Other Constructs
Last updated
Last updated
At the core of the Arbitrage Engine is latency arbitrage, which leverages slight time differences in the speed at which markets process information to capitalize on price discrepancies.
Latency arbitrage involves exploring temporary price discrepancies caused by various timing differences across trading platforms. While a significant aspect of latency arbitrage is how platforms update their prices, it also includes factors such as order execution speed, network latency, market events, differences in liquidity, and exchange-specific delays. Traders with faster execution capabilities or superior network infrastructure can capitalize on these discrepancies before they disappear, making profits from brief inefficiencies.
A key advantage that supports latency arbitrage as the core of the Arbitrage Engine is Arbix's exclusive access to Aggreg8 Dynamic Data Feeds and Quotex Unified Order Network. This access enables rapid detection and execution of profitable trades based on real-time market data, enhancing the efficiency and profitability of the latency arbitrage strategy.
The protocol's strategy for arbitrage is based on the following key principles:
Risk Management. Implementing a robust strategy focused on minimizing risks. This involves using the most popular token pairs with the highest volumes on the market, which ensures adequate liquidity and reduces slippage.
Efficiency. Leveraging our key advantages, such as cutting-edge technology and exclusive data feeds, to outperform other market players. This includes focusing on latency arbitrage and other efficient arbitrage methods to ensure the optimal use of resources and maximize returns.
Development. Constantly developing our products to stay ahead of the technological curve and compete effectively against other market players.
Adjustment. Continuously adjusting and fine-tuning our algorithms to adapt to changing market conditions and emerging arbitrage opportunities.
The current arbitrage space presents not only opportunities but also risks associated with the so-called “Dark Forest,” a concept proposed by Dan Robinson & Georgios Konstantopoulos in their article “.” This concept highlights the highly competitive and adversarial environment in DeFi, where malicious actors explore vulnerabilities and inefficiencies in blockchain transactions. Frontrunning, backrunning, and other manipulative strategies used by bots and attackers pose significant risks, making any exposed transaction vulnerable to attack or manipulation before it is confirmed on the blockchain.
To ensure our product is secure against the dangers posed by the Dark Forest, we plan to implement several measures:
Private Nodes & Infrastructure. We will either run or use private nodes for our executions, depending on cost-effectiveness at the time of launch. This will prevent malicious market players from listening to our mempool and abusing our transactions. Additionally, we will create and secure our own private infrastructure to maintain the integrity and security of our operations.
Contract Safety Measures. We will incorporate established best practices within our smart contract code to protect against common abuses. These practices are well-known within the DeFi developer community and will serve as a regular measure of protection.
Audits & Whitehat Hackers. Regular audits by reputable security firms and engagement with whitehat hackers will help identify and fix vulnerabilities.
Third-party Validators.We will integrate third-party secured services that validate on-chain to add an additional layer of security to our operations. These services will help ensure that our transactions are protected from external threats and maintain the overall security of the system.
Onchain Randomiser via Chainlink VRF (Verifiable Random Function).
By implementing these measures, we aim to safeguard our product from the various threats posed by the Dark Forest, ensuring a secure and reliable platform for our users.
Flash Loan Arbitrage is a distinct concept that utilizes flash loans - loans that must be borrowed and repaid within a single blockchain transaction - to explore arbitrage opportunities without needing upfront capital.
Flash loans are provided by various platforms and typically require a fee for their use. However, by using community liquidity to execute arbitrage opportunities, Arbix makes these transactions cost-efficient by avoiding fees associated with third-party capital and simplifies the process by eliminating the need for additional actions.
Arbix will consider leveraging flash loans whenever it has less public liquidity than required to execute all planned operations in the Transaction Pool and only for on-chain simple arbitrage via navigating through different liquidity pools.
With the introduction of our protocol, we are also introducing the concept of “community arbitrage.” This concept aims to provide the DeFi community with barrier-free access to arbitrage opportunities, requiring only their liquidity. Users can provide their liquidity to a dedicated venue that will perform arbitrage on their behalf.
As mentioned in the introduction, the current barriers to entry for regular DeFi users to participate in arbitrage are high, and there are many pitfalls to navigate. By offering easy access to Arbix products and features, we empower the DeFi community to engage in arbitrage without the usual complexities and obstacles.