Stable Swaps are swaps made within one of the newer pool types released on Trident, Stable Pools, which were made to trade like-kind assets with low price impacts. By like-kind assets, we mean assets that can generally be pegged to each other and traded on a one-to-one basis.
For example, wBTC (wrapped Bitcoin) and renBTC (Bitcoin wrapped by the Ren Protocol) are equal: they both have the same underlying asset, they are just different wrappers around that asset. The same idea applies to stablecoins: USDT (Tether) and USDC (USD Coin) are two stablecoins pegged to the same underlying asset, the US dollar.
Because these assets are essentially different masks of the same asset, it follows that one should be able to trade them like so, with minimum friction and full parity. However, this is not always the case!
How Do They Work?
Many times when trading these assets, your trades can make a large price impact due to the amount of liquidity in the pools you are trading in and the formula that those pools use (generally Constant Product). Enter Stable Pools: utilizing a different formula, these pools allow users to make friction-less Stable Swaps on these types of like-kind assets, without making an unreasonably large price impact. In other words, you can expect to get back what you put in - if you want to trade 5 USDT for USDC, you can and will (in normal market conditions) receive 5 USDC back!
Anyone can create their own Stable Pool for a pair of these types of assets on Trident and become a market maker. It’s a mutually beneficial setup: users get to benefit from the liquidity in the pools and the intuitive Stable Swaps of key assets, while market makers get to accumulate extra yield for themselves via the fees generated from their Stable Pools. Liquidity providers and market makers also get BentoBox yield added on top of any yield they’re already accumulating via the Stable Swaps, providing extra incentives to park unused capital in Stable Pools and keep liquidity levels healthy.
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