An example of a Hybrid Constant Function Automated Market Maker (HCFAMM) is Curve, which utilizes a combination of a Constant Product Automated Market Maker (CPAMM) and Constant Sum Automated Market Maker (CSAMM.) One of Curve’s key features is its StableSwap invariant design, which allows for more efficient trading when it comes to pegged assets relative to a constant product AMM.
Trading efficiency is achieved by reducing price slippage with the use of an “amplification coefficient” (A) to the constant product equation. The use of leverage with A is dynamic and provides either:
- Infinite leverage when there is a large price divergence between asset x and y or
- Zero leverage when the price is 1 to 1 (essentially functioning like a constant product AMM).
A higher A implies the pool is more tolerant to slippage when an imbalance exists, as a greater amount of leverage effectively simulates deeper liquidity. The performance of the StableSwap invariant is best demonstrated by this chart, where dx is the change in price for coin x. We dive into a detailed comparison of Curve v2 and Uniswap v3 in a recent Delphi Pro report (unlocked for everyone to read).