Stake Exchange (stHYPE AMM)
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Stake Exchange AMM is a novel AMM for LSTs.
STEX AMM's first implementation is for the StakedHYPE LST (stHYPE)
STEX solves secondary-market depeg losses for Liquid Staking Tokens (LSTs). Liquidity providers (LPs) on existing automated market makers (AMMs) incur losses by selling LSTs at a discount to remain balanced.
LPs sell LSTs below their true value, when they could retain the full value by unstaking. We call this phenomenon Loss Versus Unstaking (LVU). LVU is typically not accounted for in traditional stable swap APY calculations, but liquidity providers are constantly subject to these depeg arbitrage losses. For example, even the highest TVL LSTs consistently sell at "depeg" rates on traditional AMMs. By selling at discount rates when the AMM is imbalanced, there is loss incurred when the AMM rebalances.
Stable swap APY usually does not account for these losses, since APY is usually just "fees" collected. When LPs sell an LST for depegged price + fee that is below the true value of the LST, the LPs incur a loss not shown in APY numbers. This is a consistent problem for LST LPs, and risk not often represented. Therefore, STEX AMM represents more accurate yield numbers for LPs, by pricing the LST at its true value.
STEX AMM solves this problem by never selling an LST below its true value, and integrating with an LST's native withdrawal mechanism to rebalance itself back to native token at the true rate.
LPs are forbidden from selling LSTs at a loss.
STEX AMM is able to never depeg while remaining balanced because of its native integration with the LST protocol. Existing stable swap solutions can only rebalance themselves by selling LSTs at a discount when the pool is imbalanced. STEX AMM is able to withdraw these assets at their true rate in these scenarios—rebalancing without loss.
LPs collect fees as LSTs accumulate into the pool through a separate swap fee mechanism.
