Malt Update 2
Malt’s second week of live operation on Polygon has been one of quiet progress both for the protocol itself as well as the work progressing behind the scenes. As such there is not much new information to share, just progress on the plans laid out in last week’s update.
TLDR
- Price continues to hug the $0.99-$1 range
- Another 12 auctions occurred creating another 1k Arb Tokens.
- Collateral moved to a high of 99.61% and is now settling back down around the 99.4% area.
- Contract code for the Swing Trader OTC system is nearing completion. Some testing and UI work still to do before we can begin rolling it out
- Strong progress on the off chain arbitrage monitoring code for the upcoming Malt/ETH pool. Contracts will follow shortly.
The plan we set forth last week is in full effect. For those that missed it here are the relevant points:
- Working on a system to allow purchasing Malt that the Swing Trader holds using an “OTC” contract that sells that Malt for $1.
- A Malt/ETH pool is our highest priority. Working on the arbitrage system for Malt/ETH will open up all the doors to other non-stable assets.
These are both in place to help us with our two largest roadblocks right now:
- Increasing cashflow
- Making it easier to get larger size into Malt
OTC with Swing Trader
Allowing wallets to purchase Malt off the Swing Trader for $1 will allow larger size to enter Malt and simulate additional market depth by filling against the Swing Trader. At the time of writing the Swing Trader holds nearly 80k Malt while there is less than 300k in the AMM pool. This extra 80k allows 80k to enter Malt right now with zero price impact by filling it entirely against the Swing Trader. While simultaneously helping the protocol increase it’s collateral and pay yield to LPs.
The contracts for this system are in the final stages. We now need to write some rigorous tests to ensure the system is working as expected. Then we move forward towards deploying into the current Malt/DAI pool. More news will follow shortly on this front.
Non-stable Arbitrage
The other big direction we are moving in right now is towards the non-stable pools. These pools have to be different from the stable pools due to the nature of their price fluctuating. Our approach is to build an arbitrage system for those pools that uses some safeguards against MEV to provide the protocol some edge against regular MEV searchers. If we can capture even a small percentage of this value we will be able to increase collateral and pay yield to LPs over time.
This system requires two components:
- The offchain system that searches for arbitrage opportunities on chain and in the mempool.
- The on chain ability to execute the arbs that are found plus the code to provide some level of privilege to our contracts over regular searchers.
Fortunately the amount of code required on chain is fairly minimal in this case. So our primary focus has been on the off chain components. These will be a set of Rust crates that will search for and execute on arbitrage opportunities that arise on Malt pairs.
Our intention is to launch the initial arbitrage system for a Malt/ETH pool, which will help to inject a constant stream of volume into the Malt pools, taking steps towards overcoming the hurdle of stimulating yield. That will also help improve how tightly Malt holds it’s desired peg of $1.
That’s it for this week!
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