Dual-liquidity Types

Each pool in Esper Finance can be distinguished into two types which are based on how closely the prices of the two tokens in the pair are expected to move together.

Volatile Pools

Volatile pools consist of two assets with prices that don't correlate with each other. For instance, Esper Finance (ESPER) and Ethereum (ETH) are considered volatile because the price of ETH doesn't directly affect the price of ESPER.

The Volatile Pool is built for general-purpose tradings and utilize the constant product algorithm popularized by Uniswap:

$$x * y = k$$

The constant, represented by “k” means there is a constant balance of assets that determines the price of tokens in a liquidity pool.

Stable Pools

Stable pools consist of two assets that have a direct correlation to each other. For instance, USDC/USDT, USDT/DAI, etc. The main purpose of this pool is to maintain a 1:1 transfer ratio as much as possible. The formula is based on the well-known Solidly curve:

$$x^3y + y^3x= k$$