Curve LlamaLend V2 Goes Live on Optimism With OP Rewards

High attention and emotional sentiment detected.

The launch follows a governance vote and a phased deployment that began around June 10. At the same time, the Optimism Foundation is backing the rollout with a 250,000 OP reward grant. As a result, lenders, borrowers, and loopers can now earn incentives on three new markets.

What LlamaLend V2 Changes

LlamaLend V2 is a major redesign of Curve’s lending product. The first version tied closely to crvUSD, Curve’s stablecoin, so most markets paired crvUSD with one collateral asset.

Now that requirement is gone. As a result, V2 supports almost any collateral and borrow pair. That includes Curve LP tokens and PT tokens, which were hard to use as collateral before.

Each market is also fully isolated. In other words, risk in one market does not spill into another. Because of this design, a bad debt event stays contained instead of spreading across the protocol.

V2 also adds a dedicated risk curator. LlamaRisk now sets and reviews market parameters, and it manages each market through its lifecycle. So Curve leans on a specialist team for the riskiest decisions.

The Three Markets on Optimism

Curve opened three isolated markets at launch. Each one supports lending, borrowing, and looping, and each shows its own rates and caps on the Curve interface.

The first market pairs wstETH against WETH. You can view its controller on Optimistic Etherscan. The second pairs wstETH against USDC, with its contract also visible on-chain.

The third market pairs WBTC against USDC, and you can check it here. According to the Curve markets page, one market advertises leverage of up to 23x, while initial rates start low.

Governance also set borrow caps for each market in the June 10 vote. So the caps limit how much users can borrow while the markets stay in this early test phase.

For now, these three pairs define the test phase. Curve plans to add more markets, and a wider menu of collateral could follow as activity grows.

How Soft Liquidation and Looping Work

LlamaLend still runs on LLAMMA, Curve’s soft-liquidation engine. Most lending apps use hard liquidations, so they auction your collateral the moment your health factor breaks.

LLAMMA works differently. As your collateral price falls, the system gradually swaps it into the borrowed asset across set price bands. If the price recovers, the process can reverse. So borrowers get a smoother exit and less panic selling.

Looping is the other headline feature. First, you deposit collateral and borrow against it. Then you use the borrowed funds to buy more collateral and repeat the loop.

This boosts your exposure and can lift rewards. Still, leverage cuts both ways, because it also magnifies losses if prices move against you.

The 250,000 OP Reward Program

The Optimism Foundation granted 250,000 OP to bootstrap the new markets. The program runs for roughly two months, and it aims to pull early liquidity into V2.

An initial portion of about 100,000 OP flows through Merkl. According to Merkl, rewards depend on your position, so you can earn by lending, borrowing, or looping in the eligible markets.

Because the rewards track activity, the exact payout per position can shift over time. Therefore users should check the Merkl dashboard for live campaign details rather than rely on a fixed rate.

How the Community Reacted

Early sentiment skewed positive. On X, traders and Curve contributors praised the isolated markets and the OP incentives. Many framed the launch as Curve executing on a clear roadmap.

Merkl also promoted the integration. In its post, the team said LlamaLend V2 is live on Optimism, and it invited users to lend and earn OP on eligible positions. A Curve facilitator added that the whole team worked hard to ship the upgrade.

Skeptics stayed quieter this time. Still, some users urged caution on leverage, and they pointed to Curve’s past incidents as a reason to test slowly.

Risks and What Comes Next

The optimism comes with real caveats. Curve lost roughly $70 million in a 2023 exploit, and most of it returned later through white-hat and community efforts. In addition, a V1 market carried bad debt tied to CRV, and a recovery plan surfaced around April 2026.

Critics also flag incentive farming. OP rewards can attract short-term capital that leaves once the program ends. So sustained liquidity, not launch-week numbers, will be the real test.

Market data stayed calm around the launch. CRV traded near $0.22 to $0.25, and the OP token showed no sharp reaction. Meanwhile crvUSD TVL sat around $51.86 million, mostly on Ethereum, according to DefiLlama.

Optimism is only the first stop. Curve frames this launch as a test phase, and the team plans an Ethereum mainnet rollout in the second half of 2026. For now, watch the Optimism markets, track the Merkl rewards, and size any leveraged position with care. This article is not financial advice.