Are There AMM Formulas Other than X Y = K Designed to Minimize Impermanent Loss?
Yes, there are alternative AMM designs. For instance, stable-swap AMMs use a formula that behaves like a constant sum (x + y = k) near the peg, offering very low slippage and minimal impermanent loss for assets that are expected to trade near parity, like stablecoins.
Other models, such as concentrated liquidity, allow LPs to allocate capital within a specific price range, which can increase capital efficiency but may increase impermanent loss outside that range.
Glossar
Capital Efficiency
Leverage ⎊ Capital efficiency, within cryptocurrency and derivatives, fundamentally represents the maximization of risk-adjusted returns relative to capital at risk, a metric increasingly vital given regulatory constraints and market volatility.
Amm Formulas
Formula ⎊ Automated Market Maker (AMM) formulas represent the mathematical core underpinning decentralized exchange functionality, particularly within cryptocurrency and increasingly, options trading and financial derivatives.
Concentrated Liquidity Pools
Allocation ⎊ Concentrated Liquidity Pools represent a capital deployment strategy within automated market makers, shifting from uniform distribution to customized ranges, thereby enhancing capital efficiency.
Constant Sum Formula
Mechanism ⎊ The Constant Sum Formula, sometimes employed in specialized stablecoin AMMs, dictates that the sum of the reserves ($x + y = k$) remains fixed, implying a constant marginal price of one-to-one regardless of the trade size.