GuildSwaps: Arbitrage

⚙️ Protocol Mechanics Disclaimer

Stablecoin Exchange Module

Introduction:

GuildSwaps Arbitrage is a protocol module that enables the exchange of specific derivative assets for crvUSD. It is funded by a portion of the crvUSD generated from other protocol activities and is designed with a self-regulating fee mechanism.

Core Mechanism: A Fee-Moderated Exchange

The module operates under the following conditions:

1. A participant supplies a whitelisted derivative asset (e.g. sdCRV).

2. The protocol's logic values it at the full price of the underlying asset.

3. The participant receives 1 crvUSD for every $1 of underlying value, minus a dynamic fee paid in GUILD (The GUILD paid separately and is not deducted from the crvUSD received).

4. The exchange executes only if the target module has sufficient crvUSD balance.

Module Function & Design Context

Immediate Exchange:

This module provides a direct path to crvUSD, differing from other modules that mint GUILD.

Market Function:

The module's design allows it to act as a consistent buyer for specific assets, which can influence their external market price.

Protocol Parameter Protection:

The dynamic fee is designed to make exchanges economically untenable for the protocol when asset discounts exceed programmed risk tolerances.

Module Comparison

This module is suited for participants seeking an immediate exchange for crvUSD. Participants oriented toward long-term interaction with the protocol may find the GuildSwaps: Farm module, which mints GUILD and 3Fi, more aligned with their approach.

---

Fee Calculation: Transparent & Self-Regulating

The cost of an exchange is determined by two components:

• Arb Premium: A cost parameter for the protocol.

• Arb Fee: A dynamic fee payable in GUILD, calculated as a percentage of the Arb Premium.

This fee uses a three-curve system:

• Curve Ya: Defines the outer boundary, representing the maximum discount at which an exchange is possible.

• Curve Yb: Defines the inner boundary, representing a minimal fee threshold.

• The Applied Curve: The active fee, calculated using Ya, Yb, and a strategic weight (W) based on the protocol's Reserve Requirement KPIs. This fee increases as the asset discount deepens.

Protocol Parameters:

• Allowable premium range (P): 0% to 150%.

• Risk-adjusted fee limits: 0% to 200% of premium.

• Efficiency coefficients (C): 0.001 to 0.01.

• KPI-Weight range (W): 0 to 1.

The fee formula is defined as:

$$Arb.Fee = W \times Y_a+(1-W) \times Y_b$$

Where Ya and Yb are each expressed as:

$$Y = 200 \times \frac{1 - e^{C \times P}}{1 - e^{150 \times C}}$$

Variable Definitions:

• W = KPI-Weight at execution.

• e = Euler's number (~2.71828).

• C = Efficiency coefficient (Ca for Ya, Cb for Yb).

• P = Actual premium payable by the protocol (%).

Example Context:

The provided chart illustrates the fee curve at a KPI-Weight (W) of 0.1, which corresponds to the protocol achieving 10% of its first Reserve Requirement Curve (RRC1) target.

Valuations for this example were taken on October 20th 2025.

Table Context:

The data table shows example outputs of the fee formula for specific assets under a past market state. It demonstrates the module's variable operational parameters and should not be interpreted as a guide to future outcomes or profitability.

Efficiency Metric:

The "Efficiency" metric (e.g. 464.78% for sdCRV) is an internal protocol measure of the module's capacity to absorb a specific asset relative to its GUILD fee cost. It is a system efficiency score, not a financial return metric.

---

---