Understanding Stabble: A Comprehensive Analysis Of The White Paper

• 1 Stabble is one of the first protocols on Solana that eliminates Impermanent loss to nearly zero.
• 2 It has a TVL of $31 Million with an overall volume of $573 Million on the DevNet.
• 3 Stabble has an initial market cap of $15 Million, per the initial presale.

Decentralized Finance (DeFi) has seen strong growth from 2021 with the help of various projects. Among these projects, Stabble stands out with its unique approach to enhancing capital efficiency and liquidity. Let’s delve into the Stabble protocol’s key aspects and explore its innovative solutions.

Introduction to Stabble

Stabble is a decentralized exchange (DEX) built on the principles of the Uniswap protocol and shares similarities with Balancer and Curve. It supports weighted and composable stable pools, allowing liquidity providers to engage in arbitrage trading and automated liquidity provision through smart liquidity routing. Various features in Stabble, such as virtual margin liquidity, enhance capital efficiency. The protocol enables risk-seeking and risk-averse investors to participate in the AMM protocol.

Source: app.stable.org

The primary goal of Stabble is to mitigate inefficiencies in decentralized exchanges, aiming for a frictionless and permissionless DeFi ecosystem, as per the white paper. It aims to work actively against miner extractable value (MEV) and frontrunning while addressing liquidity provision attacks.

Liquidity Providers and Pools in the Stabble Ecosystem

Stabble identifies four key participants in its decentralized exchange: liquidity providers, traders, arbitrage traders, and attackers. The protocol aims to optimize conditions for liquidity providers and traders, replace arbitrage traders, and eliminate attackers.

Liquidity Providers and Traders

Liquidity providers (LPs) supply the necessary funds for traders to exchange assets. In return, traders generate fees that serve as income for LPs. However, LPs face divergence risk (impermanent loss), where their portfolio changes due to trading activity, often resulting in holding more depreciating assets and fewer appreciating ones.

To balance this risk, Stabble employs a competitive fee structure for traders, allowing pool creators to adjust fees based on the divergence risk faced by LPs. It ensures a fair risk-return trade-off. The protocol distinguishes between three types of pools, each with different fee structures:

– Stable to Coin (e.g., USDT-WBTC): High fee
– Coin to Coin (e.g., WETH-WBTC): Medium fee
– Equal Asset (e.g., USDT-USDC): Low fee

Weighted Pools

Weighted pools in Stabble are an extension of the Uniswap v1 AMM model, allowing for more than two assets in a pool, similar to Balancer. These pools can contain up to eight assets, enhancing capital efficiency. 

Composable Stable Pools

Composable stable pools support up to five assets and combine the constant-sum and constant-product invariant functions, following the Curve approach. It results in a dynamic leverage that depends on the relative ratio of tokens in the pool. 

Tokenomics of $STB and veSTB

The STB token is the primary medium of exchange within the Stabble ecosystem, which can be staked to earn veSTB (vested escrow) tokens. These veSTB tokens enable governance functions and offer trading fee discounts, encouraging long-term staking and reducing sell-pressure on $STB tokens. 

Source: STB token by Stabble.org

Stakers earn 14% of all protocol-generated fees, making it a lucrative opportunity for maximizing returns. The current TVL of the Stabble is around $30 Million. Meanwhile, the protocol has observed a total volume of more than $573 Million on its devnet

Some Major Benefits Of Stabble

Stabble ecosystem provides various benefits, including zero slippage, instant liquidity, and yield farming. Let’s have a look at some potential benefits of the Stabble protocol. 

Source: Defillama

Smart Order Execution

The Orders on the dex with a price impact above 0.2% will be split and executed as fractional orders. These fractional orders give their smart liquidity routing and arbitrage mechanisms a chance to recalibrate the pools and ensure improved pricing and liquidity after each fractional order.

Smart Liquidity Routing

Users can deposit just one asset to provide liquidity to various pools, while the protocol handles the auto-rebalancing of liquidity. This method not only streamlines liquidity distribution but also diminishes the risks of impermanent loss and enhances APY.

Margin Liquidity: The Liquidity providers and Stabble smart liquidity routing pools leverage liquidity through money markets while boosting capital efficiency by 8,000 times compared to concentrated liquidity.

Smart Liquidity Arbitrage 

The internal arbitrage strategy of Stabble will sideline external arbitrage traders and can generate extra revenue that benefits their liquidity providers, as per their whitepaper. This approach also bolsters price stability, reducing the price impact.

Conclusion

Stabble presents a promising advancement in the DeFi space by offering enhanced capital efficiency, fair trading practices, and opportunities for risk-seeking and risk-averse investors. It addresses issues like impermanent loss and ensures a robust and secure platform. Stabble aims to carve out a significant niche in the decentralized exchange landscape. As the protocol evolves, it will be interesting to see how it tackles the challenges ahead and contributes to the growth of the DeFi ecosystem.

Disclaimer
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