How Do "Pegged Assets" Pools, like Stablecoin-to-Stablecoin, Minimize Impermanent Loss? ▴ Learn

How Do “Pegged Assets” Pools, like Stablecoin-to-Stablecoin, Minimize Impermanent Loss?

Pegged asset pools, such as USDC/DAI, use specialized AMM formulas like the stable-swap invariant, which are optimized for assets expected to trade near a 1:1 ratio. Because the price divergence between the assets is minimal (ideally zero), the impermanent loss is drastically reduced.

The formula provides high liquidity near the peg, minimizing slippage for large trades while maintaining the desired ratio with minimal IL.

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What Is the Concept of “Divergence Loss” in Relation to Impermanent Loss?

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