Curve V2

  • work best on stablecoins & tokenised variances of a coin

  • enables swapping between uncorrelated assets in V2

  • unlike other AMM, its liquidity pool can supports more than 2 assets, simultaneously LPs are exposed to risk of all tokens in the pool

  • automatically concentrate liquidity around the current price for LPs to optimise capital efficiency, offer better prices & lower slippage for traders

Curve Pool Liquidity

  • stablecoin pair like USDT/USDC uses x + y = k

  • uncorrelated pair like ETH/USDC uses x * y = k

  • Curve theoretically maintains a balance between 2 equations to fit situations like swapping a high volume, lack of liquidity, unbalance pair liquidity to achieve lower slippage compared with other AMM

Pool Equilibrium

  • to maintain slippage as low as possible, people who provide assets in lower proportion are incentivised

  • for example, stablecoin pool 3pool contains DAI (35%), USDC (45%), USDT (20%)

  • if users deposit/sell USDT with the lowest share, they are getting slippage bonus as reward to maintain the pool equilibrium

  • oppositely, if users deposit/sell USDC with the highest share, they are paying 'rebalancing fee' which is the slippage to maintain the pool equilibrium

  • arbitrage that makes profits by buying low & selling high within the spread maintain the balance of the pools

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