CEX/ DEX Arbitrage System
YieldFu's arbitrage system is designed to exploit price differences between centralized exchanges (CEX) and decentralized exchanges (DEX), providing additional returns for $FU stakers. This innovative feature leverages market inefficiencies to enhance the overall value of the protocol.
CEX/DEX Price Differences
Price discrepancies between exchanges create opportunities for arbitrage. YieldFu monitors these differences to identify profitable trades.
Monitored Exchanges:
CEX: XT, Poloniex, Bitget, Gate, among others.
DEX: Uniswap (V2 and V3), SushiSwap.
Discrepancy Factors:
Liquidity Levels: Variations in the availability of $FU on different exchanges.
Trading Volumes: Differences in trading volumes that affect price stability.
Market Inefficiencies: Inefficiencies due to varying speeds of price updates across exchanges.
Arbitrage Bot Functionality
To capture profits from these discrepancies, YieldFu utilizes sophisticated arbitrage bots.
Continuous Monitoring: Bots keep track of $FU prices in real-time across all supported exchanges.
Threshold Detection: The system identifies when price differences exceed a profitable threshold, taking into account gas fees and slippage.
Execution Process:
Buying: Automated trades buy $FU on exchanges where the price is lower.
Selling: Simultaneous sales of $FU are executed on exchanges where the price is higher.
Risk Management:
Transaction Size Limits: To prevent market impact and maintain price stability.
Slippage Protection: Ensuring trades are executed profitably despite market fluctuations.
Reward Distribution to Stakers
The profits generated from arbitrage activities are shared with $FU stakers, enhancing their rewards.
Profit Calculation: Net profits are determined after accounting for transaction costs and operational expenses.
Distribution Mechanism:
Conversion: Profits are converted to ETH.
Staking Pool: ETH is distributed into the staking reward pool.
Reward Allocation:
Proportional Distribution: Rewards are distributed based on each staker’s share of the total $FU staking pool. For instance, a staker with 1% of the total $FU staked will receive 1% of the arbitrage profits.
Benefits of the Arbitrage System
The arbitrage system offers several advantages to the YieldFu ecosystem:
Additional Yield: Provides an extra source of rewards for stakers.
Price Stability: Helps to minimize price discrepancies across different exchanges.
Increased Liquidity: Enhances liquidity on both CEX and DEX platforms through regular trading.
Market Efficiency: Contributes to greater efficiency in the $FU token market by balancing price differences.
Transparency and Reporting
YieldFu is committed to transparency in its arbitrage operations:
Transaction Visibility: All arbitrage trades are visible on-chain for DEX transactions, ensuring transparency.
Regular Reporting: Periodic summaries of arbitrage activities and profits are provided to the community.
Performance Metrics: Key performance indicators of the arbitrage system are shared, allowing the community to track its effectiveness.
The arbitrage system is a testament to YieldFu's commitment to maximizing value for its users. By automating the arbitrage process and sharing the resulting benefits with stakers, YieldFu not only enhances the protocol's value but also incentivizes long-term participation.
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