Here are today’s trends to watch from Curve Market Cap:
Curve introduced two new proposals to make adjustments to the amplification factor “A” in two of the pools.
It’s a perfect case study in the mechanics of Curve, but there will be a little math. If you don’t like math, then you skip until you get to the picture of a llama.
For zealots of the Curve White Paper, you may be familiar with the basic equation which defines “A” as the amplification factor:
Looks difficult, but all you need to note is that there’s a Sigma term and a Pi term. Sigma means you’re adding coins, upper-case Pi means you’re multiplying coins.
There’s two basic approaches to a stable pool. You can assume that adding n number of one coin subtracts an equal amount (Sigma). Or you can multiply them together and hold it constant (Pi)
Addition vs Multiplication has real effects as the coins become imbalanced, each with their own advantages and disadvantages. The brilliance of Michael Egorov, Curve’s founder, was to blend the two together in a single function, so you can push the dial towards Sigma or Pi, depending on which properties suit the pool better. Here’s how it looks in practice:
You can see summation (red) is more stable, which is good if the price is quite constant. Purple has asymptotes, so this can be better if the value is more volatile. The blue curve has very nice properties, in that it hugs the red line, but still keeps asymptotes towards the edges.
The “A” in the equation essentially determines how much you weight the Sigma term relative to the Pi term — or whether your blue line curves closer to the red or purple lines.
Where does this tie to our new proposals? For USDN, it’s been a little bit unstable, so they’re looking at lowering A from 100 to 50 over the next week (ie more emphasis on the Pi term, curve bends to the purple line). Meanwhile DAI has been very stable since the introduction of PSM, so they’re looking at raising A from 200 to 600 (more emphasis on the Sigma term, curve bends to the straight red line) on the 3pool.
A more stable 3pool would be intended to have the effect of larger trades and more liquidity for the metapool, which is the basis for so many other Curve pools.
If you have strong opinions, shell out some gas and vote at the links above!
For more info, check our live market data at https://curvemarketcap.com/ or our subscribe to our daily newsletter at https://curve.substack.com/. Nothing in our newsletter can be construed as financial advice. The author performs development work for Curve compensated partly in $CRV, all content is otherwise independent.