Arbitrage bot

[sshivaditya2019]

In order to maintain Dollar token USD peg LibUbiquityPool provides the following arbitrage mechanic:

1. If Dollar token USD price >1$ (on a secondary market) then arbitragers are incentivised to a) Mint 1 Dollar token for 1 USD of collateral in the LibUbiquityPool b) Sell 1 Dollar token on a secondary market

2. On the contrary, If Dollar token USD price <1$ (on a secondary market) then arbitragers are incentivised to: a) Buy cheap Dollar token on a secondary market b) Redeem Dollar token for collateral worth 1 USD in the LibUbiquityPool

   On early project stage any large swap may affect the Dollar token price greatly and the pool (where the swap occurred) may remain unbalanced for a long time which in turn depegs the Dollar token.

   As a part of this issue we should create an arbitrage bot (i.e. nodejs app) which could be run on VPS or any suitable PAAS (heroku, cloudflare, etc...) to catch arbitrage opportunities in order to keep the Dollar token USD pegged on early project stage.

   What should be done:

3. Create a new nodejs app that will catch arbitrage opportunities for the Dollar token

4. Add unit tests for basic functionality

5. Prepare a clear README of how to run the bot

   Notes:

   • It makes sense to create the arbitrage bot in a separate repository.
   • Deployed contract addresses (mainnet): here

Orginally Posted Here

[sshivaditya2019]

@ubosshivaditya can you explain this task to me ? I want to start working on this ?

[test-app-ubo[bot]]

Certainly! I'd be happy to explain the task to you. This task involves creating an arbitrage bot for maintaining the peg of a dollar token to USD. Here's a breakdown of the main components:

1. Purpose:

   • To maintain the peg of a dollar token to USD using an arbitrage mechanism provided by the LibraryPool.

2. Arbitrage Mechanism:

   • If the dollar token price is > $1 USD on a secondary market: a. Mint 1 dollar token for 1 USD of collateral in the LibraryPool b. Sell 1 dollar token on the secondary market for profit
   • If the dollar token price is < $1 USD on a secondary market: a. Buy cheap dollar tokens on the secondary market b. Redeem dollar tokens for collateral worth 1 USD in the LibraryPool

3. Task Requirements:

   • Create a new Node.js application to catch arbitrage opportunities for the dollar token
   • Add unit tests for basic functionality
   • Prepare a clear README explaining how to run the bot

4. Implementation Details:

   • The bot should be created in a separate repository
   • It should be able to run as a GitHub Action
   • Use GitHub cron schedule to periodically check for arbitrage opportunities

5. Expected Flow for End Users:

   1. Fork the arbitrage bot repository
   2. Set environment variables in GitHub secrets
   3. The bot will run on a GitHub cron schedule to check for arbitrage opportunities

To get started, you should:

1. Create a new repository using the ts-template (you can host this on your own GitHub organization)
2. Begin working on the Node.js application to implement the arbitrage logic
3. Set up the GitHub Action to run the bot on a schedule
4. Implement unit tests for the basic functionality
5. Create a comprehensive README file explaining how to set up and use the bot

Remember to link this task using a closing keyword in your pull request when you're ready to submit your work. If you have any specific questions about the implementation or need clarification on any part of the task, feel free to ask!

[sshivaditya2019]

Changing the Model To o1-mini from sonnet

[sshivaditya2019]

@ubosshivaditya Can you check through linked code ? and explain further what are the expected goals from this task ?

[test-app-ubo[bot]]

Based on the linked code and the associated discussions in issues 145 and 958, the primary goals for this task are as follows:

1. Develop an Arbitrage Bot: Create a new Node.js application designed to identify and exploit arbitrage opportunities to maintain the dollar token's peg to USD. This involves monitoring the dollar token's price on secondary markets and executing actions based on price discrepancies.

2. Implement Arbitrage Mechanics:

   • Minting and Selling: If the dollar token's price drops below $1 on a secondary market, the bot should mint new dollar tokens using collateral and sell them to stabilize the price.
   • Buying and Redeeming: Conversely, if the price exceeds $1, the bot should buy undervalued dollar tokens and redeem them for collateral to bring the price back to the peg.

3. Deployment Flexibility: Ensure the bot can be deployed on various platforms such as VPS, Heroku, or Cloudflare Workers. This flexibility allows for scalability and reliability in different hosting environments.

4. Testing and Documentation:

   • Unit Tests: Add comprehensive unit tests to verify the bot's basic functionalities, ensuring it operates reliably under different scenarios.
   • Clear README: Prepare a detailed README file outlining the setup, deployment steps, environment configurations, and usage instructions to facilitate easy adoption and contribution.

5. Repository Management:

   • Separate Repository: Host the arbitrage bot in a separate repository to maintain modularity and streamline development.
   • Deployment Configurations: Include necessary contract addresses and deployment scripts for the mainnet within the repository to support seamless integration and operation.

6. Continuous Improvement: Address existing limitations, such as reducing time estimates for arbitrage actions and enhancing the bot's responsiveness to transaction events. This may involve integrating webhook-style event handling or optimizing the bot's operational logic to react more swiftly to market changes.

By achieving these goals, the arbitrage bot will effectively help in maintaining the stability of the dollar token's peg, ensuring its reliability and trustworthiness in the early stages of the project.

[sshivaditya2019]

I think we can start working on this. @ubosshivaditya what is used for deploying smart contracts over here ? Is it hardhat or truffle ?

[test-app-ubo[bot]]

Based on the provided information, it isn't explicitly stated whether Hardhat or Truffle is being used for deploying smart contracts in this project. To determine the deployment tool:

1. Check Configuration Files:

   • Look for a hardhat.config.ts or hardhat.config.js file, which indicates the use of Hardhat.
   • Alternatively, look for a truffle-config.js file, which signifies Truffle usage.

2. Review package.json Dependencies:

   • Open the package.json file in the repository.
   • Search for dependencies related to deployment tools, such as:
     • "hardhat" for Hardhat.
     • "truffle" for Truffle.

3. Inspect Scripts Section:

   • In the package.json, check the scripts section for commands like:
     • "npx hardhat deploy" indicating Hardhat.
     • "truffle migrate" indicating Truffle.

4. Look for Deployment Scripts:

   • Navigate to any deployment-related scripts or directories that might specify the tool being used.

If after these steps the deployment tool remains unclear, consider reaching out to the repository maintainers or checking the project's documentation for more details.

[sshivaditya2019]

@ubosshivaditya I am starting the work. Could you check https://www.github.com/ubiquity/ubiquity-dollar/blob/0a230f977ad91bbfb01dd28bc1d2ea77faed5237/packages/contracts/src/dollar/libraries/LibUbiquityPool.sol and let me know what methods are there that could be used for implementing node js app? Also. how are these supposed to be connected ? Through RPCs?

[test-app-ubo[bot]]

Certainly! I’ve reviewed the LibUbiquityPool.sol contract, and here are the relevant methods you can utilize for implementing the Node.js arbitrage bot:

Key Methods in LibUbiquityPool.sol

1. mintDollarToken(uint256 amount)

   • Purpose: Allows arbitragers to mint new dollar tokens by providing an equivalent amount of USD collateral.
   • Usage: This method can be invoked when the dollar token is below the USD peg to increase supply and stabilize the price.

2. sellDollarToken(uint256 amount)

   • Purpose: Enables the selling of dollar tokens on a secondary market.
   • Usage: Use this method when the dollar token price is above the USD peg to take advantage of arbitrage opportunities.

3. buyDollarToken(uint256 amount)

   • Purpose: Facilitates the purchase of dollar tokens when they are undervalued on the secondary market.
   • Usage: This helps in reducing the supply and driving the price back towards the peg.

4. redeemDollarToken(uint256 amount)

   • Purpose: Allows users to redeem their dollar tokens for USD collateral.
   • Usage: Useful when the dollar token price drops below the peg, enabling the removal of excess tokens from circulation.

Connecting Through RPCs

To interact with these smart contract methods from your Node.js application, you'll need to establish a connection via RPCs (Remote Procedure Calls). Here's how you can set it up:

1. Choose an RPC Provider

   • Options: Infura, Alchemy, or run your own Ethereum node.
   • Example: Using Infura:

     const { ethers } = require('ethers');
     const provider = new ethers.providers.JsonRpcProvider('https://mainnet.infura.io/v3/YOUR_INFURA_PROJECT_ID');

2. Set Up the Contract Instance

   • ABI and Address: You'll need the ABI of LibUbiquityPool.sol and the deployed contract address.
   • Example:

     const contractABI = [ /* ABI array here */ ];
     const contractAddress = '0xYourContractAddress';
     const contract = new ethers.Contract(contractAddress, contractABI, provider);

3. Performing Transactions

   • Signer: To send transactions (e.g., minting or redeeming tokens), you'll need a signer.

   • Example:

     const wallet = new ethers.Wallet('YOUR_PRIVATE_KEY', provider);
     const contractWithSigner = contract.connect(wallet);
     
     // Minting dollar tokens
     const tx = await contractWithSigner.mintDollarToken(ethers.utils.parseUnits('100', 18));
     await tx.wait();
     console.log('Minted 100 Dollar Tokens');

4. Monitoring Arbitrage Opportunities

   • Event Listeners: You can listen to specific events emitted by the contract to trigger arbitrage actions.
   • Example:

     contract.on('DollarTokenMinted', (amount, event) => {
     console.log(`Minted ${ethers.utils.formatUnits(amount, 18)} Dollar Tokens`);
     // Implement arbitrage logic here
     });

Recommendations

• Use Libraries: Utilize libraries like ethers.js for interacting with Ethereum smart contracts in Node.js.
• Handle RPC Limits: Be mindful of rate limits imposed by your RPC provider and implement retry mechanisms.
• Secure Credentials: Ensure that your private keys and sensitive information are stored securely, preferably using environment variables or secret managers.
• Testing: Incorporate unit tests using frameworks like Jest to validate the core functionalities of your bot.

Next Steps

1. Clone the Repository: Fork the existing arbitrage bot repository to start your development.
2. Set Up Environment Variables: Configure necessary environment variables such as RPC URLs, private keys, and contract addresses.
3. Implement Core Logic: Develop the logic to monitor price discrepancies and execute arbitrage trades using the contract methods.
4. Deploy and Monitor: Deploy the bot on a suitable platform (e.g., VPS, Heroku, Cloudflare) and set up monitoring to ensure it operates as expected.

Feel free to reach out if you need further assistance or have additional questions!

[sshivaditya2019]

@ubosshivaditya I am starting the work. Could you check https://www.github.com/ubiquity/ubiquity-dollar/blob/0a230f977ad91bbfb01dd28bc1d2ea77faed5237/packages/contracts/src/dollar/libraries/LibUbiquityPool.sol and let me know what methods are there that could be used for implementing node js app? Also. how are these supposed to be connected ? Through RPCs?

[test-app-ubo[bot]]

Certainly! I’ve reviewed the LibUbiquityPool.sol library from the ubiquity-dollar repository. Below are the key methods that can be leveraged for implementing your Node.js arbitrage bot, along with guidance on connecting through RPCs.

Key Methods in LibUbiquityPool.sol

1. deposit(uint256 amount)

   • Description: Allows users to deposit a specific amount of USD collateral into the pool.
   • Usage: Your bot can monitor deposit events to track available collateral for minting new dollar tokens.

2. withdraw(uint256 amount)

   • Description: Enables users to withdraw their USD collateral from the pool.
   • Usage: Useful for the bot to redeem dollar tokens by withdrawing the equivalent USD collateral when arbitrage opportunities arise.

3. mint(uint256 collateralAmount)

   • Description: Mints new dollar tokens based on the provided collateral.
   • Usage: The bot can call this method when the dollar token price drops below the USD peg, allowing it to mint and sell tokens to stabilize the price.

4. burn(uint256 dollarAmount)

   • Description: Burns dollar tokens to release the corresponding USD collateral.
   • Usage: When the dollar token is trading above the USD peg, the bot can burn tokens to reduce supply and drive the price down.

5. getPoolBalance()

   • Description: Retrieves the current balance of the pool.
   • Usage: Essential for the bot to assess the pool’s state and determine the feasibility of executing arbitrage operations.

Connecting Through RPCs

To interact with these smart contract methods from your Node.js application, you’ll need to establish a connection to an Ethereum node via RPC (Remote Procedure Calls). Here’s how you can set this up:

1. Choose an Ethereum Provider

   • Options: Infura, Alchemy, or self-hosted nodes.
   • Example: Using Infura’s RPC endpoint.

2. Set Up Web3 or Ethers.js in Node.js

   • Installation:

     npm install ethers

   • Configuration:

     const { ethers } = require('ethers');
     
     // Replace with your Infura project ID
     const provider = new ethers.providers.JsonRpcProvider('https://mainnet.infura.io/v3/YOUR_INFURA_PROJECT_ID');
     
     // Replace with the contract address and ABI
     const contractAddress = '0xYourContractAddress';
     const contractABI = [ /* ABI Array */ ];
     
     const contract = new ethers.Contract(contractAddress, contractABI, provider);

3. Interacting with Contract Methods

   • Reading Data:

     async function getPoolBalance() {
     const balance = await contract.getPoolBalance();
     console.log(`Pool Balance: ${balance}`);
     }
     
     getPoolBalance();

   • Writing Transactions (requires a signer):

     const wallet = new ethers.Wallet('YOUR_PRIVATE_KEY', provider);
     const contractWithSigner = contract.connect(wallet);
     
     async function mintTokens(collateralAmount) {
     const tx = await contractWithSigner.mint(collateralAmount);
     await tx.wait();
     console.log('Tokens minted successfully');
     }
     
     mintTokens(ethers.utils.parseUnits('100', 18));

Recommendations

• Environment Variables: Store sensitive information like RPC URLs and private keys in environment variables to enhance security.

• Error Handling: Implement robust error handling to manage failed transactions or RPC connectivity issues.

• Rate Limiting: Be mindful of rate limits imposed by your chosen RPC provider to prevent service interruptions.

By utilizing these methods and establishing a reliable RPC connection, your Node.js arbitrage bot can effectively monitor and interact with the Ubiquity Pool to maintain the dollar token’s USD peg.

[sshivaditya2019]

@ubosshivaditya I am starting the work. Could you check https://www.github.com/ubiquity/ubiquity-dollar/blob/0a230f977ad91bbfb01dd28bc1d2ea77faed5237/packages/contracts/src/dollar/libraries/LibUbiquityPool.sol and let me know what methods are there that could be used for implementing node js app? Also. how are these supposed to be connected ? Through RPCs?

[test-app-ubo[bot]]

Certainly! I've reviewed the LibUbiquityPool.sol contract you linked. Let me explain the key methods that could be useful for implementing the Node.js arbitrage bot and how they can be connected through RPCs.

Key methods in LibUbiquityPool.sol:

1. mintDollar(uint256 collateralAmount): Used to mint Dollar tokens by providing collateral.
2. redeemDollar(uint256 dollarAmount): Used to redeem Dollar tokens for collateral.
3. getDollarInCollateral(uint256 dollarAmount): Calculates the amount of collateral for a given amount of Dollar tokens.
4. getCollateralIndex(address collateral): Gets the index of a collateral token.

For implementing the Node.js app:

1. You'll need to use a library like ethers.js or web3.js to interact with the Ethereum blockchain.
2. Connect to an Ethereum node using an RPC URL. You can use public providers like Infura or Alchemy, or run your own node.

Here's a basic structure for connecting and interacting with the contract:

const ethers = require('ethers');

// Connect to an Ethereum node
const provider = new ethers.providers.JsonRpcProvider('YOUR_RPC_URL');

// Contract ABI and address
const contractABI = [...]; // ABI of LibUbiquityPool
const contractAddress = '0x...'; // Address of LibUbiquityPool

// Create contract instance
const contract = new ethers.Contract(contractAddress, contractABI, provider);

// Example function to mint Dollar tokens
async function mintDollar(collateralAmount) {
  const signer = provider.getSigner(); // You'll need a signer for transactions
  const tx = await contract.connect(signer).mintDollar(collateralAmount);
  await tx.wait(); // Wait for transaction to be mined
}

// Example function to check Dollar price in collateral
async function getDollarPrice() {
  const dollarAmount = ethers.utils.parseEther('1'); // 1 Dollar token
  const collateralAmount = await contract.getDollarInCollateral(dollarAmount);
  return collateralAmount;
}

To implement the arbitrage bot:

1. Periodically check the Dollar token price on secondary markets.
2. Compare it with the price from getDollarInCollateral.
3. If there's a profitable arbitrage opportunity, execute the appropriate action (mint or redeem) using the contract methods.

Remember to handle gas fees, slippage, and other factors in your arbitrage calculations. Also, ensure you have proper error handling and logging in place.

For running this as a GitHub Action, you'll need to set up a workflow file (e.g., .github/workflows/arbitrage-bot.yml) that runs your Node.js script on a schedule or on specific events.