The launch of Llamalend V2 marks a structural shift for Curve, which has historically centred its lending activity around its own stablecoin, crvUSD. The new version operates as a multi-asset lending protocol, allowing any supported token to serve as either collateral or a borrowing asset. Three markets are currently live on Optimism: USDC/WBTC, USDC/wstETH, and WETH/wstETH.

Optimism was selected as the first deployment chain in part because of a 250,000 OP grant from the Optimism Foundation, which provided direct financial incentive, alongside the OP Stack's lower transaction fees compared with Ethereum mainnet. The protocol's weekly report for Week 25 of 2026 confirmed that all three markets are distributing OP token rewards through Merkl, a reward infrastructure platform that has handled over $200 million in on-chain incentives across more than 50 chains and more than 200 protocols.

Negative Borrow Rates Explained

The headline figure from the Week 25 data is a net borrow rate of negative 54% on the USDC/WBTC market. That number requires context. The underlying borrowing cost is understood to be positive, but Merkl-distributed OP token rewards more than offset that cost, leaving borrowers with a net gain.

The USDC/wstETH market shows a negative 37.5% borrow rate, while WETH/wstETH sits at negative 17.9%. On the supply side, lenders are earning 29.6%, 21.7%, and 16.6% respectively across the three markets.

These rates are tied to the 250,000 OP grant from the Optimism Foundation, worth roughly $27,500 at the current OP price of approximately $0.11. Given OP's documented price volatility, that dollar-equivalent figure is subject to change and should not be treated as a fixed value. The incentive window runs for about two months, meaning the negative borrow rates are a bootstrapping mechanism rather than a permanent feature of the protocol.

The single highest yield recorded in the Week 25 report came from the frxUSD/USP pool on Ethereum mainnet, which posted a rate exceeding 100% APY. That figure reflects pre-market incentives that remain locked pending future conditions and is noted here for completeness alongside the Optimism-focused data.

Architecture and Risk Governance

Llamalend V2 incorporates Curve's LLAMMA liquidation model, which has defined the protocol's approach to lending since the original version. Given V2's expanded asset scope, the precise application of the mechanism may vary across markets, and readers should consult Curve's V2 documentation for specifics on any individual market.

LLAMMA (Lending-Liquidating AMM Algorithm) replaces hard liquidations with a gradual rebalancing process: as collateral value falls, the system incrementally converts the position rather than triggering a sudden wipeout. This gives borrowers more time to respond to adverse price moves.

The new version allows Curve LP tokens to serve as collateral. A liquidity provider depositing stablecoins into a Curve pool can now borrow against that position without withdrawing from the pool, preserving both trading fee income and price exposure while accessing fresh capital. V2 also supports PT tokens from Pendle as collateral. PT tokens are fixed-yield instruments, and their inclusion broadens the protocol's asset compatibility beyond what was available in earlier versions.

LlamaRisk, an independent DeFi risk firm that has worked alongside Curve since 2021, has been named the official market curator for V2. LlamaRisk sets borrowing limits, interest rate parameters, and liquidation thresholds for each market, and is responsible for evaluating the safety of accepted collateral assets. This adds a formal risk governance layer that was less structured in the earlier version.

Protocol Metrics for Week 25

Curve's total protocol TVL stands at $1.653 billion, up 0.2% week over week. DEX TVL reached $1.62 billion, a 1.9% gain. Weekly DEX trading volume came in at $1.09 billion, though that figure represents a 53.6% drop from the prior week. Weekly fees were $233,000, down 60.2%. Those declines reflect broader market conditions during Week 25 rather than protocol-specific deterioration. DefiLlama's independent on-chain snapshot recorded $1.419 billion in TVL, a variance from the protocol figure that likely reflects differing timestamps or methodologies for counting cross-chain lending TVL.

The Llamalend ecosystem across all versions holds $116 million in TVL (down 9.3% week over week), with $55.6 million supplied, $69 million borrowed, and 968 active loans. crvUSD, Curve's stablecoin, has a circulating supply of $27.6 million (down 24.2%), with its price holding at $0.9997. Peg Stability Reserves stand at $33.8 million, providing further support for the stablecoin's current peg health.

One metric worth flagging for holders of vote-escrowed CRV (veCRV): the current APR of 5.4% exceeds CRV's inflation rate of 4.835%. That means locked CRV holders are generating a positive real yield, a comparatively uncommon outcome in a DeFi environment where most governance token returns are eroded by ongoing emissions.

In the 24 hours following the Optimism launch, CRV posted a 22% price increase. Futures volume rose 208% to $265.47 million over the same period. Despite that short-term move, CRV remains down 30.78% year to date.

Regional Relevance

India ranked first in the 2026 Global Crypto Adoption Index, holding first-place positions in both CEX and DeFi protocol value received. Pakistan placed eighth overall in the same index. Both countries have growing crypto user bases, and India's DeFi participation in particular is well-documented by on-chain metrics. The negative borrow rates on Optimism represent a concrete carry trade opportunity for users already holding WBTC or wstETH positions.

Borrowing USDC against those assets and collecting OP rewards currently produces a net positive return, though the two-month incentive window limits the runway.

In sub-Saharan Africa, Nigeria ranks second globally in adoption, with Ethiopia, Kenya, and Ghana each entering the top 20 for the first time in 2026. Stablecoin usage in the region grew 180% year over year, driven by remittances, merchant payments, and savings dollarisation.

The USDC-paired markets on Llamalend V2 are relevant to that use case, but friction remains. Optimism gas fees are lower than Ethereum mainnet, but users still need ETH to execute transactions, a barrier where local fiat on-ramps are limited.

Curve's current TVL is 94.4% concentrated on Ethereum mainnet according to DefiLlama. The Optimism deployment is the first step in a broader L2 expansion that the protocol has flagged for 2026, with Scroll, zkSync, and Polygon CDK cited as future targets. Ethereum mainnet deployment of Llamalend V2 is planned for the second half of this year.

The Optimism launch represents more than a single chain expansion for Curve. It is the protocol's first deployment using externally funded token incentives to seed a new lending market, a model that may be replicated as Llamalend V2 moves to subsequent chains. LlamaRisk's formal curator role and the Merkl reward distribution infrastructure are both portable to future deployments. The Ethereum mainnet rollout in H2 2026 will be the clearest test of whether the strategy can scale beyond its current bootstrapping phase.