexistence suggests a future where multiple liquidity models flourish, catering to different needs. Builders and investors can take cues from both: the longevity and composability of Curve and the agility and financial ingenuity of Fluid. As decentralized liquidity continues to evolve, the likely winners will be those who learn from both models – creating systems that are as open and reliable as Curve’s, while being as efficient and economically sound as Fluid’s.
Ultimately, the competition between Curve and Fluid is driving introspection and improvement across DeFi. It challenges projects to clarify whether they view themselves as infrastructure providers or product companies, and perhaps encourages being a bit of both. For the DeFi community, this means more choice and, hopefully, more robust liquidity on which to build the next generation of decentralized applications. In the long run, the real “dominance” will belong not to a single protocol, but to the DeFi ecosystem that successfully harnesses these innovations in pursuit of a more liquid, accessible financial system for all.