💹Volatility Farming

Arbitrage and Volatility Farming

Arbitrage

Arbitrage is the process of buying and selling assets across different markets or in derivative forms in order to take advantage & profit from differing prices for the same asset.

Volatility Farming

As the market price of all assets are perpetually fluctuating, users and MEV bots are constantly searching for arbitrage opportunities to make quick and easy profits.

The protocol capitalizes on this by creating the arbitrage opportunity itself. With the existence of pods, arbitrageurs now have the necessary secondary market where price differences can occur between the same asset giving them the arbitrage opportunity.

In relation to pods, arbitrage opportunities occur when the price of TKN and pTKN deviate beyond the cost to wrap or unwrap, and when these opportunities are taken advantage of with pods, protocol fees are collected and distributed based on pod configuration.