I couldn't roll my eyes faster..
Oh why did I continue reading..
> our most recent bot required substantial modifications to the validator software, constructing and evaluating a graph of thousands of tokens, math accurate to 18 decimal places, and robust reliability and error catching, all written in super optimized Rust code.
This genuinely almost reads like a parody. My BS-o-meter is through the roof!
https://etherscan.io/address/0x0000000000007f150bd6f54c40a34...
Can you explain why? Nothing really jumps out at me as being total nonsense. A lot of things are handwavey, but for obvious reasons such as not revealing the money printer.
The man is not hiding who he is either, so it could be a troll post, but from looking at other things, doesn't seem likely.
Math generally looks good, and is similar to things I learned decades ago in chaos theory and stochastic processes, especially the comment/proof towards the middle. I have never been a professional trader, but I am familiar with a lot of the jargon, generally translates well to crypto.
TL;DR: this is a pairs trading strategy that relies on the (very strong) statistical assumption that the price of a token on a centralized and decentralized exchange will converge.
My longer definition below:
Stat arbs: in finance, statistical arbitrage generally refers to any trade where a pair of assets should statistically move in a certain way. However, there are degrees of should. TradFi traders might reason that Meta and Google are both in the ads business, so if Meta is relatively expensive and Google is relatively cheap, they should short the former and long the latter. However, this is a weak argument. Perhaps Meta is just a better business or Google has structural problems. A stronger stat arb thesis is that Royal Dutch Shell used to be traded on both American and European exchanges. If the shares were trading at different prices on each, nearly risk-free profits are available to those who close the spread. This is what stat arb means in a crypto setting. AVAX may be trading at slightly different prices on Binance and on various blockchains.
The Royal Dutch/Shell case is different because the two stocks were not actually fungible, so the trade would only have been profitable if the two prices eventually converged.
PS I enjoyed the article and it’s clear you’ve spent a lot of time thinking about this space. I just can’t resist chiming in when it comes to well-established terminology.
