GuildSwaps: Arbitrage
The Immediate Exit Path
Introduction:
GuildSwaps Arbitrage provides a mechanism for an immediate exit to a stable-coin by selling discounted derivative assets directly to the protocol for crvUSD. It is funded by a portion of the revenue from 3Bond sales and is designed as a self-regulating market maker that protects the protocol from unsustainable asset discounts.
Core Mechanism: A Fee-Moderated Instant Exchange
You supply a whitelisted, discounted derivative asset (e.g., sdCRV).
The protocol pays you 1 crvUSD for every $1 of the asset's underlying value.
To complete the trade, you must also pay a dynamic Arbitrage Fee in GUILD. This fee is calculated per unit of the asset you are selling.
The trade executes if the target Arbitrage Engine has a vested crvUSD balance.
User Benefits & Strategic Context:
Immediate Liquidity: Receive crvUSD directly, providing a fast exit without needing to settle GUILD.
Market Efficiency: This PSU acts as a decentralised market maker, helping to re-peg derivative assets by creating consistent buy-side demand.
Protocol Safeguard: The dynamic fee structure ensures the protocol only engages in economically sustainable arbitrage, automatically becoming cost-prohibitive for deeply off-peg assets.
Considering Your Options?
Arbitrage is ideal for users seeking immediate stable-coin liquidity. If you are building a long-term position and can accept a settlement delay, the GuildSwaps Farm PSU offers GUILD and 3Fi tokens at a fixed, favourable rate and does not require a fee.
The Math: Transparent & Self-Regulating
The cost of an arbitrage trade is determined by two key components:
Arb Premium: The cost to the protocol.
Arb Fee: The dynamic fee payable in GUILD, calculated as a percentage of the Arb Premium. This fee uses a three-curve system to protect the protocol:
Curve 1. 'Ya' represents: The outer boundary, defining the maximum discount at which a trade is possible.
Curve 2. 'Yb' represents: The inner boundary, defining a minimal fee for slightly off-peg assets.
Curve 3. 'The applied curve' represents: The active fee, calculated using 'Ya', 'Yb', and a strategic weight based on the protocol's Reserve Requirement KPIs. This fee increases exponentially as the discount deepens, making trades for severely off-peg assets economically unviable.
Here are 3's curve parameters:
Allowable premium range based on derivative valuation: 0% to 150%. (P)
Risk adjusted limits (that determine the fee payable), are set to: 0% to 200% of premium.
Efficiency coefficients (which define 3's risk tolerances) are set to: 0.001 to 0.01.
KPI-Weight range (which determines the applied risk tolerance) is set to: 0 to 1.
The arb.fee is thus defined by the following formulae:
Where 'Ya' and 'Yb' may each be expressed as:
W = KPI-Weight at the time of execution.
e = Eulers number = 2.71828182845905
= the efficiency coefficients.
of Ya = = Max. KPI curve boundary.
of Yb = = Min. KPI curve boundary.
P = Actual premium payable by 3, expressed as a percentage.
200 = the maximum fee payable, expressed as a percentage.
150 = the maximum allowable premium, expressed as a percentage.
Example.
At KPI-Weight of 0.1 = Assumes 10% of 3's first Reserve requirement curve (RRC1) has been achieved.
Table takeaways:
Profitability.
At the time of the above calculation, arbitrage of sdCRV and yCRV would yield profitable results.
Arbitrager net profits:
11.2c per token ($1,120 per 10k sdCRV).
9.7c per token ($ 970 per 10k yCRV).
cvxCRV, while not profitable at this time, can be RePegged via GuildSwap Farm.
Efficiency.
At the time of the above calculation, efficiencies of sdCRV and yCRV would greatly benefit their respective projects ability to maintain their pegs.
sdCRV efficiency = 464.78% Meaning, acquiring 10k GUILD (assuming 1 crvUSD per GUILD) has the potential to remove $ 56,478 worth of sdCRV from the open market.
Reducing your GUILD cost increases efficiency and profitability, hence the benefit of PRIME and ALPHA or through 3Bond purchases with higher rebate allocations.
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