On-chain arbitrage activity investigation

[LouisTsai-Csie]

Summary

Please give a short summary of this research topic.

In Homework 2, we employed a Python script to search for profitable paths, a practice commonly known as "Arbitrage". For this topic, please investigate the current methods and strategies developed by developers in arbitrage activities.

Description

Please provide a detailed description to the topic.

Arbitrage contains various strategies, such as arbitrage among decentralized exchanges (DEX) and more. Engaging in arbitrage often requires a significant initial investment. How can you acquire the necessary funds for these activities? For this topic, we encourage you to delve into the mathematics behind arbitrage.

Source

Please provide related resource for the topics, including articles, research papers and more.

Price Arbitrage for DeFi Derivatives

eth-arbitrage

Others

Please provide more information if there is any.

None

[1am9trash]

Hi, TA. I’m not sure how to add myself as an assignee. It seems I don’t have the necessary permissions.

[LouisTsai-Csie]

@1am9trash I assigned you as the assignee now, please check.

By the way, do you have any question about this research domain?

[1am9trash]

@LouisTsai-Csie

First, thanks for adding me as an assignee.

I've read the reference sources for this issue.

1. Price Arbitrage for DeFi Derivatives: This discusses the real-time issues of obtaining price information on the DEX Mycelium.
2. eth-arbitrage: This provides an implementation of DeFi tokens arbitrage.

Combining this with the introduction in the issue, I’m still unsure which part to focus on for my final project. Following is some topics.

1. How to obtain the necessary funds (e.g., DyDx Flashloans and the underlying math logic)
2. Surveying different arbitrage methods in special DeFi financial products (e.g., perpetual futures and swaps)
3. Surveying how to determine the optimal arbitrage path between DeFi tokens

I would appreciate any advice.

[LouisTsai-Csie]

@1am9trash I just provide potential research directions for students, you can do whatever you want to research about arbitrage. But according to your information, here I provide some feedback for you.

1. Can you survey all the ways to obtain the necessary funds and compare their differences related to the underlying financial logic? However, this way might be identical to this research topic.
2. This one is great; I am interested in arbitrage activities in perpetual futures and their mathematical calculations. How can you maximize your profit?
3. For this topic, I anticipate you to survey and compare different algorithms within the domain. There might be some existing open-source arbitrage bots; you can investigate their implementations.

Please let me know whether you have any other question, or you need any resource for research, thank you.

[1am9trash]

I've read through some more related papers and decided to choose the second research topic (arbitrage activities in perpetual futures) for my final project. Thanks for helping.

[Ya88012]

Hello TA, I am also interested in this research for my final project.
Can you assign it to me? Thanks~

[LouisTsai-Csie]

@Ya88012 No problem, please take a look at the previous discussion.

[LEE-CHI-HSUAN]

Hello TA, I would like to select this topic for my final project.

[Ya88012]

@LouisTsai-Csie Thanks for the assignment. After looking the discussion, I prefer study the topic "There might be some existing open-source arbitrage bots; you can investigate their implementations."
For this topic does it some required parts, i.e. which content should I should foucs on?

[LouisTsai-Csie]

@Ya88012 You can check forta network and bots developed by Nethermind.

We anticipate you to research the mechanism of these bots, for example, is there any formula for arbitrage? And maybe how they optimize their gas consumption to reduce the cost.

[Ya88012]

@LouisTsai-Csie Thanks for your advice. I will pay more attention on this. Thanks!

[LouisTsai-Csie]

@Ya88012 Great!

[LouisTsai-Csie]

@LEE-CHI-HSUAN Done, sorry I miss it.

[Ya88012]

@LouisTsai-Csie Hello TA, these 2 days I am trying to find the information about Forta and Nethermind.
So far my understand is that Forta is a platform designed to enhancethe security and monitor blockchain.
Nethermind, on the other hand, is a company dedicated on applying ML technique and software engineering on blockchain.
Currently I do not see much information about arbitrage with these two terms.
Do I need to change the keyword or there is something I misunderstand?