StellaSwap Launching Correlated-Asset AMM for Low-Slippage Stablecoin Trading with Minimal Fees

StellaSwap
5 min readApr 21, 2022

After weeks of hard work, we’re close to launching our correlated-asset AMM that will provide minimal fees & slippage for same-valued assets! 🎆 The correlated-asset AMM will integrate seamlessly with StellaSwap’s current standard AMM, so you don’t need to do anything much 🙌 With this launch, StellaSwap will be a hybrid AMM DEX; imagine combining Curve (largest stablecoin DEX) and Uniswap (largest standard AMM DEX)!

TLDR: Not only does StellaSwap’s correlated-asset AMM enable much lower fees+slippage so users can get the best prices when trading same-valued assets, but it also solves for liquidity fragmentation on Moonbeam and leads to a more efficient emissions structure that maximizes tokenholder value.

Users would be able to trade stablecoins, or different variations of the same coin (e.g. anyETH <>madETH), in an extremely efficient manner with ultra-low fees and slippage, ensuring that you get the most out of your trades. StellaSwap’s correlated-asset AMM will launch with the first ETH, risk-free pool in Polkadot with Nomad’s ETH (madETH) and Multichain’s (anyETH).

Timeline of Correlated-Asset AMM Launch

The launch of the correlated-asset AMM will follow the following cadence:

  • Phase 1 (Early Next Week): Launch of ETH risk-free farm of Multichain and Nomad’s Ethereum> anyETH:madETH
  • Phase 2 (Within 3 Weeks): Launch of 4pool basepool of leading stablecoins that will be incentivized by major protocols
  • Phase 3 (Within 1.5 months): Subsequent metapools of Polkadot assets and other L1 assets

Why Launch A Correlated-Asset AMM?

A correlated-asset AMM, or a Stable AMM, facilitates extremely efficient trades between assets of the same value that ensures ultra low slippage and fees. Although this applies mostly to stablecoins (e.g. USDC, USDT, BUSD, UST, FRAX) with a standard value of $1, it also covers different variations of the same asset resulting from the use of different bridges. For example, ETH trades between madETH and anyETH.

More than that, there are various issues that can be solved with a correlated-asset AMM;

Issue #1: Liquidity Fragmentation From Multiple Variations of the Same Token

Since Moonbeam doesn’t have an official bridge, the presence of various bridges entails different variations of the same coin. For example, StellaSwap initially only supports anyUSDC, which are wrapped-USDCs issued by Multichain while certain DEXs only support madUSDC, which are Nomad’s wrapped-USDC. Essentially, the version of the token you’re using is based on the bridge that you use.

Various types of USDCs & USDTs

This causes severe liquidity fragmentation across the ecosystem, as certain DEXs accept a certain kind of USDC and exclude other versions. This affects the user experience, and was a core issue for many users who wanted to use a variety of DEXs.

With a stablepool AMM, we can actually solve for liquidity fragmentation by creating various pools of assets that include various types of the same coin. For example, having anyUSDC, madUSDC and celerUSDC (like a 3pool or 4pool of the same asset) in the same stablepool allows users to 1) trade between the various different kinds of USDC and 2) aggregate the overall USDC liquidity on Moonbeam!

Issue #2: Higher Trading Cost

If you’re swapping between stablecoins on a standard AMM, you need to pay 1) high fees and 2) incur high slippage. That’s because a standard AMM — like StellaSwap & Uniswap — uses a different AMM model called ‘Constant Product’. This model has the advantage of continuous liquidity, but a drawback is inefficient capital deployment. That is why it causes high slippage on swaps. Here’s an example:

You lose $11 swapping $1,000 across $1-Stablecoins, which is sorta crazy!

For same-valued assets like stablecoins, it is imperative to reduce slippage as much as possible, like Curve, the leading stablecoin AMM that uses a different AMM model called ‘Constant Sum’. You can see the difference in slippage here:

Exchange rate is 1.0009, which means craaaaaazy low slippage!

That is why we’re deploying a constant sum AMM model for out correlated-assets AMM to significantly reduce slippage so users can trade same-valued assets with the best prices!

Issue #3: Unproductive Farms Leading to Wasteful Emissions

Long-term sustainability of any DEX that incentivizes liquidity (in the form of TVL) entails careful and calibrated emission structures. Daily emissions in the form of native DEX tokens must be quantified to ensure maximum optimization, else the protocol runs the risk of oversupply and value dilution. Under the standard AMM model, there are multiple ‘inefficient’ farms like USDC-GLMR and BUSD-GLMR, both of which are stablecoin<>GLMR farms. Daily emissions in the form of $STELLA is distributed to LP stakers in both individual farms, so this represents a redundancy.

With a correlated-asset structure, a metapool consisting of GLMR-4pool (stablecoin pool) would be sufficient in ensuring concentrated GLMR liquidity against stablecoins. In this case, only 1 pool is requires to be incentivized, thereby resulting in efficient emission handling.

What Can be Expected

StellaSwap is constantly innovating and pushing the boundaries of DeFi capabilities for the betterment of the ecosystem. We’re dedicated towards streamlining the DeFi experience and fostering greater utilities to create more value for end users. The launch of this hybrid AMM will be a step forward in creating a more robust DEX infrastructure.

The main focus of StellaSwap has always been to accrue value for stakeholders in the Polkadot ecosystem. With the impending launch of the XCM protocol that will allow for cross-parachain interoperability, StellaSwap is in prime position to be the leading DEX across Polkadot.

About StellaSwap

StellaSwap is the first and leading Moonbeam DEX that offers an integrated gateway to the DeFi world. Users can swap, earn, yield farm, bridge assets, explore new projects and engage in NFT trading all from a single unified platform. StellaSwap’s products are structured in such a way that facilitates decentralized governance of STELLA holders, while continuing to innovate on the collective foundations by design.

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StellaSwap

StellaSwap.com, Leading Moonbeam DEX and DeFi gateway on Moonbeam. Swap, earn & stake effortlessly from a single unified platform.