All About Arbitrage

<p>In this episode, Shylo (LtSnakePlissken) and Farid talk all about arbitrage. We talk about what it is in relation to both the financial system (https://en.wikipedia.org/wiki/Arbitrage) as well as how it relates to crypto, and Elk specifically!</p> <p>We focus primarily on 'spacial arbitrage' in regards to cryptocurrency. Quoting the Wikipedia article linked above, "in spatial arbitrage, an arbitrageur looks for price differences between separate markets. For example, there may be a bond dealer in Virginia offering a bond at 100-12/23 and a dealer in Washington bidding 100-15/23 for the same bond. For whatever reason, the two dealers have not spotted the difference in the prices, but the arbitrageur does. The arbitrageur immediately buys the bond from the Virginia dealer and sells it to the Washington dealer".</p> <p>In DeFi, a simple example of this might be that you notice the price of Elk is $2.90 on TraderJoexyz.com and is $3.00 on app.elk.finance. You would buy the token on Trader Joe (but not so much that the price increases drastically so you do not pay more per token) and sell it for $3.00 on Elk's DEx. This way, you would have bought for $0.10 cheaper, and would keep the price even between the DEx's, increasing Elk price when buying on Trader Joe and decreasing the price on Elk's DEx, causing them to "even out" in price.</p> <p>A more complex example of this would be arbitraging Elk using different chains. So, let's say the price of Elk is $2.80 on AVAX and is $3.30 on Polygon. Before doing anything, you need to make sure that you have enough Elk to sell to make a profit. You can do this by inputting the amount of Elk you will sell on Matic, and "previewing" the amount of Matic you would get. You can then take this Matic and use a tracker such as CoinGecko to see how much that Matic is worth, then, taking a few dollars off for fees, you could see how much AVAX you could purchase with that amount. You would then go to AVAX and preview the amount of ELK you could get with that AVAX on the Elk Dex, or per