Cheetah Exchange is a next-generation AMM protocol (single-sided decentralized exchange) designed for exchanging stablecoins on the Sei.
The protocol is implemented as a set of smart contracts; designed to prioritize censorship resistance, security, self-custody and maximum capital efficiency.
Cheetah features single-token provision, eliminating impermanent loss risk for liquidity providers, and ultra-low slippage for traders.
By implementing ALM, Cheetah Exchange allows tokens to grow based on natural supply and demand, contrasting with Curve, which requires uniform liquidity across all tokens. This “Extendable Liquidity Pool” design offers benefits such as tracking financial health, lending idle assets, enabling new stablecoin solutions, and eliminating impermanent loss.
Existing AMMs like Uniswap and Curve require liquidity providers to supply token pairs or bundles, exposing them to impermanent loss due to price volatility. In stableswap pools, providers may receive different tokens than initially supplied. Impermanent loss occurs when asset prices change after deposit, leading to reduced value upon withdrawal. Although stablecoins typically remain within a stable range, providers still face some risk if a stablecoin loses its peg.
The key concept behind Cheetah Exchange is asset liability management (ALM), which most DeFi protocols overlook. In traditional AMMs, liquidity providers receive LP tokens representing partial ownership of a pool, but the ratio of tokens can change, leading to discrepancies upon withdrawal.
Cheetah Exchange differs by recording liabilities, giving liquidity providers LP tokens that specify the exact amount and type of token deposited. This ensures they can withdraw the same amount of the original token plus any token emissions if the system is liquid.
By implementing ALM, Cheetah Exchange allows tokens to grow based on natural supply and demand, contrasting with Curve, which requires uniform liquidity across all tokens. This “Extendable Liquidity Pool” design offers benefits such as tracking financial health, lending idle assets, enabling new stablecoin solutions, and eliminating impermanent loss.