Flash Boys | Arbitrage DAO
We are the flash boys: we have made the first flash loan ever on Blockchain 🔥
This post is about Flash Loan and we will introduce ArbitrageDAO | Flash Boys in details in another post.
In the world of trading, arbitrage is a strategy of taking advantage of price differences between markets to make a profit. Arbitrage opportunities exist in one form or another in all financial markets — crypto being no exception via its many different exchanges. Arbitrage helps reduce the price disparity of an asset in different markets even as it helps boost the liquidity.
We focus on decentralized exchanges running on the Ethereum blockchain that have Contract Fillable Liquidity (CFL). Examples of exchanges with CFL are Oasis, 0x relayers (open-orderbook only), Uniswap, Bancor, and Kyber. Exchanges with CFL allow traders to exploit arbitrage opportunities within one transaction to the Ethereum blockchain.
What are flash loans?
Flash loans are designed for developers to borrow in a flash without needing to put up any collateral. All of this is done in a single transaction (one block)! Devs can borrow from the Aave reserve pools on the condition that the liquidity is returned to the pool before the transaction ends. If this liquidity fails to return to the pool in time, the transaction is reversed, ensuring the safety of the reserve pool.
Flash loans have many interesting use-cases including:
- Arbitrage between decentralized exchanges
- Liquidation of loans on several lending platforms like Compound, dYdX or Nuo
- Refinance, e.g. take DAI from Aave, close your MakerDAO CDP, get the collateral, deposit on Compound, open a position, get the DAI back, return the DAI plus a fee
This allows many more actors to come play in the arbitrage and liquidation space because no capital is needed to get started. Arbitrage opportunities usually do not require much capital (in the $100 — $10k range). Liquidations, on the other hand, require a lot of capital to liquidate borrower positions. Many liquidations on Compound or single-collateral DAI (SAI) required more than 1 million USD in ETH or DAI.
ArbitrageDAO is the best use-case of undercollateralized / uncollateralized flash loans, but we are sure that we will see many exciting projects using flash loans in the coming months.
The first flash loan
ArbitrageDAO has done the first uncollateralized FLASH LOAN ⚗️ (as reported by Camilla Russo here: https://twitter.com/CamiRusso/status/1218640871048056832).
To demonstrate the incredible potential of flash loans we decided to focus on a specific arbitrage strategy, but they can be applied in many other ways. You can check the transactions we sent from our wallet here (You also see the PoA — Proof of Arbitrage at the end of the post):
We borrowed >3.1k DAI on Aave in the above arbitrage 🔥
More transactions:
- https://etherscan.io/tx/0xc47ed2ebce6a23c961e0d9f7e40444412a8a836bc53d5c72611e5d644940a9da
- https://etherscan.io/tx/0x8b891a8a4fcbcec0fbdff85e0cbb6f425395b1cb43949c2f4641ce2e9cf0e5fc
- https://etherscan.io/tx/0xcd774671f1c384d35560ebee21b28aae304adfd3db1fb21dae0d09f4a8a3671c
- https://etherscan.io/tx/0x0f98dbea3cbeac172400e19c44623583bbdf974e38bd70fe4156dba624f2f187
ArbitrageDAO borrowed ~9400 DAI from Aave in total at the time of writing this, but we expect many more transactions to come!
About ArbitrageDAO | Flash Boys
Arbitrage DAO is a DeFi Union Arbitrage Fund built by Stake Capital team. It uses a combination of on-chain liquidity and off-chain bots designed for arbitrage opportunities. The DAO has > 150 ETH from pledgers and intended to build and run strategies to capture the most profitable arbitration opportunities in the decentralized finance ecosystem.
The DAO is live for pledgers there: https://daohaus.club/dao/0xa8fc468da0417f71393523393bd7d57450143a62 and discussion group here: https://t.me/ArbitrageDAO . Website will be live on www.arbitragedao.org and maybe www.flashboysdao.org (If name change is vote by the DAO).
Learn more about us by following our Medium! We have an exciting announcement coming soon. Please don’t hesitate to reach out to us if you want to join the adventure 🔥The ArbitrageDAO Gitcoin Grant proposal: https://gitcoin.co/grants/369/arbitrage-dao?tab=description
Follow-us on Twitter | Join our Telegram
and smash the clap button 👏
written by Julien Bouteloup & Nicolas Feignon from ArbitrageDAO & Stake Capital. We would also like to thank Aave team for their amazing feedback🔥
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For a Proof of Arbitrage (PoA), go to Etherscan: https://etherscan.io/verifySig
- Address: 0x8645AbFFE4FAD9E0c6c18aFfF30eF6AEA438008c
- Message Signature Hash: 0x09930fd1d46a4b0c6efcf1ba476405647d48354d3fcefbee097e1fcec450fb5669ca72419588e234fa8d7e372f9179f7306b7dc79ea5ca6250bb829195738b2d1c
- Enter the original message that was signed: “ArbitrageDAO”
