Governance proposals within Curve Finance are causing a stir in the Defi community. This is because one contributor is asking for a pause of the protocol’s expansion into the Ethereum Layer 2 network.
On July 31, Curvedao members submitted proposals claiming that Curve’s Layer 2 deployment would generate revenue and divert resources from more valuable initiatives like native Stablecoin, Crvusd. Layer 2 networks are designed to improve the scalability of Ethereum and have become increasingly popular over the years.
Curve earns a lot from Ethereum in one day, including a 450 L2.
The proposal highlighted Curve’s disappointing revenue generation across 24 layer 2 networks. According to the proposal, the protocol wins around $1,500 each day on all these layer 2 chains, equivalent to just $62 per network.
With this in mind, the proposal stated that such returns do not justify the engineering costs and long-term maintenance required to support these rapid blockchain networks.
“Currently, attempts are being made to bring curves to the L2S, but statistics speak for itself. There is little return while spending many developers’ time, but there is almost no maintenance costs due to fast pasting and short-lived nature,” the author states.
In comparison, Curve’s Ethereum Mainnet remains a much more lucrative revenue stream.
The protocol reportedly makes around $28,000 a day from its Ethereum pool. This is more than 18 times the daily revenue from Layer 2 ventures.
“The Curve’s Ethereum Pool will be generated in a slow $28,000 revenue of 28,000 days, equivalent to about 450 L2s, given the average revenue,” he said.
This is not surprising given that more than 90% of Curve’s total value locked (TVL) remain in the blockchain network, according to Defillama data.
Therefore, the proposal urged the protocol to reduce all development on the Layer 2 network and focus on Ethereum.
“Each of these chains requires at least the same care as Ethereum, but they offer little restitution. By cutting all developments in this direction, the curve can regain headspace and push it in a more fruitful direction,” the author writes.
Meanwhile, the radical position of the proposal has sparked debate within the Defi Protocol community about the multi-chain expansion move.
Defi analyst Ignas noted that another prominent Defi protocol, Aave, is experiencing similar challenges.
According to him, Aave expansion across multiple chains has proven unprofitable, reflecting the challenges many Defi protocols face when deploying to numerous layer 2 networks.
Ignus suggests that it is due to a lack of user traction across most layer 2 networks, indicating that the Ethereum Layer 2 ecosystem may be approaching saturation.
“We’ve reached the L2 saturation point…it’s a really tough time for an undifferentiated L2S,” Ignas said.
L2Beats data supports this perspective, revealing that only a handful of Ethereum Layer 2 networks see considerable activity, including polygons, arbitrum, and optimism.
Meanwhile, Curve’s core team distanced themselves from the proposal and said it didn’t reflect the current roadmap.
“To be clear: this post is not from a team currently working on the curve, and no one on the team agrees (and therefore probably won’t take that direction),” the protocol states.
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