Crypto glossary
What is StableSwap? An AMM for closely priced assets
KriptoMeta Editorial Team
- Added:
StableSwap is an automated market maker design for closely priced assets. Associated with Curve Finance, it aims to provide low price impact around the target price when pool conditions support it. It neither issues stablecoins nor guarantees dollar redemption.
The asset balances and algorithm parameters determine the price curve. A token losing its peg can still cause losses. Trade size matters too: a curve designed for efficient swaps does not provide unlimited liquidity at a fixed price.
Example
Imagine a hypothetical pool holding one million USDC and one million USDT. A small USDC-to-USDT trade may use liquidity near parity. Repeated large purchases of USDT reduce its share of the pool, changing the amount available to the next trader for the same USDC input. An exact output requires current balances, fees and pool parameters; the intended 1:1 relationship is not enough.
Price impact describes how a trade changes the pool’s price. Slippage tolerance sets an execution boundary chosen by the trader. They are different measurements.
The worked cost example in our Curve review connects the algorithm discussion with actual quote and pool screens.
Source
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