Stablecoins Arbitrage Strategy Quietly Making 113 Million USD Profit

To begin with, the strategy is essentially a flash loan strategy, which means users can lend tokens, earn a profit, and repay the loan all in one transaction. If a problem arises during the transaction, the lender loses nothing because the entire process is rolled back. 

Stablecoins Arbitrage Strategy Quietly Making 113 Million Usd Profit

The above transaction made a profit of over $101K while only spending $30.1 on gas and swap fees on the liquidity pool. Its arbitrage type is identified as spatial. Uniswap and Sushiswap, for example, require knowledge of specific tokens’ exchange rate spread between different liquidity pools in order to perform spatial arbitrage. The trader would benefit from transactions that take advantage of the spread. When one looks at the transaction details on Etherscan, one will notice that there are five people working together to make the magic happen as can be seen in the image below.

Stablecoins Arbitrage Strategy Quietly Making 113 Million Usd Profit

The contract begins with the code 0x59e: MIM CauldronV2 Lending Protocol, which was deployed by the Abracadabra.money team. It allows users to open loans, borrow MIMs, leverage, and pay back their loans. Abracadabra.money is a lending platform that uses interest-bearing tokens (ibTKNs) as collateral to borrow a USD pegged stablecoin (Magic Internet Money also known as MIM), which can be used in the same way as any other traditional stablecoin.

The address begins with 0xd96 and is displayed as Abracadabra.money’s Degenbox, which allows the creation of strategies for the asset held inside. Degenbox is a lending vault that specializes in UST. The Degenbox is built on top of the Cauldron mentioned earlier. The USTSwapper, which starts with 0xff4, is used by Abracadabra.money. The 0x55a address is a Curve Plain Pool-based liquidity pool for MIM-UST exchanging on Curve.fi. The exchange rate was set by an oracle outside. The trader initiating the transaction is identified by the address beginning with 0xb98. The process of exchanging tokens is depicted in the image below.

Stablecoins Arbitrage Strategy Quietly Making 113 Million Usd Profit

The trader used the USTSwapper to borrow 243,098.235492 UST from the Degenbox. Using the exchange rate here, the trader instructed the USTSwapper to exchange 243,098.235492 UST for 244,132.700775 MIM in the MIM-UST-f Curve Pool. To repay the borrowed asset, the trader instructed the 244,132.700775 MIM to be sent back to the Degenbox. The trader instructed the Degenbox to exchange the 244,132.700775 MIM for UST and pay the loan from step one. Degenbox swapped out 344,119.620672 UST, held 243,098.235492 UST for the loan, and left 101,021.385180 UST for reciprocation based on its own public exchange rate. Without hesitation, the trader withdrew 101,021.385180 UST. The transaction is now complete.

In the token flow chart below, we have simplified the confusing process by only displaying meaningful transaction knowledge. It’s obvious that two liquidity pools are involved. The trader sent Degenbox 244,132.700775 MIM and received 344,119.620672 UST, according to the first line. The MIM-UST-f Curve Pool, on the other hand, shows the trader receiving 244,132.700775 MIM in exchange for sending 243,098.235492 UST. The last line indicated that the trader made a net profit of 101,021.385180 UST.

Stablecoins Arbitrage Strategy Quietly Making 113 Million Usd Profit
Chaahat Girdhar
Chaahat Girdhar

I'm Chaahat Girdhar, a journalist by profession who's turning her dreams into vision and vision into reality. I'm curious and have an appetite for gaining new knowledge. So I'm looking forward to learning things in the better way possible.

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