Uniswap StablePair Hook Exposed: Flaws Drain Liquidity Providers' Returns
Uniswap's StablePair hook is designed to help liquidity providers (LPs) by reducing fees on trades that rebalance stablecoin pools. However, a recent analysis has revealed three hidden flaws in this mechanism.
The StablePair fee logic compares the cached pool price with a reference rate stored in the hook's configuration. If the pool price moves away from the reference, LPs are exposed to losses if the token's economic value drops.
One of the main issues is that the fee rules split trades by direction, charging zero LP fees for trades that move the pool away from the reference and higher fees for trades that bring it back. However, this design cannot protect LPs if a token loses its peg.
A hypothetical example illustrates how an issuer shock can reduce one coin's external value while the configured reference still assumes a one-for-one exchange. In such cases, selling the weakening coin for the stronger coin may move the pool farther from the reference while moving its price closer to the outside market.