🎨DEX Liquidity

Liquid stacking can be improved with external liquidity

Traditional automated market makers (AMMs) are exposing users to unnecessary impermanent loss (IL).

The good part is that with a liquid stacking token, the IL is very limited. stSTX and STX are both tied to the STX price itself. This means that users can expect less divergence in the prices of the two assets. As a result, the trading fees they make are truly a net benefit (plus potentially additional emissions).

We should keep in mind however that both assets (STX and stSTX) may experience significant divergent price movements during volatile conditions. This means your deposit is exposed to the price movements of both tokens in the pair, and your exposure to each token can also change. Volatile conditions may still lead to increased impermanent/divergence loss, but this will be arbitraged away within one (1) PoX cycle.