AMM FAQs
Last updated
Last updated
Answer: The "FX Invariant" determines price differently between 2 regions. In the beta region (square colored region), spot price will be determined by Chainlink FX oracles (such as SGD:USD, IDR:USD, etc) where the curve has similar behavior to a constant sum invariant (linear). [Refer to line where Beta=1] Beyond the beta region, the spot price is determined by the ratio of existing reserves (the "LP ratio"). This can be represented by the curvature beyond the beta region.
(https://www.desmos.com/calculator/2qhuh660gd)
This behavior aims to provide a range of "FX accuracy" (the beta region) using less liquidity compared to AMMs that utilize more generalized invariants, such as Uniswap's constant product or Curve's Stableswap.
Answer: There are 5 dimensions used for this FX Invariant and this includes alpha, beta, delta, lambda and epsilon.
Alpha
Maximum and Minimum Allocation of each reserve
Beta
Depth of Liquidity pool without price slippage
Delta
Rate of Price Change
Epsilon
Fixed Fee
Lambda
Dynamic Fee
Answer: The rate of price slippage beyond the beta region is determined by the value of delta which is determined by the team's internal Stablecoin Liquidity Profile model (to be documented soon). (https://www.desmos.com/calculator/pfi7o5iirl)
Answer: The slippage tolerance is heavily determined by the parameters set for the respective pairs that are deployed (specifically beta and delta as seen from the diagram above). The parameters are set differently for each individual stablecoin pair depending on the Stablecoin Liquidity Profile associated to it. Overall the parameters set will cause a larger change to the slippage as compared to the base level liquidity. As a more tangible example under current production parameters, if a pool has ~35k USD worth of liquidity, it can support ~10k USD worth of FX accurate swaps w minimal slippage. Granted this is use case specific to FX trading, but to do the same with Curve or even Uni V3 would entail much more liquidity (~10x more in the given example) and/or more active effort (in managing the actively traded range for concentrated liquidity).
Answer: Arbitragers that trade towards the beta region stand to enjoy cost savings and earn maximum profits.
Our "FX Invariant" AMM has embeded a dynamic fee solution that serves to encourage FX accurate rates by providing subsidy to users who trade into the beta region and charge a higher fees for traders who trade away from the beta region. Do note that users who trade within the beta region will only incur a fixed fee.
