What is a stableswap?
Stableswaps serve as a critical foundation for DeFi — whether it be borrowing and lending, or yield farming, stablecoins act as an important part of the ecosystem. We’ll dig deeper into the stableswap jungle in the following medium.
What is a stableswap?
A stableswap is an automated market maker (AMM) focused on stablecoins swapping with minimal slippage and more efficient trading for liquidity providers. The concept was introduced by Michael Egorov, founder of Curve Finance in late 2019, and this has greatly impacted the DeFi ecosystems.
How does a stableswap work?
A stableswap takes on the basic concept of AMM, where there is a contract that holds x amount of token A and y amount of token B, and whenever x changes, y should shift so that it maintains the invariant that x*y=k for some constant k. It makes sure that the value of the two tokens remains at a ratio of 50:50.
Despite how it has been a perfect solution for trading volatile assets, this model is not ideal when it comes to swapping pegged assets like stablecoins, as it may intensify the price volatility of the stablecoin with a high slippage fee. Curve’s brand new invariant formula allows various parameters (liquidity, swap amount etc.) to be changed in order to deliver optimal swaps for users.
With the stable swap invariant, the curve is flattened, creating a range where prices remain constant. This flattened curve allows for swaps to occur with minimal slippage, even as larger trades affect a token’s liquidity.
What makes Wombat different from Curve?
Wombat adopts a modified invariant curve, which uses an all-in-one closed-form quadratic solution that is highly efficient and scalable. To put it in a nutshell, we offer an exact calculation which tells you exactly how much you need to swap for another token. With a more accurate and gas-efficient algorithm, Wombat can adapt to different chains, even those suffering from finality and blocktimes, making it a potential challenge to Curve Finance and managing the liquidity more efficiently.
Read this medium to understand further how Wombat outperforms our competitors!
Summary
We at Wombat believe that in order to successfully fuel DeFi growth and adoption, it is essential for us to be platform-agnostic and multichain. We proudly declare ourselves as the next-generation stableswap 2.0 as we re-engineer the stableswap experience through our innovative algorithm design, enabling lower slippage, and greater capital efficiency. Wombat’s vision is to fuel DeFi growth and push boundaries with greater capital efficiency, accessibility, and scalability in a multi-chain world.
