Lending-Liquidating AMM Algorithm.
LLAMMA replaces traditional liquidations with a continuous liquidation/deliquidation process that converts between collateral (such as Ethereum) and stablecoin (such as USD) through a series of price bands. The goal is to prevent significant losses for borrowers even when the price of the collateral drops below the liquidation threshold.
The stablecoin is essentially a Collateralized Debt Position (CDP), where users can borrow the stablecoin against a volatile collateral, such as ETH.
Curve Stablecoin model, released End of 2022
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Overall Schematic
Curve is leader in stablecoin liquidity provisioning
The AMM is constantly selling at a loss to reduce or increase exposure
Overview:
Algorithmic Stablecoin Lending/Liquidating Curve
Type: LLAMMA
Shape: Multi-Dimensional / Dynamic
Oracle: LLAMMA uses an external price oracle to maintain the prices in each band by adiabatic shifting the tokens between collateral (e.g., ETH) and stablecoin (e.g., USD) while preserving the constant-product invariant.
Automatic Stabilizer: the PegKeeper contract is allowed to mint uncollateralized stablecoin and (only!) deposit it to the stableswap pool single-sided in such a way that the final price after this is still no less than 1.
Interest Rate: (r) sets the interest rate, incentivize borrowing or returning loans based on the market conditions
Variables**:**