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🥯 add some notes on arbitrage

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Dr. Mia von Steinkirch 2022-10-16 12:20:15 -07:00 committed by GitHub
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arbitrage/README.md
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<br> <br>
* liquidity on-chain is fragmented: there are thousands of uniswap-like pools that don't communicate with each other, each providing quotes for swapping assets in real time. fragmented liquidity creates opportunity to buy low and sell high accross different pools.
* arbitrage refers to the simultaneous buying and selling of tokens in different markets * arbitrage refers to the simultaneous buying and selling of tokens in different markets
in order to take advantage of price discrepancies of that asset. in order to take advantage of price discrepancies of that asset.
* the simplest MEV opportunity: two DEXes offering a token at two different prices, someone can buy the token on the lower-priced DEX and sell it on the higher priced DEX in a single atomic transaction. * the simplest MEV opportunity: two DEXes offering a token at two different prices, someone can buy the token on the lower-priced DEX and sell it on the higher priced DEX in a single atomic transaction.
* atomicity is what makes things different in defi: the blockchain's state updates on a block-by-block basis, which means that a tx can perform multiple actions, provided that the end state of the tx is correct (flash loans)
* most of the atomic arbitrage space is dominated by a few addresses, who land most of the profitable arbs. this is a very competitive space, and success is derived from a mixture of cleverness, low latency and good infrastructure.
<br> <br>
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