Weight Pools
Last updated
Last updated
The weighted pools are highly versatile and customizable pools. These pools employ a weighted calculation and are best suited for general use with tokens that are not necessarily price correlated. (e.g. USDC/OAS).
Unlike traditional AMM pools, which only offer a 50/50 weighting, Gaming DEX weighted pools enable users to create pools with varying token counts and weightings, such as 80/20 or 60/20/20 pools.
Weighted pools allow you to select the level of exposure to a specific asset while still providing liquidity. The higher the weight of tokens in the pool, the lower the impermanent loss incurred in the event of a price spike. For example, if one wants to provide liquidity for Z (PLAN Z tokens) and OAS, they can select the weighting that best matches their strategy. A pool that favors Z indicates that greater profits for the Z are expected, and a pool that favors the OAS means greater profits for OAS are expected. Assets with values that are anticipated to be proportionate over the long term should be placed in an evenly distributed pool.
The loss of the value difference that occurs between holding an asset and providing liquidity for that asset is referred to as impermanent loss.
Some people think the term "impermanent" is misleading, preferring to call it "divergence loss" or "rebalancing loss," because one token may outperform another indefinitely and the loss may be permanent.
The impermanent loss is much lower in pools where one token is heavily biased against another, but this is also a disadvantage when performing a swap. When making transactions, a pool with a skewed weight of tokens will have high slippage since one side of the pool has very little liquidity. The 80/20 pool is suggested as a moderate ratio to balance liquidity and to mitigate impermanent loss.
