White Whale x Sei Network
Bringing interchain arbitrage infrastructure to the premiere DeFi blockchain of the Cosmos Ecosystem
We are happy to announce our partnership with the Sei Network! Our product will be live on Day 1.
If you missed our Twitter space, listen here. If you haven’t already, make sure to read our Litepaper and listen to our interview with Tendermint Timmy!
White Whale x Sei Network Summary.
- SEI provides a robust, layer-1 blockchain with the fastest time-to-finality of any blockchain. Their powerful infrastructure enables exceptional user experience for DeFi dApps such as Central Limit Order Books (CLOB) and derivative trading.
- White Whale provides local arbitrage infrastructure (AMM pools, flash loan vaults, and open-source bots) that is critical to the health of Sei’s DeFi ecosystem.
- White Whale x SEI improves trading on CLOBs on SEI by (i) providing liquidity during market turmoil, (ii) equalizing pricing across different chains, and (iii) generating transaction fees for Sei and White Whale due to constant arbitrage opportunities.
Sei: a new blockchain built for Defi Apps (dApps).
Sei, the fastest layer 1 blockchain to transaction finality, is built specifically for DeFi dApps: order books, derivatives, lending, etc. Sei’s on-chain order matching engine processes trades in parallel to increase transaction throughput. The benefit of parallel order processing is more transactions at a quicker pace.
Sei has built their chain to use Cosmwasm and IBC, so they function with Cosmos compatibility. One of Sei’s premiere dApps is the derivative platform Vortex. A more complete description of Sei Network is provided in their docs.
White Whale: a new platform built for interchain liquidity and stability.
White Whale (WW) infrastructure (AMM liquidity pools, flash loan vaults, and open-source bots) is critical to the health of any DeFi ecosystem because it provides everything needed to perform arbitrage and liquidations: Capital, Opportunity, and Knowledge.
The WW liquidity pools (LPs) provide traders the opportunity to profit from divergent prices across CLOBs and pools through arbitrage. Without WW’s AMM pools, there would be no opportunity for atomic (instant) arbitrage because otherwise an IBC transaction is required for the arb.
WW provides the knowledge to readily implement arbitrage by releasing open-source arb bots that any person can access.
The WW flash loan vaults provide arbitrageurs and liquidators access to instant capital to perform the arbitrage. Access to flash loan capital obviates the need for every arbitrageur/liquidator to have their own capital idle waiting for arbitrage or liquidation opportunities, thereby increasing capital efficiency. All participants can share the same WW pool. A detailed description is provided in our litepaper.
White Whale will democratize and decentralize the market participation of Sei, decreasing the likelihood of large price discrepancies, increasing high capital efficiency, and providing an improved trading experience on Sei’s many DeFi dApps. In particular, Vortex, a decentralized Central Limit Order Book, will especially benefit from our deployment on Sei.
AMMs provide liquidity to CLOB during market crises
AMMs are automated market makers that provide exchange pricing between 2 tokens using a fixed formula (generally balancer’s formula). The user accepts the AMM price and is virtually guaranteed execution with some set slippage. The AMM works smoothly along the curve until exhausted by lack of either token.
CLOBs allow users to set a fixed price for the exchange of 2 tokens with no guarantee of execution. Other users or market makers must provide the other side of the trade. CLOBs exhibit ranged liquidity with walls of liquidity around the current market price; the greater the deviation from the market price, the lower the liquidity. Liquidity is most concentrated near the current market price. During market turmoil, the price may break above or below the buy or sell walls, resulting in minimal liquidity at the new market price because the order book is sparse with orders at the new price. The rapid price change may cause liquidations of borrowers who have not anticipated the price move, further pressuring the price in an empty order book and making for a bad DeFi experience.
AMMs decrease CLOB liquidity problems. As the CLOB order wall breaks and struggles to find market making at the new price, arb bots can instantly fill the lack of orders on the CLOB trading against the AMM pool which has guaranteed execution and thereby profiting from the price difference between the CLOB and AMM in the process. For instance, when the price breaks down on the CLOB arbitrageurs can bid on the CLOB and sell on the AMM. When the price breaks up on the CLOB, arbitrageurs can buy on the AMM and sell on the CLOB.
The arb bots are filling the order tree on the CLOB, providing support for the CLOB market price and restoring liquidity by use of the AMM.
AMM-CLOB interactions stabilize pricing.
As described in the previous section, AMMs provide liquidity to CLOBs during major market moves (i.e., when CLOB price changes beyond the liquidity wall). Another benefit of this interaction is the stabilizing of prices across AMMs and CLOBs. When there is an arbitrage opportunity between prices on AMMs and CLOBs, then arb bots automatically activate to profit and continue until the price on AMMs and CLOBs equalize. In fact, as long as the trade is profitable between the AMM price and market CLOB price, arb bots work to equalize the prices.
AMM-CLOB increase volume generating more fees for SEI and WW
The constant arb opportunities (especially during market turmoil) will result in arb bots continually working to trade between the AMMs and CLOBs as described above to stabilize prices. An additional benefit is that both Sei and WW profit from the fees generated by the arb bots, making their tokens more valuable.
White Whale brings critical DeFi primitives AMM pools and Flash loans to Sei Network, the DeFi Chain of the Cosmos. Additionally, Sei Network’s premiere dApp Vortex a CLOB will have exceptional synergies with our arbitrage infrastructure.
If you would like to support the White Whale team, make sure to delegate to us on Terra 2.0, Juno, Chihuahua, Injective, and Kujira.
