ARBITRAGING

ARBITRAGING

The arbitrage trading bot service (short: arbitraging service) offers a tool to perform profitable trading for PRISMA platform users. For this an arbitrage interface which virtually ‘connects’ different exchanges is used. Users can deposit funds into the interface which distributes those funds onto the exchanges to work efficiently. The generated profit (minus a small fee which goes into the resonator) is paid out to the user. Profits that were generated can be converted to ETH or PRIS to manage the users funds easily on ERC20-compatible ethereum wallets. Funds can be withdrawn at any time.

Individuals who invest in PRISMA during the ICO can use the arbitraging service for free for the first 6 months. Other users will have to pay an initial service activation fee (in the region of 0.5 ETH, which will go into the resonator) to gain access to the arbitraging bot. The arbitrage profits will be harvested to at least 97 % by the user and only maximal 3 % will go into the PRISMA resonator to stabilize the ecosystem. The higher your stakes and the longer you are using the arbitrage bot, the lower the fees will get (dynamic arbitraging fee system), down to a minimum fee of 0.25 %. The cost to use the arbitraging service is smaller when paid with PRIS.

Working principle of the arbitraging service. Users send funds to the arbitrage bot via an interface on the PRISMA platform. The funds are distributed on several exchanges to set arbitrage trading up. Then the arbitraging software will generate profit by performing trades following our arbitrage trading bot model. Profits can either be paid out or left in the arbitrage system to generate even more profit with a higher available stake.

The arbitraging bot can either be run preconfigured by PRISMA or tweaked by the user. For this the user can manually change parameters in the algorithm. The latter option is only recommended for people who have gathered experience with trading bot software. As a possibility there could be community guides in the future, where experienced community members can share their custom arbitraging settings so that improvements can be worked out in a joint effort which benefits the whole PRISMA community.

A so called arbitrage bot (i.e. automated program) will exploit small differences in asset prices on different exchanges to generate a profit. In the following this principle is explained in more detail.

Schematic of the arbitrage trading bot model. The program detects periods in which the price of an asset on one exchange is lower than on another exchange and subsequently performs a dual-trade where the asset with the lower price on one exchange is bought and simultaneously the same asset with the higher price on the other exchange is sold, leading to a profit. For this funds have to be distributed between exchanges which will be done via the PRISMA arbitraging interface where funds are sent to several exchange wallets in an automated process.

To perform arbitraging the bot constantly checks the prices of the considered asset on different exchanges. If it detects a price difference which is large enough to offset trading fees it will perform a dual-trade where the asset with the lower price on one exchange is bought and simultaneously the same asset with the higher price on the other exchange is sold, leading to a profit. For arbitraging to work the cryptocurrency asset should always be traded with a stablecoin (like Tether for example). Because of the nature of the dual-trade the arbitrage bot cannot induce losses. Only a surplus in the considered asset can be achieved — although in the worst case (under low trading volume) rather slow. In normal cases we expect a return of investment of up to 1.5 % daily, leading to maximum monthly profits of up to 56 % for a highly tuned arbitrage trading bot algorithm.

The arbitraging bot can either be run preconfigured by PRISMA or tweaked by the user. For this the user can manually change parameters in the algorithm to modify specifics which determine when dual-trades get triggered. Funds can be deposited in the arbitraging interface which then will be distributed by the PRISMA arbitraging bot among the exchanges. At some point there might be a redistribution of funds between the exchanges necessary which will also be handled by the arbitraging bot.

For more details on the PRISMA arbitraging system please see our whitepaper.