How Does the “Amplification Factor” in StableSwap Affect the Curve’s Shape and Slippage?
The amplification factor (A) is a parameter that determines how closely the StableSwap curve approximates the constant sum formula near the 1:1 peg. A higher A value creates a flatter curve around the peg, meaning lower slippage and deeper virtual liquidity.
This optimization is crucial for efficient stablecoin trading. However, a very high A also increases the risk of severe impermanent loss if the peg breaks, as the pool is more easily drained of the healthy asset.
Glossar
StableSwap
Architecture ⎊ The StableSwap protocol, initially popularized by Curve Finance, represents a distinct automated market maker (AMM) design diverging from the constant product model prevalent in platforms like Uniswap.
Amplification Factor
Factor ⎊ The amplification factor, within cryptocurrency derivatives and options trading, quantifies the sensitivity of an underlying asset's price movement to changes in the price of a related derivative contract.
Stableswap Curve
Architecture ⎊ Stableswap Curve represents a novel automated market maker (AMM) design prioritizing stable asset trading, diverging from constant product formulas.