Stable Pools
Stable Pools are tailored for tokens pegged to specific values, synthetics like liquid-staking derivatives, or assets correlated with others. This category encompasses stablecoins, synthetic or wrapped assets, and staked derivatives (e.g., staked Aptos and Aptos). These pools facilitate low-impact, low-fee exchanges between assets converging on a relative value of "1".
Stable Pool Math
To accommodate swaps between similar assets, Stable Pools utilize a distinct equation. Meridian employs a Stable Pool invariant (originally developed by Curve), which is as following:
Amplification Factor
Stable pools can be fine-tuned using an "amplification factor" (A), which influences trade price impact. This factor determines how closely the pool's trading curve aligns with either the constant product or constant sum curve. A low amplification factor makes the pool's assets more susceptible to deviating from their peg, while a high factor requires significant trade volumes to shift relative asset values. It's worth noting that maximizing this factor isn't always optimal, as it can affect fee accumulation in the presence of alternative markets for similar assets.
Low Amplification Factor: In a pool with a low amplification factor, even small trades can cause noticeable deviations from the peg, making the pool less stable. Low A-factor is more suited for asset pairs that are less tightly correlated.
High Amplification Factor: A high amplification factor makes the pool more resistant to price deviations. For example, swapping between dollar-pegged stablecoins in a pool with a high amplification factor would result in minimal price impact, even for larger trade sizes.
Pool Parameters
The pool creator initially sets the amplification factor, which can only be modified subsequently through protocol governance. Any intended changes to this factor over time require the submission of a governance proposal.
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