Ever stared at a liquidity pool dashboard and thought, “Okay… now what?” You’re not alone. DeFi dashboards can feel like a control panel for a spaceship, and yet the knobs matter. The combination of automated market maker (AMM) design, token weights, and curve choice is what decides whether a pool is quietly useful or a capital sink. I’m going to walk through how weighted pools and stable pools work inside AMMs, why you might choose one over the other, and practical design choices for anyone building or providing liquidity in custom pools.
Start simple: an AMM replaces an order book with a deterministic pricing function. That function is the rulebook. Change the rulebook and you change everything — slippage, arbitrage windows, fee capture, and impermanent loss. Different AMM families optimize different tradeoffs. Constant-product AMMs like the classic x*y=k are generalists. Weighted pools tilt that equation by letting tokens have different “importance”, and stable pools swap the emphasis from wide-range flexibility to capital efficiency for similar-priced assets.
Weighted pools: tilt the scale where it matters
Think of a weighted pool as a pie chart where each token’s slice size is a design parameter. A 50/50 pool treats two tokens equally. A 90/10 pool, by contrast, prioritizes one asset and makes the other act like a hedge or liquidity peg. That’s powerful. You can back a synthetic token with a stable asset without needing a 50% backing, or create index-like pools where a governance token holds more weight than others.
Why use weights? Three reasons. First, capital efficiency: by giving higher weight to the asset people want exposed to, you reduce rebalancing pressure and can accept larger swaps with lower relative slippage. Second, risk management: weights let you control LP exposure to volatile tokens. Third, composability: weighted pools can serve as building blocks for index funds, automated vaults, or on-chain rebalancers.
But — and this is important — weighted pools still face impermanent loss. If the price of the underweighted token moves a lot relative to the overweighted one, LPs can suffer. The degree of IL scales with the divergence in prices and the weight choices. So choose weights intentionally, not arbitrarily.
Stable pools: tight curves for like-priced assets
Stable pools are a design built around the reality that many swaps are between closely pegged assets — think stablecoins or multiple wrapped versions of the same underlying. Instead of x*y=k, stable pools use bonding curves that are much flatter near the peg. That means very low slippage for small-to-medium trades and much better capital efficiency for arbitrageurs and LPs alike.
In practice, stable pools are great for DEXes aiming to capture low-slippage volume for large-ticket swaps: stablecoin rails, wrapped BTC variants, or different representations of the same token across chains. The tradeoff is complexity; stable curves are more mathematically intricate and therefore can be a larger attack surface if implemented poorly. Also, they often assume assets will remain closely correlated — break that assumption and losses can mount quickly.
Practical tradeoffs: fees, slippage, and impermanent loss
Designing a pool means balancing three levers: pool curve/logic, fee schedule, and weights (if applicable). A tighter curve (like stable pools) reduces slippage but increases sensitivity to depegging events. Higher fees protect LPs from frequent arbitrage wage-loss, but high fees also dampen trade volume. Heavier weight for an asset can lower slippage for swaps into that asset but concentrates LP exposure.
From a practical standpoint, here are some heuristics I use when advising teams or deploying capital:
- For stablecoins or tightly correlated assets, prefer stable curves and low fees (to attract volume).
- For index-like or asymmetric exposures, use weighted pools — set weights to match the intended exposure profile.
- When uncertainty about future correlations exists, choose a more conservative weight (closer to balanced) and monitor continuously.
- Fee tiers should reflect expected trade frequency and size: high-volume pairs can sustain lower fees, niche pairs may need higher fees to compensate LPs.
Real-world example: multi-token weighted pools
Multi-token weighted pools let you do more than two-asset trades. Imagine an index pool with five tokens and weights reflecting market caps or governance decisions. Traders can swap between any pair through the pool, and arbitrage will keep prices aligned across markets — at least in theory. These pools are powerful for protocol treasuries or on-chain funds. But admin complexity rises: reweighting requires governance or automated rebalancers, and larger pools can mask price movements that would otherwise be visible in simpler pairings.
If you want a platform that supports flexible weighted and stable pools, check the balancer official site for how these mechanisms are implemented and the interface options available to deploy or join such pools.
Security and MEV considerations
Okay, this part bugs me: smart contracts and complex curves are great until they’re exploited. Stable pools’ mathematical complexity means a subtle bug or poorly considered edge case can be catastrophic. Front-running and MEV are constant risks; arbitrageurs will race to rebalance pools, and that can harm LP returns unless fee and slippage settings are tuned. Audit, testnet stress tests, and formal verification where feasible are musts. No shortcuts.
Design checklist for builders
Here’s a quick actionable list if you’re creating a custom pool:
- Define objectives: volume vs. exposure vs. index replication.
- Pick curve family: constant-product for flexibility, stable for like-assets.
- Choose weights aligned with intended exposure and risk tolerance.
- Set fee tiers that reflect expected trade patterns.
- Plan governance or automated rebalancing logic for weight changes.
- Run simulations across volatility scenarios and slippage profiles.
- Audit contracts and simulate MEV/arb behavior.
FAQ
What’s the key difference between a weighted pool and a stable pool?
Weighted pools adjust token influence via percentage weights, changing how large trades impact pool composition. Stable pools use specialized curves optimized for low-slippage swaps between tightly correlated assets. One is about exposure control; the other is about peg efficiency.
How do I pick fees for my pool?
Estimate expected trade size and frequency. Lower fees make sense for high-volume, low-margin trades (like stablecoin rails). Higher fees protect LPs in low-volume or high-volatility pools. Revisit fees after launch — defaults are rarely perfect.
Can weighted pools eliminate impermanent loss?
No. They can mitigate it relative to a 50/50 pool depending on price movements and weights, but IL is inherent to AMM mechanics when external prices diverge from pool balances. Consider hedging or dynamic fees to manage IL.
Are stable pools risk-free?
Not at all. They reduce slippage between pegged assets, but if correlation breaks (e.g., stablecoin depeg), losses can be severe. Complexity also increases the attack surface.