Arbitrage trading between decentral and central cryptocurrency exchanges

Abstract

This paper demonstrates practical arbitrage trading on the cryptocurrency market. It provides guidance on how to build a high-frequency trading system that benefits from exhibiting arbitrage opportunities. It reveals the algorithm of the trading bot that incorporates the order placement and execution strategy between decentral and central cryptocurrency exchanges. The arbitrage algorithm is implemented on two different blockchains that interact with Uniswap and Balancer folks. Current research explores arbitrage opportunities with back-testing models, the paper focuses on trades with realized arbitrage trades. Practical arbitrage includes all operational costs, liquidity constraints, direct effects on markets, and competition with peer arbitrage traders.