Wombat—An Efficient Stableswap Algorithm

Jen Houng Lie, Tony W. H. Wong () and Alex Yin-ting Lee
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Jen Houng Lie: The University of Hong Kong
Tony W. H. Wong: Kutztown University of Pennsylvania
Alex Yin-ting Lee: The University of Hong Kong

A chapter in Mathematical Research for Blockchain Economy, 2023, pp 233-251 from Springer

Abstract: Abstract Curve Finance invented the first stableswap-focused algorithm. However, its algorithm involves (1) solving complex polynomials and (2) requiring assets in the pool to have the same size of liquidity. This paper introduces a new stableswap algorithm–Wombat, to address these issues. Wombat uses a closed-form solution, so it is more gas efficient and adds the concept of asset-liability management to enable single-side liquidity provision, which increases capital efficiency. Furthermore, we derive efficient algorithms from calculating withdrawal or deposit fees as an arbitrage block. Wombat is named after the short-legged, muscular quadrupedal marsupials native to Australia. As Wombats are adaptable and habitat-tolerant animals, the invariant created is also adaptable and tolerant to liquidity changes.

Keywords: Decentralized finance; Automated market maker; Stableswap; Asset liability management; Smart contract (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/978-3-031-18679-0_13

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