Watch Out for Terra’s White Whale
A brief overview of Terra’s up-and-coming arbitrage platform
Herman Melville’s 19th-century classic, Moby Dick, uses the white whale to symbolize forces beyond human control — nature, fate, and God.
In the crypto-verse, whales seem to symbolize the same thing. Their decisions dictate the price, and their capital gives them unique opportunities not easily accessible to regular investors.
Fortunately, Terra’s “White Whale” isn’t as sinister.
In this piece, I’ll briefly explore three questions concerning Terra’s up-and-coming arbitrage platform, White Whale.
- What problem does White Whale solve?
- How does it work?
- What plans and features can users expect in the near future?
What White Whale Solves in Terra
White Whale is an application being built on Terra that plans to bring arbitrage opportunities to everyone in the ecosystem. Arbitrage just means buying an asset in one market while simultaneously selling it in another to profit from the price difference. This low-risk opportunity is fundamental to how UST algorithmically maintains its peg to the dollar.
Normally, arbitrage opportunities are only available to individuals with large holdings, bots, and technical expertise. As a result, retail can’t easily participate in this economic activity that is so integral to the Terra blockchain.
White Whale fixes this. With a user-friendly application, it allows investors to pool funds which are then used to participate in arbitrage opportunities. This solution hits two birds with one stone — it allows UST to maintain a tighter peg to the dollar and allows all participants to profit from doing so.
How does White Whale work?
Investors can pool their UST in White Whale’s arbitration vault through a simple front end. Under the hood, these funds are used by bots whenever an arbitrage opportunity presents itself.
If UST falls below its dollar peg, the bot burns UST for LUNA and sells it to the market to realize a quick profit. Conversely, if UST rises above the dollar peg, the…