Jan 14th, 2024 – Coinscribble by Coinbound / In the dynamic world of decentralized finance (DeFi), the quest for efficiency and innovation is ceaseless. Today, Salty.IO introduces what we believe will be transformative paradigm: Automatic Atomic Arbitrage (AAA). This novel mechanism represents a substantial leap towards optimized yield generation and equitable value distribution — one with the potential to transform all existing and future Decentralized Exchanges (DEXs).
A Market Disoriented: The Problem at Hand
Arbitrage bots have long taken advantage of inefficiencies in decentralized markets to extract as much profit as possible for themselves. With each trade executed on traditional DEXs, price imbalances create opportunities for profit— opportunities that bots exploit far faster than any human trader could. Consequently, DEX users themselves are left behind, forfeiting potential earnings to automated entities who have little interest in the ideals of DeFi.
But what if the DEX itself could be the arbitrager? What if the profits from these fleeting opportunities could be channeled back to the community instead of the self-serving arbitrage bots? Salty.IO introduces AAA — an innovative protocol designed to autonomously harness and redistribute arbitrage profits, directly benefitting the platform’s loyal users and contributors.
Automatic Atomic Arbitrage (AAA): Salty.IO’s Game Changer
The concept of AAA is simple in theory yet innovative in practice: we integrate arbitrage directly into the transaction layer of the exchange, making it seamless and atomic — unable to be front-run or outpaced by bots or miners engaging in Maximal Extractable Value (MEV).
The Process of AAA
1. When a user initiates a swap on Salty.IO, say USD for ETH, the smart contract instantly conducts the trade with the usual market-expected price impact.
2. Post-swap, Salty.IO’s smart contract searches for arbitrage opportunities across its liquidity pools, leveraging the price movement resulting from the executed swap. Specifically the contract looks chooses between five possible triangular arbitrage paths for the given swap.
3. If an opportunity is detected, a predetermined series of trades is automatically executed within the same transaction. These trades simultaneously rebalance the exchange’s own pools’ reserves, and lock in arbitrage profits.
The net result? Users experience the usual trading process, but with the added advantage that AAA instantly identifies and capitalizes on arbitrage opportunities. This mechanism not only preserves the integrity of each swap but also ensures the redistribution of profits within the Salty.IO ecosystem, thereby enhancing the value for every participant.
The Zero-Fee Paradigm
By rerouting arbitrage profits to replace trading fees, Salty.IO establishes a novel model for DEXs — the zero fee DEX. This strategic shift has the potential to create more enhanced capital efficiency, a more inviting experience for users and to influence the standards of DEX operation and user engagement across the DeFi landscape.
Evolution of Efficiency: Gas and Governance
Despite the additional complexity, AAA maintains exceptional gas efficiency — a necessity for sustainability on the Ethereum network. By utilizing a fixed number of possible arbitrage paths and a heavily optimized bisection search, Salty.IO keeps the gas cost competitive — 93k gas for both the user swap and the arbitrage trades, and only 69k when users are swapping from pre-deposited tokens.
Conclusion: Ushering in a New Era
Automatic Atomic Arbitrage is more than just a tool for maximizing revenue; it is a catalyst set to redefine the financial landscape of DEXs. As Salty.IO demonstrates the practicality and profitability of AAA, it lays down the gauntlet for other platforms to innovate or be left behind in an ever-evolving market.
The future of DeFi is one where yield generation is not only optimized for the end-user but also reinforces the ecosystem’s resilience. With initiatives like Salty.IO leading the charge, that future is closer than we think.
Be the first to experience the power of Automatic Atomic Arbitrage on Salty.IO’s zero-fee DEX when it launches on March 1st, 2024.
Intrigued? Dig deeper with the comprehensive Gitbook Documentation.
Disclaimer: This article is for informational purposes only and is not intended as investment advice. Please conduct careful due diligence and consult a financial advisor when considering any investment.