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The new stable swap on Plenty facilitates trading of similarly priced assets, with low slippage. At equilibrium, 78% of a stable swap liquidity pool can be bought for slippage of less than 5%.
By: Lee Evans
16 February 2022
Plenty Introduces Stable Swaps
The new stable swap on Plenty facilitates trading of similarly priced assets, with low slippage. At equilibrium, 78% of a stable swap liquidity pool can be bought for a slippage of less than 5%.
Plenty’s stable swap is based on Arthur’s curve, rewritten in Smartpy, and audited with a “highly secure” rating.
Ctez-tez stable swap
The first pair to be introduced on Plenty’s stable swap is ctez-tez. The equilibrium of this specific stableswap is 1:target. The target represents the peg between tez and ctez.
It started out at 1.0, but changes over time, and is currently 1.039. During each swap the ctez admin contract is called for the current target.
MOAR stable swaps
The team is hard at work to rebrand the current wrapped assets from the Wrap Protocol. Token names will change from w<bridged_asset> to <bridged_asset>.<source_chain> by deploying a new FA2 contract.
For example, wUSDC changes into USDC.e and wWETH changes into WETH.e. More stable swaps will launch after the transition of these assets to avoid a tedious and complicated rebranding phase.
Differences Between Automated Market Makers
The Constant Product Market Maker (CPMM) was popularized by the first AMM-based DEXs, Bancor and Uniswap.
CPMMs are based on the function x*y=k (green), which establishes a range of prices for two tokens according to the available quantities (liquidity) of each token.
When the supply of token X increases, the token supply of Y must decrease, and vice-versa, to maintain the constant product K.
As AMM-based liquidity has progressed, we have seen the emergence of advanced hybrid CFMMs which combine multiple functions and parameters to achieve specific behaviors, such as adjusted risk exposure for liquidity providers or reduced price slippage for traders.
For example, Curve AMMs create denser pockets of liquidity that bring down slippage within a given range of trades.
Arthur’s curve U(x,y) = (x+y)⁸ — (x-y)⁸ (orange) achieves something similar. This formula is very flat around `x = y` and similar to CPMMs, even very high swaps will never empty the other asset as the function can make the outgoing asset arbitrarily expensive.
This makes it suitable to create a CFMM between two assets that ought to have a similar value.
A possible downside of the stable swap is that arbitrage to bring the pool back to its theoretical midpoint will be significantly less profitable, as there are much lower price differences to benefit from.
As a consequence, there is a chance that the ratio of the pools gets stuck close to one of the points where the flat part of the curve ends. As such, trades in one direction start having a larger price impact.
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Decentralized exchange, Plenty, is poised to enhance the decentralized finance (DeFi) experience on Tezos with the imminent launch of its advanced “Plenty V3” exchange. The announcement made via the platform’s Twitter account confirmed the launch date to be today, September 20th.