The Curve Finance protocol has significantly evolved since its inception, offering increasingly efficient solutions for stablecoin swaps.

One such solution is the concept of “Strategic Reserves” — a new type of pool configuration designed for assets with high peg stability. It delivers unprecedented price stability, minimal slippage, and superior capital efficiency.

“Stablecoin pools typically reach 20%. But optimizing pool parameters in Strategic Reserves makes them exceptional: this little monster hits over 1600%!” — Mikhail Egorov

In this article, we’ll take a detailed look at the technical features of Strategic Reserves, their advantages and impact on the future of DeFi, and also examine real-world efficiency improvements of specific pools.

1. Base Pools and Metapools in Curve

2. New Challenges and the Need for Change

3. The Concept of Strategic Reserves

4. Amplification Coefficient (A)

5. Key Technical Parameters

6. Comparison with the Previous Generation (3pool)

7. Impact on Liquidity, Swaps, and LP Yields

8. Institutional Interest and New Strategic Reserves Pools

9. The Future of Strategic Reserves and Development Prospects

10. Conclusion

In the Curve Finance ecosystem, a base pool refers to a primary liquidity pool of stablecoins, which other pools connect to via the metapool mechanism.

A metapool is a liquidity pool built on top of an existing base pool. It uses the LP token of the base pool together with an additional asset, allowing users to swap this new asset with the base pool’s assets without depositing them directly.

Originally, the role of such a core pool was played by the famous 3pool — a pool consisting of the three largest stablecoins: USDC, DAI, and USDT.
Many other pools on Curve were built on top of 3pool: tokens were paired with the general LP token of 3pool, gaining access to the deep liquidity of all three coins at once.

Over time, alternatives emerged — for example, the Frax Base Pool (FraxBP), launched by Frax Finance in 2022 as a new base pool consisting of the FRAX + USDC pair.

3pool was launched in early 2020 as one of the first pools on Curve Finance and effectively addressed the challenges of that era. Four years ago, the market dynamics and DeFi liquidity were vastly different from today’s reality.

In just the past 2.5 years, the supply of stablecoins on the Ethereum network has grown more than fivefold! Take a look at this chart:

As the industry evolved and stablecoin liquidity increased, there arose a need for more efficient solutions capable of providing minimal slippage and maximum price stability.

In response to these challenges, a new version of the contracts — StableSwap-NG — was developed and launched in late October 2023. It turned out to be the perfect foundation for the new base pool concept.

Strategic Reserves represents a new generation of liquidity pools within the Curve ecosystem, characterized by ultra-concentrated liquidity and minimal slippage during swaps. These reserve pools are positioned as efficient pools for stable pairs and as a modern liquidity core for metapools — essentially, a replacement for 3pool.

The name "Strategic Reserves" hints at the fact that both stablecoins are backed by reserves (U.S. dollar-denominated assets) and are widely used as strategic reserve currencies in DeFi.

The key idea behind this pool is to combine the liquidity of USDC and USDT and make swaps between them as efficient as possible.
The pool was launched using the next-generation StableSwap NG format and became the first example of a configuration now referred to on Curve as a “Strategic Reserve.”

To better understand the rest of the article, let’s take a look at what the amplification coefficient (A) is.

The key parameter that determines the efficiency of a Curve pool is the amplification coefficient (A). This parameter controls how strongly the pool maintains balance between stablecoins.

At low values of A, the liquidity curve resembles a constant product model (x * y = k), similar to Uniswap. However, as A increases, liquidity becomes more concentrated around the 1:1 price ratio, which is particularly beneficial for stablecoins with a reliable peg.

For assThat said, it’s important to acknowledge that in a hypothetical scenario where one of the issuers (e.g., due to regulatory or financial issues) faces trouble, the pool would become imbalanced.

However, Strategic Reserves is equipped with protective mechanisms — such as dynamic fees — that were not present in earlier pools to handle such situations.ets with a shared price peg, such as stablecoins, it is efficient to raise this parameter, whereas for volatile assets, it should be reduced. The more stable the peg, the higher this parameter can be set without negative side effects for the pool’s performance.

You can read more about how Curve pools work in this article.

First, the amplification coefficient is exceptionally high — A = 20,000.
For comparison, 3pool has an A of around 2,000, and FraxBP is approximately 1,500.
The amplification (A) determines how "flat" the swap curve is near the price parity (almost like a constant sum invariant). A high A means the pool concentrates liquidity very close to the 1:1 price ratio, allowing large USDC↔️USDT swaps with barely noticeable slippage.
In effect, even with a relatively modest TVL, a pool with A = 20,000 behaves like an ultra-deep liquidity reserve: the price remains extremely stable.

Second, the base swap fee is ultra-low — only 0.003%.
This is significantly lower than traditional Curve pools (for instance, 3pool has a 0.04% fee).
Such a low base fee makes swaps through Strategic Reserves nearly free during stable market conditions. This attracts arbitrageurs and high trading volumes, as millions of dollars can now be swapped with just a 0.003% fee.

Third, the pool is equipped with a dynamic fee mechanism with an off-peg multiplier.

What does that mean?
If the pool balance becomes significantly skewed (for example, when one asset greatly outweighs the other, usually due to a deviation from the $1 peg), the swap fee automatically increases substantially.
In the Strategic Reserves pool, the off-peg fee multiplier is 10×!

In other words, during stress conditions, the fee can rise up to 10 times the base rate.
For example, instead of 0.003%, users may pay up to ~0.03% per swap if the pool is imbalanced.

Why is this important?
The increased fee during imbalances serves two purposes: first, to discourage excessive withdrawal of one asset by making such trades more expensive; and second, to reward liquidity providers and incentivize arbitrage.
When the pool falls out of balance, arbitrageurs help restore the peg and pay the elevated fee to LPs as a reward.

Essentially, this configuration — “ultra-high liquidity concentration, ultra-low base fee, and high off-peg multiplier” — is purpose-built for stable assets with a strong peg to $1.
USDC and USDT both have robust mechanisms to maintain their peg and enjoy high trust, making them ideal candidates for this new pool.

Asset Composition
A key difference lies in the composition and nature of the stablecoins.
3pool consists of three coins: centralized USDC and USDT, and the formerly decentralized DAI. This mix offered some diversification of risks; however, over time, DAI itself became largely backed by USDC and also became more sensitive to fluctuations in its crypto-collateral.

In contrast, Strategic Reserves includes only USDC and USDT — the two most liquid, historically stable, and conservative stablecoins, each backed by real-world reserves (fiat assets).
The absence of DAI eliminates risks related to its liquidity or peg maintenance model.

From a $1 peg stability perspective, USDC and USDT rarely experience significant depegs and typically regain parity quickly due to strong redemption and issuance mechanisms.
Therefore, a two-asset pool like this is considered stable: the likelihood of both coins simultaneously losing their peg is extremely low.

As mentioned earlier, Strategic Reserves uses an A of 20,000, compared to around 2,000 for 3pool and 1,500 for FraxBP.
A high amplification value flattens the pool’s curve near the $1 price, meaning that equivalent swaps between USDC and USDT barely move the price.
With an A ten times lower, 3pool would show noticeably more slippage for the same swap volumes — especially when one of the assets is being drained from the pool.

What’s remarkable is that even with significantly lower TVL, the new USDC/USDT pool can process volumes just as effectively as older, larger pools — thanks to its high A value.
While 3pool and FraxBP were also considered high-A pools by Curve standards, Strategic Reserves sets a new record for liquidity concentration.

For LPs, a high A means their capital is working extremely efficiently within a narrow price range: the pool effectively offers enormous liquidity around $1 but becomes less suited to situations where the balance is heavily skewed (i.e., one asset dominates).

That’s why this configuration is justified only for reliably pegged stablecoins — so that the pool operates almost exclusively near a 50/50 balance.

3pool and FraxBP used a fixed swap fee (around 0.04% per trade, with half going to LPs and half to the protocol).
This fee remained constant regardless of the pool’s state.
In calm market conditions, the fee was low enough to attract volume, but during peg crises — such as in March 2023 when USDC briefly depegged — 3pool was unable to respond dynamically.

In that instance, 3pool became heavily imbalanced toward USDC, as traders swapped “overvalued” DAI/USDT for the “undervalued” USDC.
LPs ended up holding the depreciated asset and could only hope for a price recovery — all while receiving minimal fees for the risk they were exposed to, since the fee remained at 0.04%.

Strategic Reserves, on the other hand, employs a dynamic fee model: the base fee is just 0.003%, but it increases up to 0.03% (10×) when the pool becomes imbalanced.
This means that under normal conditions, users pay virtually nothing for swaps, but during peg deviations, those wishing to exit the “falling” asset will pay significantly more.

For example, if USDC is suddenly trading at $0.98 and someone wants to swap a large amount of USDC for USDT via this pool, the fee for that trade will automatically rise.

For liquidity providers (LPs), this model is both more profitable and safer.
During periods of volatility, they earn increased fee revenue (proportional to the risk) and have stronger incentives to provide liquidity.
Dynamic fees are also beneficial for the system as a whole — they make the pool’s behavior more stable by slowing down the process of full imbalance.

Arbitrageurs don’t walk away empty-handed: they pay higher fees, which go back to the LPs.
As a result, the pool's balance is restored more gradually, and LPs are compensated for the temporary imbalance.

All three pools discussed aim to maintain the $1 = $1 peg.
3pool is time-tested, but its weakness is the lack of dynamic parameters: in the event of a serious depeg of one stablecoin (such as issues with DAI or USDC), the pool can remain imbalanced for a long time, and LP yields may drop.

Strategic Reserves (USDC/USDT), in contrast, relies on the most liquid and resilient assets.

Historically, both USDC and USDT have quickly restored their peg even after rare disruptions (for example, USDC returned to $1 following the Silicon Valley Bank incident in 2023).

You could say this new pool bets on a simple and reliable asset model: two fully reserve-backed stablecoins with maximum swap efficiency between them.
Thanks to the added protection of dynamic fees, the pool can handle short-term shocks more effectively while rewarding LPs for participation.

Of course, it is not free from systemic risk: in the event of a catastrophic failure of one of the stablecoins, LPs could incur losses if left holding the troubled asset.
However, similar or even greater risks exist in 3pool as well.

All in all, Strategic Reserves offers more consistent income under normal market conditions and better risk compensation during stress events compared to its predecessors.

The USDC/USDT Strategic Reserves pool has already demonstrated impressive efficiency.
Even with a relatively small amount of funds, the pool provides record-breaking liquidity depth. This attracts high trading volume: traders and arbitrage bots prefer to use this route for USDT↔️USDC swaps because slippage is minimal and the fee is nearly zero.

For example, in one recent observation, the USDC-USDT pool on Curve ranked second in daily trading volume, processing ~$27 million in 24 hours with only ~$6.3 million in TVL. The top position went to another Strategic Reserves pool by Ethena — more on that later.

In this case, the daily volume exceeded the pool's liquidity by 4–5 times — a clear sign of highly efficient capital usage.
By contrast, the older 3pool, with much greater liquidity, sees much lower turnover.

Thanks to Strategic Reserves, large market participants can move liquidity between the two leading stablecoins with virtually no losses, reinforcing Curve’s role as the premier DEX for stablecoins.

Low fees under normal conditions make this pool an ideal venue for arbitrageurs.
Even the slightest price difference between USDC and USDT across exchanges is quickly resolved via Curve, since it offers the cheapest route for swaps.

Arbitrageurs ensure that the internal pool price stays in line with the external market: if USDT is slightly cheaper on Curve, for example, they will buy it here and sell it where it's more expensive — until the price evens out.

These actions not only help maintain the peg within the pool but also generate constant fee revenue for LPs.
Without arbitrage, the peg could drift — but the pool’s attractive conditions ensure imbalances are continually corrected.

With Strategic Reserves’ dynamic fee model, arbitrage becomes especially profitable for LPs during periods of volatility:
when one of the coins “wobbles” and the pool becomes imbalanced, arbitrage trades are executed at significantly higher fees.
In these moments, LPs see a surge in fee income — sometimes earning in hours what a typical pool would generate in days.

Thanks to the high trading volume, even the base yield from fees in the Strategic Reserves pool significantly exceeds that of older pools.
According to estimates, LPs in this pool have earned around 3–7% APY from trading fees alone — at least 5 times more than what 3pool offered over the same period.
And that’s without counting additional rewards!

The USDC/USDT pool has received support from the Curve community — it was voted in as a new base pool, meaning it qualifies for CRV emissions (LP rewards) on par with other major pools.
These CRV rewards add several more percentage points of APR on top of fee income.
As a result, the total APR for liquidity providers in Strategic Reserves is quite attractive, especially considering the minimal impermanent loss risk (since both assets are pegged to the dollar).

The pool’s high efficiency means each dollar of liquidity “works harder” — generating more in both fees and rewards.

Additionally, having such a powerful base pool opens up new earning opportunities: projects can create metapools built on top of it, offering their LPs additional sources of yield.

It’s important to note that the increased yield comes without added complexity for participants.
For a typical liquidity provider, interacting with the Strategic Reserves pool is almost identical to using 3pool: you simply deposit any supported asset (no need to split assets beforehand), since the ultra-high liquidity concentration eliminates slippage, and you receive LP tokens in return.

After that, just like before, the LP can stake their deposit in boosting protocols (such as Convex, StakeDAO, etc.) to earn additional CRV rewards.

At the same time, the pool is transparent in terms of risk — it holds only two well-established assets.
There are no complicated algorithms or reliance on the success of third-party protocols: the primary yield comes from direct market activity (swaps), plus Curve’s protocol rewards.

Strategic Reserves is becoming not just a “targeted” solution for the two most liquid stablecoins (USDC/USDT), but a universal pool model for any pair of reliable assets.

New proposals are already emerging to create similar pools based on other stablecoins from major projects.
For example, LlamaRisk has proposed reconfiguring the PayPal stablecoin pool on Curve (“PayPool”) following the Strategic Reserves model — specifically, by increasing the A parameter to 5,000 and the Off-peg multiplier to 10×.

Ethena has already launched its own new pool — “Curve Strategic Ethena Reserves” — with an A coefficient of 10,000 and an Off-peg multiplier of up to 40×.

Both organizations have lowered the swap fee to 0.003%, which is also a record-low rate.

A concrete example of the shift toward the Strategic Reserves model is the recent proposal by LlamaRisk to improve the pyUSD/USDC pool. According to the proposal, the plan includes:

1. Increasing the amplification parameter (A) from 1,000 to 5,000 over two weeks.

2. Raising the off-peg multiplier from 5× to 10×.

3. Reducing the base fee to enable more “aggressive” price stabilization.

Although the proposed A = 5,000 for PayPool is still significantly lower than the typical A = 20,000 seen in “classic” Strategic Reserves pools, it marks a meaningful step toward more concentrated liquidity.
Notably, raising the off-peg multiplier to 10× brings it in line with Strategic Reserves standards, enhancing the pool’s protection against imbalances.

The expected outcomes from these changes include:

1. Improved Price Stability – A higher A value will keep pyUSD and USDC as close as possible to the 1:1 parity.

2. Greater Protection from Deviations – If a stablecoin deviates from the peg, the increased fee (thanks to the 10× multiplier) will discourage one-sided arbitrage and encourage the restoration of balance.

3. Enhanced Competitiveness – For users wishing to swap pyUSD for USDC or vice versa, the pool will offer some of the best conditions on the market.

With $3.4 million in liquidity, the pool is generating $56.42 million in daily trading volume — demonstrating a liquidity utilization rate of 1,651%.

Over the past few weeks, it has delivered fee-based returns of 4–14%, which is a record for stablecoin pools of this size. And when factoring in additional CRV incentives, the total yield approaches 20%!

The Curve Strategic Ethena Reserves pool currently ranks first in trading volume — all of this achieved within just a month of launch.

The evolution of the Strategic Reserves concept opens up broad opportunities for the continued advancement of the entire Curve ecosystem. Several potential directions for this innovation can be envisioned.

First, we’ll likely see the Strategic Reserves model expand to new stablecoin pairs — including next-generation algorithmic stablecoins that demonstrate strong price stability.
This would create a network of highly efficient pools, delivering minimal slippage across various asset combinations.

Second, further improvements to pool protection mechanisms are possible, such as adaptive algorithms for setting the A parameter and off-peg multiplier — which could automatically adjust based on market conditions and the historical volatility of the underlying stablecoins.

Third, Strategic Reserves may serve as the foundation for new financial products within the Curve ecosystem.
For example, protocols could be built around guaranteed low slippage to implement complex trading strategies or to provide liquidity to large institutional players.

The strategic value of these pools to the Curve ecosystem is difficult to overstate.
They may become the core infrastructure for future metapools, aggregators, and protocols that seek ultra-low slippage and high capital efficiency.

Strategic Reserves represents the next stage in the evolution of the Curve Finance protocol, offering unprecedented capital efficiency and minimal slippage for reliably pegged stablecoins.
By adapting pool parameters to modern DeFi conditions — such as higher amplification values (A) and the off-peg multiplier mechanism — these pools create optimal conditions for both traders and liquidity providers.
The phenomenal results in capital utilization and increased fee-based yield generate a mutually beneficial outcome for all market participants.

The key advantages of Strategic Reserves include ultra-low slippage during swaps, enhanced protection against market imbalances, and seamless integration with metapools — opening new possibilities for the entire Curve ecosystem.

The PayPal pool proposal and the new Ethena pool highlight growing interest from major players in this new technology, signaling a broader trend toward the Strategic Reserves model.

Looking ahead, the development and expansion of the Strategic Reserves model could become one of the key drivers shaping the future of Curve Finance and solidifying its position as the leading protocol for efficient stablecoin trading in the DeFi ecosystem.