A Typical Arbitrage Example

A typical Arbitrage example involves 3 tokens and 3 liquidity pools identified by EigenPhi:

We use the six steps mentioned earlier to determine whether a transaction is an Arbitrage:

Steps 1 & 2: Parse the transfers in the transaction and draw a directed graph based on the transfers.

Step 3: Identify the strongly connected components in the graph and create a combined transfer table based on it.

The result is that the original graph is the strongly connected components.

Then we can create a combined transfer table based on the graph above.

The TransferTable of the transaction:

The resulted CombinedTransferTable:

Step 4: Find the closest point to the "from" or "to" address of the transaction in the above strongly connected components.

In view that the "to" address is already in the graph, the closest point is the "to" address itself.

Steps 5 & 6: Calculate the profit of the point (Address) in Step 4, and determine whether it is positive.

(77,406.53 - 76,860.06) USDC + (77,666.66 - 77,666.66) USDT > 0

Therefore, we identify this transaction as an Arbitrage.

Last updated 1 year ago