Headline: Curve launches LlamaLend v2 on Optimism — isolated markets, LP collateral and non-crvUSD borrowing pave way for mainnet upgrade
Curve Finance has kicked off the first phase of a major lending upgrade with the deployment of LlamaLend v2 on Optimism. The new version removes a core limitation of LlamaLend v1 (which required crvUSD as the borrowed asset) and lets Curve markets support any governance-approved asset pair — opening the door to isolated, non-crvUSD lending markets and broader collateral options.
What’s new
- Asset-flexible markets: Markets can now be created with supported assets on both sides of a pair (collateral and borrowed asset), subject to governance approval — no crvUSD required.
- LP tokens as collateral: Curve LP tokens can be used as collateral while continuing to earn trading fees, enabling liquidity providers to borrow against their positions.
- Broader collateral roadmap: The framework could later extend to other productive assets such as yield-bearing vault tokens and principal tokens from fixed-yield strategies.
- Same liquidation model: LlamaLend v2 retains the “liquidation range” approach first introduced in early 2024, which converts collateral gradually across price bands to reduce concentrated liquidation pressure and give borrowers more time to react.
- Isolated risk controls: Each market is standalone with its own collateral, borrowed asset, oracle setup, borrowing limits and risk parameters to limit cross-market contagion.
Initial rollout on Optimism
Curve is starting on Optimism with three isolated markets:
- ETH / wstETH
- wstETH / USDC
- WBTC / USDC
All three launch with borrow caps set to zero — users may lend into these markets immediately, but borrowing will remain disabled until governance sets debt limits. Curve expects the DAO vote to take around seven days to approve borrow caps.
Governance and risk assessment
LlamaRisk will vet proposed collateral assets and conduct market assessments before markets proceed through governance. The isolated-market design intentionally reduces the chance that trouble in one pair spreads to others.
Incentives and testing strategy
To encourage liquidity and participation, the Optimism Foundation has granted 250,000 OP tokens to support the launch, which Curve says will be distributed over roughly two months. Curve’s docs also note an initial incentives campaign distributing 100,000 OP via Merkl across the first markets.
Curve chose Optimism as a lower-risk environment to observe contract behavior, integrations and user activity before enabling borrowing. A wider Ethereum mainnet rollout is planned for the second half of the year.
Context: next steps for Curve lending
Llamalend v2 follows other Curve lending moves, including a bad-debt recovery framework that converts distressed lending positions into tradable on-chain claims — a mechanism Curve founder Michael Egorov has described as a potential investment tool for future markets if it proves effective.
Bottom line: LlamaLend v2 represents a meaningful expansion of Curve’s lending architecture — more asset flexibility, LP collateral support and isolated markets — with Optimism serving as a staging ground ahead of a planned mainnet launch later this year.
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