Open Source Arbitrage Bot: Leverage Price Discrepancies Across Cardano DEXs

[GENERAL] Name and surname of main applicant

ADA Markets

[GENERAL] Are you delivering this project as an individual or as an entity (whether formally incorporated or not)

Entity (Not Incorporated)

[GENERAL] Please specify how many months you expect your project to last (from 2-12 months)

7

[GENERAL] Please indicate if your proposal has been auto-translated into English from another language

No

[GENERAL] Summarize your solution to the problem (200-character limit including spaces)

We will build and open-source bot that users run to auto buy on one dex and sell on another allowing users to capitalize on price differences without manual intervention

[GENERAL] Does your project have any dependencies on other organizations, technical or otherwise?

Yes

[GENERAL] If YES, please describe what the dependency is and why you believe it is essential for your project’s delivery. If NO, please write “No dependencies.”

We depend on their being dexs on Cardano to track which there are multiple of them

[GENERAL] Will your project’s output/s be fully open source?

Yes

[GENERAL] Please provide here more information on the open source status of your project outputs

The main part of the bot will be open source so anyone can take the code and use it.

[METADATA] Horizons

DeFi

[SOLUTION] Please describe your proposed solution

Why This Approach?

Through building the ADA Markets DEX aggregator, we’ve observed significant price spreads across Cardano DEXs. By offering an open-source arbitrage bot, we aim to empower the community to take advantage of these opportunities, close price gaps, and allow users to earn from running the bot. This approach benefits both the users and the overall liquidity of the Cardano ecosystem.

Details on the Platform

We are developing an open-source arbitrage bot that the Cardano community can easily customize. Users can select specific assets to track, and the bot will automatically monitor and execute trades based on user-defined parameters. The flexibility to tweak settings ensures users can optimize the bot for their personal trading strategies, enabling them to capitalize on price discrepancies across multiple DEXs.

[IMPACT] Please define the positive impact your project will have on the wider Cardano community

This open-source arbitrage bot will empower the Cardano community by allowing anyone to run their own bot, capitalizing on price differences across DEXs. Arbitrage bots help align prices, improving market efficiency across the ecosystem. By making this tool accessible, more community members can participate in maintaining fair prices while earning rewards. Additionally, this bot will serve as a framework for future trading bots, enabling the community to build and expand new strategies for automated trading.

Measuring Impact

We will measure impact by tracking:

• The number of users running the bot.
• Reduced price discrepancies across DEXs over time.

[CAPABILITY & FEASIBILITY] What is your capability to deliver your project with high levels of trust and accountability? How do you intend to validate if your approach is feasible?

We have already demonstrated our technical expertise by building the DEX aggregator app.ada.markets, which allows users to trade across Cardano DEXs from a single platform. Our aggregator helps users find the best trade values by interacting directly with DEX contracts, constructing transactions for them, and allowing them to sign and submit trades seamlessly. This showcases our ability to work with smart contracts and dApps, proving that we have the required skills to deliver this project.

Additionally, we've built a custom indexer for tracking DEX orders and liquidity pools, which is integrated into the ADA Markets platform. This indexer will serve as the foundation for the arbitrage bot, enabling efficient tracking of swaps and pools to identify arbitrage opportunities.

Trust & Accountability

We have experience managing development and have delivered a functional platform in ADA Markets. Our team will ensure transparency and accountability by providing regular project updates and detailed budget reporting. The open-source nature of the bot allows for community validation and ensures funds are allocated to a fully transparent project.

[PROJECT MILESTONES] What are the key milestones you need to achieve in order to complete your project successfully?

Milestone 1: Initial Specification and Research

Milestone Outputs

• Research the steps required for the bot and the technical framework.
• Create an initial spec document detailing the functionality and DEXs to be supported.

Acceptance Criteria

• Spec document is completed and covers all key aspects of the bot

Evidence of Milestone Completion

• Submission of the completed spec document.

Milestone 2: Market Watcher Development

Milestone Outputs

• Develop a market watcher to track token prices across multiple Cardano DEXs.

Acceptance Criteria

• The market watcher is running and successfully tracking prices for all specified assets.

Evidence of Milestone Completion

• Video recording showing command-line interaction with the running market watcher.

Milestone 3: Arbitrage Strategy Implementation

Milestone Outputs

• Build a customizable arbitrage trading strategy that identifies and recommends profitable opportunities.

Acceptance Criteria

• The bot successfully generates trade recommendations based on arbitrage opportunities.

Evidence of Milestone Completion

• Video recording of the bot in action, displaying real-time arbitrage recommendations.

Milestone 4: Transaction Framework Development

Milestone Outputs

• Develop a framework for transaction building and submission to execute trades on DEXs.

Acceptance Criteria

• A fully functional framework capable of submitting trade recommendations for execution on DEXs.

Evidence of Milestone Completion

• Access to the bot through a terminal or video recording of successful transaction submissions.

Final Milestone:

Milestone outputs

• Open bot up to beta testers
• Fix any issues from beta testers
• Publish the bot’s code publicly on GitHub for community access

Acceptance criteria

• The bot is live and accessible to everyone for use.

Evidence of milestone completion

• Bot live for everyone to access

[RESOURCES] Who is in the project team and what are their roles?

The main team for this project consists of:

Paddy – Principal Engineer

With over 15 years of experience in engineering and architecture, Paddy is the lead engineer for this project. He has been a Cardano Stake Pool Operator (SPO) since 2021 and has contributed to several notable Cardano projects, including PoolPeek and ADA Markets. Paddy will oversee the technical development, focusing on the platform’s architecture and integration with Cardano DEXs. Twitter

Paul – Cardano Educator & SPO

Paul has been an SPO since 2021 and runs a popular YouTube channel focused on educating the community about Cardano and its projects. He is part of the ADA Markets DEX Aggregator team focusing on front end dev and will lead community engagement, user onboarding, and outreach ensuring the platform meets the needs of the wider Cardano ecosystem. - Twitter

With this proposal we would also look to expand the team for certain parts of the build

[BUDGET & COSTS] Please provide a cost breakdown of the proposed work and resources

Milestone Breakdown

Milestone 1: Initial Specification and Research

• Budget: 40,000 ADA
• Research the technical framework and create a specification document detailing bot functionality.

Milestone 2: Market Watcher Development

• Budget: 50,000 ADA
• Develop a market watcher to track token prices across multiple Cardano DEXs in real-time.

Milestone 3: Arbitrage Strategy Implementation

• Budget: 50,000 ADA
• Build a customizable arbitrage strategy to identify and recommend profitable opportunities across DEXs.

Milestone 4: Transaction Framework Development

• Budget: 39,000 ADA
• Develop the framework to execute trade recommendations by building and submitting transactions to DEXs.

Final Milestone: Beta Testing and Public Launch

• Budget: 20,000 ADA
• Open the bot to beta testers, fix any issues, and launch the bot for public use by publishing it on GitHub.

Overall Cost Breakdown

Infrastructure: 10,000 ADA

• Hosting and cloud infrastructure to support real-time market data and transaction execution.

Backend and Frontend Development: 116,000 ADA

• Development of the market watcher, arbitrage strategy, and transaction framework, as well as user interface integration.

Testing: 30,000 ADA

• Comprehensive testing, including beta testing and bug fixes before public release.

Documentation & Tutorials: 18,000 ADA

• Create user documentation, tutorials, and guides to ensure ease of use for the community.

Project Management & Reporting: 15,000 ADA

• Oversee project progress, manage milestones, and provide regular updates to the community.

Contingency for unknown and ADA price fluctuations: 10,000 ADA

• Reserve for unforeseen expenses or price changes in ADA.

[VALUE FOR MONEY] How does the cost of the project represent value for money for the Cardano ecosystem?

This project offers significant value for the Cardano ecosystem by helping maintain price alignment across all DEXs, which is essential for a healthy and efficient trading environment. By enabling community members to run the arbitrage bot, we’re giving users the opportunity to earn from price discrepancies while contributing to liquidity and market stability.

The cost of development is proportional to the complexity of building and testing a real-time trading bot that interacts with multiple DEXs. We have kept the costs in line with typical developer rates in the blockchain industry, and our past experience with ADA Markets gives us the capability to deliver efficiently without unnecessary expenses.

Furthermore, once the bot is published, it will be open source, allowing the community to not only run it but also build on top of it. This extensibility will provide ongoing value to the Cardano ecosystem at no additional cost, making this project an investment in both immediate and long-term growth.