Starbank Finance, which is based on Balancer V2, is releasing several types of pools. These pools consist of:
· Weighted Pools
· Stable Pools
· Meta Stable Pools
· Liquidity Bootstrapping Pools
Each of these pools employs a different strategy which means it’s important for the investor to understand exactly what they’re getting into. We will be covering each one of these pools to explain how they work.
What is a stable pool?
In simple terms, a stable pool is a liquidity pool that consists of tokens that are expected to trade around the same price. These stable pools could be in the form of something such as DAI/USDC, USDT/USDC, etc. Or they can be in the form of wrapped tokens such as WBTC/BTC, WETH/ETH. As long as the tokens inside the pool are currently, and are expected to, trade around the same price, it can be a stable pool.
Perks of a stable pool
Compared to a normal liquidity pool which has two or more tokens that can drastically change in price, the perk of a stable pool is that there should be little to no impermanent loss. As a reminder, impermanent loss is the unrealized loss you can experience if the tokens in your liquidity pool spike or drop in price.
Rewards Low Risk
Another perk of stable pools is how they reward liquidity providers for a relatively safe investment. The APY for a stable pool seems to be around 1–2%. Most people are happy with this return since they can turn their spare cash into something that nets them at least a little bit in return.
One final perk of stable pools is they don’t experience arbitragers. In a normal liquidity pool, arbitragers help keep the pool in balance by taking advantage of price differences. Well, they aren’t needed with stable pools since the two tokens should trade at roughly the same price.