Explanation of Stable Pools


Pools that maintain assets at consistent prices are referred to as stable pools within the FLASHPAD V2 ecosystem. These stable pools are grounded in robust mathematical principles. The architecture of FLASHPAD's core integrates a dual-liquidity model, accommodating both stable pools comprising assets with correlated values and volatile pools featuring uncorrelated assets.

Stable pools strategically allocate their liquidity to match current prices, enhancing their operational efficiency. With every trade, the pool has the capacity to modify prices, optimizing the positioning of the highest liquidity area without suffering losses.

Stable swaps within these pools predominantly adhere to a 1:1 ratio, maintaining equilibrium between the assets, until a certain threshold when they transition to a xyk curve when a 1:1 ratio is no longer viable. A significant discrepancy in the liquidity ratio spread, in comparison to a xyk curve, is required for the swap ratio to deviate from the 1:1 mark.

Calculations are used to maintain the liquidity of the pool at all times using mathematical formulas:

  • x is the amount of the first asset in the pool

  • y is the amount of the second asset in the pool

  • k is a fixed value

Engaging as a liquidity provider in a stable pool mirrors the process undertaken in a volatile pool. By participating as a liquidity provider in a stable pool, you gain exposure to all assets contained within the pool. However, it's important to note that this exposure entails certain risks and potential rewards, just as in any financial endeavor.

An illustration of how the stable 'purple' and volatile 'orange' AMM pricing calculation compare is presented below.

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