MCDEX Arbitrager Bounty II

Based on the proposal 26, We are glad to extend our bounty with hummingbot to widen the participants of the arbitrager bounty.

Description

MCDEX is calling for developers to produce arbitrage strategies based on MCDEX perpetual swaps. This arbitrage strategy is designed based on elements including but not limited to the funding rate, cash and carry trade, and spread.

Rules:

  1. The MCDEX foundation shall review the application and reply to the qualified arbitragers.
  2. Arbitrager integrates his system to the MCDEX v3.
  3. MCDEX Foundation reviews the integration/adapter codes of the arbitrage and tests the arbitrager’s system. The test will be on both Arbitrum Testnet and mainnet.
  4. The Arbitrageurs’ system shall work on the first day of v3 launching and work fine in the following 30 days.
  5. The reward is sent to the arbitragers.

Please notify that:

  1. you can find the MCDEX connector of Hummingbot here
  2. Check out a ref strategy here
  3. Strategies based on humming bot or not are both acceptable.

Reward Distribution

  1. 800 MCB
  2. 400 MCB
  3. 400 MCB
  4. 100 MCB
  5. 100 MCB
  6. 100 MCB
  7. 100 MCB

DDL:

Reference:

However, the calculation of funding rate of each exchange is not exactly the same. The user case below is to explain the funding mechanism on MCDEX, so that the arbitrager can have a clear picture of it and generate their own arbitrage strategies.

Funding rate mechanism on MCDEX:

1.When AMM holds a net short position (which means more traders long than short), AMM price will be higher than the index price. In this case, Longs will pay the funding payment. to shorts.

2.When AMM holds a net long position (which means more traders short than long), AMM price is lower than the index price. In this case, shorts will pay the funding to longs.

3.The funding rate mechanism on MCDEX is unique in a way that it is charged on a rolling basis rather than in every few hours.

User story (ETH-USD):

Assuming index price of ETH =100u , ETH-USD price on MCDEX =120u

In this case we can open a short position of 1 ETH (short position entry price=120) while buying 1 ETH in a spot market.

If the index price stays at 100u, when the price deviation on MCDEX is buffered by the decrement of long traders, we can then close our 1 ETH short position at 100u and sell our 1 ETH in the spot market.

So we profit 20u from closing the short position.

Before closing the short position, we get funding payment as profit as long as the AMM is in a net short position.

Our profit=20+funding rate.

More Info

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