All you need to know about Stableswaps on Ston.fi.
In Decentralised Finance (DeFi), we have seen that although trading crypto assets can land one a fortune, there’s an inherent risk that persists with these activities solely because the value of the traded assets are unstable and fluctuate greatly.
Through the combination of blockchain algorithms and fiat currencies, Stablecoins were created. As the name suggests, Stablecoins are cryptocurrencies that have a constant price. This constant price is achieved by pegging the stablecoin price to a fiat currency or to another cryptocurrency. For example, USDT is a stablecoin pegged to the US dollar, stETH is another stablecoin with its price pegged to Ethereum. DeFi protocol developers and users have embraced the stable value of stablecoins as they are now a key building block for decentralized exchanges (DEXs), lending platforms, and yield farming protocols.
The Emergence of Stable Swap on Ston.Fi
Ston.fi’s vision for providing top-notch cross-chain DEX services to its users is seen in the #Stonchronicles — a section where future plans are documented. Previously stable swap pools were a future plan, now they’re a reality. The deployment of AquaUSD/USDT Stable swap pool is both a giant step towards providing swap solutions to assets with similar value (stablecoins) and the beginning of creating more stable swap pools.
Stable swaps were created to directly address the shortcomings of Constant Product Automated Market Makers (CP-AMM), the algorithm used by many DEXs. By their design CP-AMMs favour the swap of assets with different prices. However, when the intent of a DEX user is to swap large volume of assets with a similar value, CP-AMMs are not suitable because of high slippage, large price impact due to most of its liquidity being far outside the range of possible exchange ratios. Again, this design of DEXs results in balancing asset price after each trade resulting in a price change for each of the assets. A change in a stablecoin price opposes the idea of establishing them in the first place, causing a depeg of the stablecoin and a consequential loss for any one holding this stablecoin.
Ston.fi recognised this as a chance to tackle the inconvenience of high slippage and high price impact while swapping assets of similar value. The specially developed Ston.fi algorithm takes into account minimal price changes between these assets, ensuring optimal trading conditions. From the launch of AquaUSD/USDt in V2 version of the pools and until now, the feedback from Ston.fi users have been positive and encouraging.
In response, Ston.fi created an indepth piece, where the advantages of this Stableswap are stated in details. Consequently, this piece further expands on this existing advantages reported by Ston.fi.
Benefits of Using AquaUSD/USDt Stableswap Pool
The benefit is directly linked to the problem it is solving. This stableswap offers;
Minimal price impact. Normally, price impact measures the influence of the user’s trade over the market price of an underlying asset pair. With the Ston.fi algorithm we’ve talked about, stableswap through this pool occurs with a minimal price impact(<0.04%), even for large transaction volumes. This is especially beneficial for traders dealing with significant amounts.An Onchain example from @StonfiAttractive conditions for liquidity providers. There’s an expected rise in number of liquidity providers within these Stablecoin pool thanks to the exceptionally low fees and a rise in popularity of stablecoins.
Stableswap pools will attract high trading volumes and make a constant flow of transaction fees share for liquidity providers.Reduced impermanent loss. Providing liquidity for stable pools is an already established hedge against impermanent loss. Since the value of stablecoins remains almost unchanged, the inherent risks is reduced and increasing efficiency in the new type of pools.
In the direction of impermanent loss protection, Stonfi has an introduced an easy to use calculator where users can simulate potential impermanent losses guiding their decision making. Again, there’s an ongoing Impermanent loss protection campaign on the STON/USDt pool. More details on the event here.
Closing Thoughts
Stablecoin swap introduced by Ston.fi is a noteworthy innovation holding the potential to bring the significant benefits we discussed to Ston.fi users and play a deterministic role in where liquidity providers decide to deposit their assets. As this solution matures and become more comprehensive, I expect a substantial adoption with the creation of more stableswaps on Ston.fi and within other DEXs on TON ecosystem.
As a Ston.fi culture, we could see in the future an incentivized program where users would be rewarded when they trade & deposit into this Stablecoin pools.
What’s the next move? The first Stableswap on STON.fi is now available to everyone for liquidity provision and farming! Try liquidity provision and farming in a Stableswap pool.
If all you’ve read sounds strange, and there are a few lurking questions like what is a liquidity pool? Check here for a comprehensive guide on liquidity pools.
Additional Resources to get familiar with Ston.fi
STON.fi DEX Data on DeFi Lama: STON.fi’s Total Value Locked (TVL) is around $160M [See More on Defi Lama]TON Protocols Stats: Data about TON network stats including total transactions, performance, total fees, etc. can be found on TON Stat and you can also find some stats on Tonscan.STON.fi market on Dexscreener: You can find STON.fi on Dexscreener to see STON.fi’s liquidity pools and trading pairs.
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A Deep Dive into Stableswap pools by Ston.fi. was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.