strategy.md

Cross Exchange Strategy

High Level Overview

The MMM bot is built on the assumption that there are inefficient markets, which is a logical occurrence that happens when comparing custodial exchanges to truly decentralized markets. When interacting with these markets, there is more liquidity in the taker exchanges with smaller bid-ask spread and less liquidity in the maker exchange with larger bid-ask spread.

-- Taker Exchange --      -- Maker Exchange --
|------------------|      |------------------|
|                  |      |  Best Ask(102)   |
|  Best Ask (101)  |      |                  |
|                  |      |                  |
|  Best Bid (99)   |      |                  |
|                  |      |  Best Bid (98)   |
|------------------|      |------------------|

There are two types of orders: buy order and sell order in the maker exchange.

1. Buy order. The Bot creates a limit buy order on the maker exchange. Once this order is filled, it immediately creates an opposite sell order in the taker exchange.

   This requires the Price(bid, taker exchange) > Price(bid, maker exchange) when opening a buy order in the maker exchange

   For example, in the above runbook, you can create a limit buy order with 98.1 in the maker exchange. Once it is filled, you immediately create a sell order in the taker exchange at 99.

2. Sell order. Bot creates a limit sell order in the maker exchange. Once this order is filled, it immediately creates an opposite buy order in the taker exchange.

   This requires the Price(ask, taker exchange) < Price(ask, maker exchange) when opening a buy order in the maker exchange

   For example, in the above runbook, you can create a limit sell order with 101.9 in the maker exchange. Once it is filled, you immediately create a buy order in the taker exchange at 101.

There are two an infinite loops. One loop is in charge of create orders if needed, inside this loop:

1. Adjust open maker orders.
   1. Check the profit_rate to decide whether to cancel the order
2. Create maker orders when the potential profit is above the target profit level. The order can be buy order or sell order
3. Load all filled maker orders and create corresponding taker orders

The other loop is to check order status and update the state in the local db. For the maker exchange (borderless), not only does it checks the order status, but also 1) auto-unlock collateralized nrg 2) sent underlying assets if the maker tx is still in its settlement window.