📚 | Pools Models

The AMM is the central component of pool designs and liquidity pools which do not rely on the Oracle price since the algorithm is used to establish prices.

Volatile Pools

Assets such as Bitcoin (BTC) and Ethereum (ETH), which do not have a direct relationship in price, are known as volatile pools. There is no correlation between the value of ETH and BTC. The Classic Pool, on the other hand, is suitable for general trading needs and uses the constant product algorithm:tokenA_balance(p) * tokenB_balance(p) = kand popularized by Uniswap as:x * y = kThe constant, represented by “k” means there is a constant balance of assets that determines the price of tokens in a liquidity pool.​

Stable Pools

Stable pools refer to assets that have a strong connection with each other, such as USDC/USDT, USDT/DAI, and others. These assets tend to trade at similar values to each other. As a result, a unique approach can be utilized to facilitate trading with higher volume and lower slippage. Stable pairs are priced using a formula that was first introduced by Solidly:x³y + y³x ≥ k​

Image representation

The blue curve visualizes the stable formula while the red curve shows the volatile formula