Arb. Engines
Protocol-Owned Exchange Modules
Core Function
An Arbitrage Engine is a specialised smart contract that functions as a protocol-owned exchange module. Its programmed purpose is to exchange whitelisted derivative assets for crvUSD at a predefined valuation logic.
Upon Stage 3 deployment, three such modules are planned, targeting specific initial assets.
How It Works: The Exchange Mechanism
Each module operates with the same structure, differing only in its target asset.
Asset Allocation: An engine receives crvUSD from the Arb. Master Node module. The amount is determined by the proportion of total VW3 weight staked within it.
Executing an Exchange:
A participant supplies a whitelisted derivative asset to the engine.
The engine transfers 1 crvUSD to the participant for every $1 of the asset's underlying value, as determined by the module's internal oracle logic.
To complete the exchange, a dynamic fee must be paid in GUILD. This fee may be paid by the participant or, if parameters allow, sourced from other allocations within the engine.
The Fee Parameter: This dynamic GUILD fee is calculated as a percentage of the asset's market discount. The fee increases as the discount deepens, a parameter designed to limit the module's exposure to severely discounted assets.
System Function & Interaction
Arbitrage Engines are modules for automated asset exchange.
For the 3 Protocol: They are a mechanism for the protocol to exchange crvUSD for specific assets according to its programmed logic.
For Ecosystem Interaction: Other protocols can interact with these modules. For example, by allocating GUILD to a specific engine, they can alter the fee parameters for exchanges involving their asset.
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