Important: The information contained in the article represents the view and opinions of the Wombat team and does not represent the views or opinions of BNB Chain. The following content also does not constitute an endorsement or approval of any of the products or services of the project, organization, or individual.
The terminology 2.0 is typically used to indicate a more advanced version of an idea or a product. The same as how DeFi 2.0 improves the solution to existing problems of its predecessor, Stableswap 2.0 embodies the same notion.
In the world of Stableswap 1.0, Curve Finance has risen to be the star player in space. Its all-time-high TVL is at 24.3 billion dollars in January 2022. Curve has provided solutions to the expensive fee-bearing method of stablecoin swapping by making provision for the very nature of stablecoins being value pegged. Following this, the world has seen stableswaps forking Curve in other chains. As DeFi 2.0 continues to evolve, the room for improvement of stableswaps has dawned.
Wombat Exchange is the first to be branded with Stableswap 2.0 on the BNB Chain. Having innovative solutions to the existing problems of stableswaps, is carved out to be a breakthrough from the conventional systems and designs. Current stableswaps have complex pool compositions, which is highly impractical due to the organic differences between stablecoins. Wombat’s adoption of a single-sided liquidity pool, a first on the BNB Chain, made the pool composition much more efficient, eradicating scalability barriers other stableswaps face.
What problems do Stableswap 2.0 solve?
The first generation stableswaps use Constant Sum Market Maker (CSMM) or Constant Product Market Maker (CPMM) formulas in their AMM algorithms. Curve Finance has improved their algorithm by using an invariant formula tailored for stableswapping.
But a good formula is not always the best, especially as time goes by. The emergence of Wombat Exchange and its implementation of Coverage Ratio from traditional finance is a breakthrough that made way for even lower slippage. Wombat’s slippage improvement reaches up to 40% compared to its peers in the market.
The crypto world is notorious for its volatility and the space of stablecoins is considered a safe haven by many. But it is not immune to wild movements as witnessed in the TerraUSD crash. In that incident, many liquidity pools were drained and left unhealthy. As a stableswap 2.0, Wombat has a strategy that manages risks and protects users' funds during disastrous events. The first to introduce the concept of Equilibrium Coverage Ratio, Wombat has withstood the event and kept their pools and their users healthy.
As mentioned previously, existing pool compositions face scalability barriers where stableswap 2.0 has improved upon. Wombat adopts a single-sided liquidity pool where only one token is needed to be a liquidity provider, rather than having to obtain a pair of tokens. One of the risks of providing liquidity to stableswap pools is impermanent loss. Single-sided pool design eradicated this risk, and great user experience allows it to scale massively.
An accurate calculation of a swap cost has always been just an approximation. To further what Wombat Exchange brought to the table, precise details are now available to users before they proceed with a transaction - thanks to their mathematical conviction. This elegant and efficient approach to stableswaps makes Wombat a potential Curve challenger - and a 2.0 version of it. All these improvements combined allowed for Wombat to be multi-chain, existing not only on the BNB Chain, but futuristically speaking, on many other blockchains.
Stableswap acts as a fundamental base in DeFi space. As we enter the era of stableswap 2.0, DeFi users can expect a stronger ecosystem with new solutions to enhance its integrity, usability, and interoperability.
About Wombat Exchange
Wombat Exchange is a BNB native multichain stableswap focused on re-engineering the stableswap experience with our innovative algorithm design. Wombat's vision is to fuel DeFi growth and push boundaries with greater capital efficiency, accessibility, and scalability in a multichain world.
Our success in the Binance Incubation Program was followed by the Binance BNB Chain Most Valuable Builder Season 4 Incubation Program, where we had the pleasure of being one of the monthly stars for January.
To know Wombat more, please visit: https://www.wombat.exchange/