Arbitrage Requiring More Tokens and More Trading Venues
Last updated
Last updated
Certain arbitrage takes advantage of the exchange rates spread among more than three cryptocurrencies founded in over three liquidity pools to make a profit.
Searcher Alice detects the rate spreads of WBTC, WETH, BNT, and SATA amid two UNISWAP liquidity pools and two BANCOR liquidity pools. Then, Alice starts the arbitrage as below:
Alice sells 100 $WETH for 7.25 $WBTC in a UNISWAP liquidity pool called LP1 with an exchange rate of 1 $WBTC for 13.79 $WETH.
Alice sells 7.25 $WBTC for 134,652.36 $BNT in a BANCOR liquidity pool called LP2 with an exchange rate of 1 $WBTC for 18,572.74 $BNT.
In another BANCOR liquidity pool called LP3, Alice exchanged 134,652.36 $BNT for 3,519,619.70 $SATA with an exchange rate of 1 $BNT for 26.14 $SATA.
In another UNISWAP liquidity pool called LP4, Alice exchanged 3,519,619.70 $SATA for 145.87 $WETH with an exchange rate of 1 $WETH for 24,128.47 $SATA.
Alice's revenue from this arbitrage is 45.87 $WETH. The cost is the gas fees for the four transactions. Assuming it's 0.9 $WETH, an equivalent of 2,208 USD at the price of the time. In the end, Alice's profit is 44.97 $WETH worth of 124,117.2 USD.
However, some arbitrages use more than three tokens and trading venues in different ways. It might put several "simple" arbitrages into a big one arbitrage package.