Wombat Versus The World

Let’s take a look at how Wombat outperforms current stableswaps on the market!

Wombat Is More Capital Efficient

Liquidity and slippage are inversely correlated. The larger the liquidity pool, the lower the slippage since the pool is able to stay closer to equilibrium even at larger transaction amounts. With this logic in mind, we can measure the efficiency of a liquidity pool based on its size: bigger is better!

Now, let’s take a look at how liquidity pools are structured in popular stableswaps:

Figure 1 (left) — USDT-DAI Pool, Figure 2 (right) — USDT-USDC Pool

Curve and Ellipsis have segregated liquidity pools by design. The USDT are in different pools with different liquidity levels and slippage rates even though they are the same currency, which is quite strange. Comparatively, banks do not separate their USD during forex operations because doing so would be very inefficient given the size and scale of their transactions. The USD in USD — EUR and USD — AUD are pooled together for the best slippage and liquidity — the same way Wombat’s liquidity pools are structured for our stablecoins. Our shared liquidity pool is inherently larger by design and ultimately translates into drastically reduced slippage for our users!

Figure 3 — Wombat’s Shared Liquidity Pool, we’re all friends here!

In addition to liquidity segregation, Curve and Ellipsis also maintain equilibrium inefficiently. Swapping is a primary function of any stableswap that naturally disrupts equilibrium. Thus, it is counterproductive to base equilibrium on balancing liquidity levels between any pair of tokens. But this is exactly what current stableswaps are doing and this design flaw makes it exceedingly difficult for them to reduce slippage for their users.

Wombat uses the concept of Coverage Ratio to manage our liquidity, which enables us to deploy more capital from our liquidity pools for transactions. Our liquidity is managed using an asset to liability model instead of balancing tokens. For the user, this fundamental upgrade negates slippage and slows down slippage buildup until higher transaction amounts.

You can refer to our previous article for an in-depth explanation of how Coverage Ratio works here.

Wombat Is More User Friendly

Current stableswap users are no strangers to the complicated liquidity pools shown below. These pool compositions were implemented as workarounds for managing organic differences between stablecoins and liquidity pool equilibrium. For example, there is naturally more USDT in circulation than other stablecoin e.g. UST or FRAX, which makes it inherently difficult to balance liquidity levels within these pairs/combinations. Curve is forced to 3Crv as a proxy to enable staking and swapping for UST and FRAX since their liquidity pools require two currencies to exist.

However, to obtain 3Crv users need to acquire equal amounts DAI, USDC and USDT and swap them for 3Crv before using it to stake or swap for their desired token, all while incurring fees and slippage. This awkward fix is replicated by all other stableswaps and Curve forks, such as Ellipsis with 3eps. With no alternatives, users are forced to navigate complex liquidity pools, settle for overcomplicated processes, and interact with a primitive UI just to obtain a new stablecoin or earn some interest.

With Wombat, that will no longer be the case.

Figure 4 (left) - Curve’s complex stablecoin pools, Figure 5 (middle) - 3Crv as a liquidity proxy, Figure 6 (right) - 3eps as a liquidity proxy

For starters, our shared liquidity pools completely eliminate the need for liquidity proxies or complicated pool compositions. All transactions are supported by a simple, straightforward interface for both swapping and staking. All you need to do is to stake one type of currency to start earning interest.

Wombat Is More Stablecoin Friendly

Wombat’s liquidity pool innovation also enables us to market make for new or less popular stablecoins because they are not constrained by organic differences (e.g. limited liquidity) or the need to balance their liquidity with other coin’s for equilibrium. With single token provision under Wombat, nascent stablecoins no longer hinder the growth of their own liquidity pools due to low supply, which ultimately facilitates their adoption and leads to a healthier stablecoin ecosystem.

Wombat Preserves Your Capital

When you deposit your money into a bank or DEX, you expect to withdraw the same currency you deposited. But this is not the case with stableswaps at the moment because of liquidity pool compositions. Users receive a mixture of 3Crv/3eps and or a mixture of its components (USDT, USDC, DAI) when they withdraw, and are forced to expend time and fees to swap the tokens back to their original deposit.

By eliminating pool compositions, Wombat users are no longer penalized for depositing tokens into our liquidity pools. What you stake is what you will withdraw, with interest of course.

Additionally, Wombat’s LP tokens consist of one currency — $USDT or $USDC (or whichever stablecoin they are staking), which makes our LP tokens an ideal addition to lending/borrowing platforms such as AAVE or Venus.

Figure 7- Comparison table between other stableswaps with Wombat

We Will Wombat Ahead

Wombat means efficiency, savings, and a design that just makes sense. We hope to set new standards for DeFi in a world that will inevitably be multichain.

Tune in to our next article where we will dive deep into our liquidity pools (pun intended) to explain how they work. Until then, trade safely!

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