Cryptocurrency Arbitrage on DEX Exchanges — ArbitrageScanner

Summary

In this video, Alexander from Arbitrage Scanner introduces viewers to the concept of Dex Arbitrage, explaining how to utilize arbitrage opportunities across decentralized exchanges. He demonstrates how to set up filters to track asset pairs, explains the differences between liquidity pools on Dexes and order books on centralized exchanges, and walks through tools like 1inch, including its classic and fusion modes. The video also touches on the complexities of bridging tokens between networks and the importance of considering gas fees and volumes. The session concludes with insights on future updates to the Arbitrage Scanner platform.

Takeaways

• 😀 Arbitrage Scanner is a tool that helps users identify profitable arbitrage opportunities between decentralized exchanges (DEXs), available for Platinum subscribers or higher.
• 💡 DEX arbitrage involves trading assets between different decentralized exchanges to take advantage of price discrepancies.
• 📊 To use Arbitrage Scanner effectively, users must set up filters for both buying and selling exchanges, including networks like Arbitrum, Ethereum, and Polygon.
• 🔍 1-Inch is a DEX aggregator that combines multiple decentralized exchanges into one platform, providing access to price data from nearly 200 different exchanges.
• ⚖️ The price on 1-Inch can vary depending on the liquidity of a token and the volume being traded, with different prices across different blockchains.
• 💰 Gas fees on networks like Ethereum can impact small trades in DEX arbitrage. Large trades may not be as affected by high gas fees.
• 🔄 There is no order book in DEXs like 1-Inch. Instead, trades occur through liquidity pools, where prices are determined by the available liquidity and trade volume.
• 💻 1-Inch operates in two modes: Classic and Fusion. Classic mode shows real prices, including network fees, while Fusion mode eliminates fees but results in worse prices for users.
• 💸 Arbitrage Scanner uses Classic mode pricing to ensure accurate and reliable price data for arbitrage opportunities.
• 🌐 Cross-chain arbitrage involves trading between different blockchain networks (e.g., Ethereum to BNB Chain), requiring bridging tokens. Bridging can involve fees, delays, and potential risks due to price fluctuations.
• 🔄 Bridging tokens between networks can take time (up to 7 days in some cases), making it critical to strategize carefully when attempting cross-chain arbitrage to avoid losing profit due to changing price spreads.

Q & A

What is Dex Arbitrage and how does it work?

Dex Arbitrage involves exploiting price differences for the same asset between different decentralized exchanges (Dexes). Traders look for arbitrage opportunities where they can buy an asset at a lower price on one Dex and sell it at a higher price on another. The Arbitrage Scanner platform helps users spot such opportunities by comparing prices across supported DEXs.

How do I set up filters in Arbitrage Scanner?

To set up filters in Arbitrage Scanner, you need to specify the networks for buying and selling. For example, for buying, you can select networks like Arbitrum, 1inch, Ethereum, and Polygon. For selling, you can choose all the exchanges you have access to, which allows you to see potential arbitrage opportunities based on your selection.

What is 1inch and how does it relate to Dex Arbitrage?

1inch is an aggregator of decentralized exchanges (DEXes) rather than a Dex itself. It allows users to access liquidity from around 200 different DEXs. With Arbitrage Scanner, users can spot arbitrage opportunities using 1inch by comparing prices of assets across multiple DEXs aggregated by 1inch.

How does Arbitrage Scanner display volume information?

Arbitrage Scanner displays trading volumes based on centralized exchange data. For example, on Ethereum, the volume for a trade is set to $500, meaning the price shown is accurate for trades worth around $500. For other supported blockchains like Polygon or Arbitrum, the volume is set to $100.

What is the difference between Classic Mode and Fusion Mode on 1inch?

Classic Mode on 1inch reflects actual market conditions, including network fees. In contrast, Fusion Mode eliminates network fees but results in worse token prices for larger trades. While Fusion Mode may offer savings on fees, the price you pay for assets may not be as favorable.

Why does Arbitrage Scanner work only with Classic Mode on 1inch?

Arbitrage Scanner works exclusively with Classic Mode on 1inch because it reflects the real market prices, including network fees, which are crucial for accurately assessing arbitrage opportunities. Fusion Mode, while offering fee savings, gives a less accurate picture of true market pricing.

How can you identify arbitrage opportunities between different blockchains using Arbitrage Scanner?

Arbitrage opportunities between blockchains, such as Ethereum and BNB Chain, can be identified when there are price differences for the same asset across these networks. Users can bridge tokens between blockchains, but this requires careful planning since prices can change quickly and bridging can take time and incur fees.

What are the challenges when bridging tokens for arbitrage between networks?

Bridging tokens between networks can be challenging due to high fees, especially with networks like Ethereum. Additionally, bridging takes time (from 15 minutes to several days), and the price spread you’re targeting may disappear during this delay. Bridging also incurs fees on both networks involved, making it important to carefully plan arbitrage strategies.

How does Arbitrage Scanner handle transactions based on volume?

Arbitrage Scanner bases the volume shown on centralized exchange data. For instance, on Ethereum, a volume of $500 is used, which means the price shown is accurate for a trade of that value. This helps ensure that the arbitrage opportunities identified are realistic and achievable based on liquidity.

When should a trader avoid using Ethereum for arbitrage on 1inch?

A trader should avoid using Ethereum for arbitrage when the gas fees are too high, as they can significantly eat into the profits from arbitrage trades. High gas fees on Ethereum, particularly for smaller trades, can make arbitrage unprofitable. For larger trades, gas fees may be less impactful.