Wombat Exchange
Wombat Exchange
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# Swap

Utilizing a stableswap 2.0 model, Wombat users can: swap stablecoins at hyper-efficient exchange rates with minimal slippage.
The swap price is defined by the rate of change in cash of asset x per change in cash of asset y. Defined as:
$exchange\ rate = \frac{\partial A_x}{\partial A_y} = \frac{1 + \frac{A}{r_x^2}}{1 + \frac{A}{r_y^2}}$
As you may have noticed, the exchange rate is independent of the number of token x and token y in the pool and depends solely on the coverage ratio.

#### Example

Assume
$A$
= 0.05,
$r_x$
= 80% and
$r_y$
= 150%. We have
$exchange\ rate = \frac{1 + \frac{0.05}{0.8^2}}{1 + \frac{0.05}{1.5^2}} \approx 1.055$
If we reverse the direction, swap from token y to token x. We have
$exchang\ rate = \frac{1 + \frac{0.05}{1.5^2}}{1 + \frac{0.05}{0.8^2}} \approx 0.95$

### Incentives for convergence of coverage ratio

Wombat incentivizes a swap if the coverage ratio of two tokens is converged and penalizes if it diverges, as shown in the above example. It helps keep the pool in a healthy state and prevents a token from being defaulted. Learn more in below guide: