The BlackHoleSwap’s whitepaper and its “Unlimited Liquidity” claims have made its rounds over Twitter and Telegram this week. With a tagline of that magnitude, it is hard not to stop whatever you are doing and read. For the individuals who don’t have the time to read whitepapers for their job (thank you Delphi), let me break down the core components of this decentralized stablecoin AMM exchange for you.
For starters, the image below paints a picture of how BlackHoleSwap’s invariant compares to existing designs. mStable’s design is the constant price function.
As we have mentioned in a previous Daily, mStable can utilize a constant price function, because of certain tradeoffs. For one, in a constant price formula, a reserve asset can be fully drained, and this is what happened for Dai. While BlackHoleSwap’s invariant looks most similar to the constant price function, BlackHoleSwap builds off Uniswap’s constant