Curriculum·J304 Lending, Borrowing, and Collateralized Leverage·about 32 min
Interest rate mechanics
By the end of this lesson you can
- →Compute a borrow rate from a utilisation curve above and below its kink
- →Explain why a ten point move in utilisation can multiply the rate tenfold
- →Show how a rising rate and a falling price push a health factor the same way
- →Identify what happens to depositors when utilisation reaches one hundred percent
Junior · enrolled learners
This lesson opens with Michael Egorov's CRV-backed loans, July and August 2023.
- What happened
- Curve's founder had borrowed about $95.7M of stablecoins against roughly $141M of CRV across five lending protocols, being Inverse, UwU Lend, Fraxlend, LlamaLend and Aave. On 30 July 2023 a reentrancy bug in Curve's own pools was exploited for about $65M, and CRV fell, reaching $0.58 on 3 August, down twenty percent in a day. The positions came under pressure from both directions at once: the collateral was falling and, as lenders withdrew and utilisation rose, borrow rates climbed on the remaining debt. Aave governance passed a proposal to freeze the CRV market. Egorov sold 106 million CRV for about $46M in private deals, including 72 million to fifteen investors on 3 August, and closed the Aave position in September with an $11M deposit.
- The decision point
- The position was never liquidated on Aave in the way J304-02 describes. It was resolved by the borrower selling collateral privately at prices he did not choose, under a deadline set by an interest rate rather than by a price. That is the mechanism this lesson exists to make visible: a utilisation curve is not a fee schedule, it is a clock, and it runs faster exactly when everyone else is trying to leave.
What you will be able to answer
- →What determines a borrow rate?
- →How steep is the curve above the kink?
- →Why do rate and price push the same way?
- →What happens to depositors at full utilisation?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.coindesk.com/business/2023/08/03/curve-founder-still-owes-80m-despite-raising-nearly-30m-in-past-two-days
- https://thedefiant.io/news/defi/curve-finance-founder-michael-egorov-suffers-massive-liquidations
- https://blockworks.co/news/curve-stablecoin-crv-loan
- https://medium.com/coinmonks/how-curve-finance-founders-85m-loans-could-trigger-a-defi-meltdown-af6f989686bc
Confidence high·Volatility medium·Reviewed 2026-08-06·Owner unassigned
Contested
Reported loan and collateral totals for these positions vary across sources and dates because the positions were spread over five protocols and were being actively repaid. The figures used are those reported at the start of August 2023 and the argument does not depend on their precision.
The curve parameters in the worked example are illustrative of the common shape rather than any specific market's settings. Every protocol publishes its own base rate, optimal utilisation and slopes, and they should be read rather than assumed.