❇️Pod Arbitrage

Example of pod arbitrage

Below is an example of how the process of arbitraging works in relation to a Pod token (pTKN) and it's underlying asset.

This example will be using the PEAS token, along with the PEAS index Pod (pPEAS) that only contains the PEAS token.

For this example, we will assume that the price of PEAS has been rapidly increasing due to sudden buy pressure and is worth now $100 USD, however, the price of the PEA index Pod (pPEAS) has not yet caught up and remains at $95 USD.

As there is a ~5% difference between PEAS and the Pod token - pPEAS, a user could arbitrage the PEAS token vs the pPEAS token by executing the following steps:

  • Buy pPEAS via Uniswap

  • Unwrap the pPEAS tokens to PEAS for a small fee

  • Sell the unwrapped PEAS on Uniswap to make a profit

The inverse scenario can also occur where the price of pPEAS is greater than the price of PEAS. A user could:

  • Buy PEAS via Uniswap

  • Wrap PEAS into pPEAS tokens for a small fee

  • Sell pPEAS tokens via Uniswap make a profit

In both scenarios, everyone wins.

  • The arbitrageur makes a profit

  • pPEAS collected as fees from wrapping or unwrapping are burned, which increases the overall value of pPEAS to the benefit of pPEAS holders

  • 5% of the remaining fees are kept aside as the Pod paired asset and used to accrue a Treasury which will be used to provide revenue to PEAS

  • 5% is used to market buy PEAS and burn them burned, again to the benefit of all holders with supply reduction

  • 90% of the remainder is used to market buy PEAS and distributed as rewards to the staked liquidity providers of the pPEAS index Pod With more Pods being created and more liquidity being provided to each Pod, these arbitrage opportunities grow exponentially and will be taken advantage of by users and automated MEV bots to the benefit of everyone in the Peapods ecosystem.

Last updated