How Does a “Hybrid” AMM Curve Balance Capital Efficiency and Impermanent Loss?

A hybrid AMM curve, such as the one used by Curve, balances these factors by creating a price curve that is extremely flat near the target price (like a Constant Sum) and transitions to a Constant Product curve as the price diverges. The flat section maximizes capital efficiency and minimizes slippage/IL when assets are pegged.

The curved section ensures the pool can handle large price divergences without being completely drained, thereby limiting the maximum impermanent loss risk.