Curve Finance just rolled out the second version of its isolated lending protocol, Llamalend, on the Optimism network. The deployment comes with a 250,000 OP token grant from Optimism designed to bootstrap liquidity and pull users into the new ecosystem.
Llamalend v1 was tightly coupled to Curve’s crvUSD stablecoin. Version 2 blows that scope wide open, supporting multiple collateral and borrow assets, including LP tokens and PT tokens.
What actually changed in v2
The original Llamalend was built around crvUSD. Users can now pair a wider range of assets on both sides of a lending position. LP tokens, the receipts you get for providing liquidity in DeFi pools, are now eligible collateral. So are PT tokens, the fixed-yield instruments popularized by protocols like Pendle.
The protocol also replaces the traditional hard liquidation model with soft liquidations. In a hard liquidation, your collateral gets sold off the moment it dips below a threshold, often at a loss. Soft liquidations work more like a gradual rebalancing, converting collateral into the borrowed asset as prices decline and converting back if prices recover.
LlamaRisk enters as market curator
LlamaRisk, a DeFi risk management firm that has been a strategic partner in Curve’s governance since 2021, now serves as market curator for the protocol. LlamaRisk is responsible for risk parameterization, which means it sets the rules governing how much can be borrowed against specific collateral types, what interest rate curves look like, and how liquidation thresholds are calibrated.
Why Optimism, and why now
The 250,000 OP token grant provides direct financial incentive to seed the protocol on Optimism. The deployment begins with a test phase scheduled for Q2 2026, letting Curve stress-test the new asset types and soft liquidation mechanics before potentially scaling to other chains.