Curve rolls out Llamalend v2 on Optimism with LP collateral

Curve Finance launched Llamalend v2 on Optimism, backed by a 250,000 OP grant from Optimism. The upgrade enables loans against Curve liquidity provider (LP) tokens and allows markets with a wide range of collateral and borrow asset combinations under a curated framework.

The Optimism deployment is the first phase of a broader upgrade that Curve plans to deploy on Ethereum mainnet in the second half of the year. Llamalend v2 removes the prior restriction to crvUSD pairs and replaces the earlier model that allowed anyone to create isolated markets.

LlamaRisk will serve as the market curator for Llamalend v2. The team will provide qualitative assessments for new collateral types, manage market lifecycles and decide which assets qualify for listing.

V2 introduces support for Curve LP tokens as collateral, allowing liquidity providers to maintain trading exposure while borrowing against their positions. Curve described the change as intended to enable more capital-efficient strategies.

On Optimism the v2 markets launched with a zero borrow cap, permitting deposits and lending but preventing borrows until governance action. A seven-day DAO vote will set borrow caps and approve markets before full borrowing functionality is enabled. Curve has scheduled a rewards campaign to begin around June 16 if the votes pass.

The 250,000 OP grant will be distributed as incentives over about two months to bootstrap liquidity and activity on v2. Curve plans to monitor contracts, user flows and market behavior on Optimism for a month or two before rolling the upgrade out on Ethereum mainnet.

Curve founder Michael Egorov described the redesign as focused on ease of use: “It tries to make it more convenient for users to work with. But they don't have to have a PhD in operating Llamalend.” He said borrowing against Curve liquidity could raise liquidity on Curve's DEX and meet demand for principal tokens stripped of future yield, noting that the curated market model aims to reduce the need for users to evaluate each market's safety.