Definition
Stable swap is a type of automated market maker (AMM) mechanism specifically tailored for trading assets that are expected to maintain nearly identical prices, most commonly stablecoins. Instead of using a simple constant-product curve, it uses a specialized pricing function that keeps the exchange rate very close to 1:1 within a wide range of trade sizes. This design reduces slippage for traders and allows more efficient use of capital in a liquidity pool composed of similar-value assets. The concept is closely associated with protocols like Curve, which popularized this approach in decentralized finance.
In a stable swap setup, liquidity providers deposit pairs or baskets of stable-value assets into a shared liquidity pool, and the AMM algorithm quotes prices based on the pool’s balance and its stable-focused curve. Because the assets are designed to track the same underlying value, the mechanism can tolerate larger imbalances before causing significant price deviations. This makes stable swap particularly suited to stablecoin trading, where maintaining tight pegs and predictable pricing is critical. The model aims to minimize slippage while still allowing the pool to respond to supply and demand changes.
Context and Usage
Stable swap underpins many decentralized exchanges that specialize in stablecoin pairs and other closely correlated assets. By concentrating pricing sensitivity around the target exchange rate, it enables deep on-chain liquidity with relatively low capital compared with more general-purpose AMM designs. This structure is central to how Curve and similar protocols facilitate efficient swaps between different stablecoins without relying on traditional order books.
The concept also influences how liquidity pool parameters are chosen, including amplification factors that control how aggressively the curve maintains the target price region. In practice, stable swap mechanics help reduce slippage for traders moving between stablecoins, while still allowing the pool to absorb imbalances when one asset diverges from its intended value. As a result, stable swap has become a foundational design pattern in DeFi for markets where price stability, tight spreads, and predictable on-chain execution are priorities.