Wombat

Market Making

Wombat is a stableswap automated market maker (AMM) built on BNB Chain that minimizes impermanent loss and price slippage.

Risk Rating
Good
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Wombat is a stableswap automated market maker (AMM) that enables single-sided liquidity provision to minimize impermanent loss.
What we like less
Wombat only pays liquidity providers (LPs) in its own native WOM token, which can be less desirable for users seeking to accrue the underlying liquidity tokens.
What it means for you
Offers you one of the top stableswap platforms for you to earn yield on stablecoins and tokenized assets with cheap gas fees on the BNB Chain.
Information
Info
  • Website
  • Token: WOM
  • Tags: Market Making
Key Metrics
  • TVL: $24.4M (Rank #120)
  • TVL Ranking by Market Making: #0
  • Blockchain: Binance, Avalanche, Arbitrum, Ethereum, Optimism, Base, Scroll
  • Chain TVL
    • Binance: $12.14M
    • Avalanche: $6.28M
    • Arbitrum: $5.27M
    • Ethereum: $375.27K
    • Optimism: $145.6K
    • Others: $133.91K
Risk Assessment
Good
Protocol Code Quality
  • Code reviewed by several experienced auditors including PeckShield, Hacken and Zokyo
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Latest protocol version launched in 2022; maturity over one year minimizes technical risk as smart contracts are well battle-tested
  • Top 5% by total value locked reduces risk
  • Multisig wallet controls protocol upgrades
  • Multisig consists of at least 4 signers, which means the protocol is less susceptible to centralization risks
  • No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
  • Low voting power concentration reduces risk
Protocol Design
  • No death spiral concerns
  • Robust controls to mitigate oracle price manipulation
  • This protocol is susceptible to risks related to decentralized exchanges (DEXs), such as impermanent loss
Things to know about Wombat

How Wombat works

Wombat improves upon the stableswap concept introduced by Curve with single-sided liquidity and a modified AMM algorithm. The key concept underpinning Wombat's design is asset liability management (ALM). With a traditional AMM, users who provide liquidity receive LP tokens in return that represent partial ownership of a pool. Liquidity pools consist of two or more assets. By design, trades against that pool adjust the balance over time. So when LPs withdraw their assets, they often receive a different amount than they originally deposited due to impermanent loss. With ALM, Wombat records the liability upon a user deposit and is given LP tokens matching the exact amount and token deposited. This allows each token to grow organically through supply and demand.

How Wombat makes money

Wombat charges a series of fees on its platform including swap fees (haircut), deposit/withdrawal arbitrage fees, and a coverage ratio fee. The haircut fee varies by pool and is used to support and incentivize the platform's operations. Currently, all fees are retained in the pool as a reserve. A portion of this fee may be shared with LPs in the future. Wombat implements a withdrawal fee to deter arbitragers from draining funds from the pool that can harm the protocol's long-term financial health. Similarly, the protocol also charges a deposit fee to counter such attacks. All deposit and withdrawal fees also remain in the pool and are used to keep the system at equilibrium. Lastly, Wombat introduces a coverage ratio fee that is applied on top of the normal haircut of a swap. This serves to discourage users from swapping in order to prevent riskier assets from draining other assets on the platform.

How you make money on Wombat

You earn swap fees for providing liquidity on Wombat. Currently, all rewards are paid in inflationary WOM token emissions. In the future, LPs will also earn a portion of swap fees. You can also stake WOM (veWOM) to boost your liquidity mining rewards (paid in WOM).