Arbitrage
Before diving into execution details, we recommend reviewing the Peg Stability section to understand the role of arbitrage in maintaining tgUSD’s price stability. Arbitrage is not just a trading opportunity—it’s a key mechanism that supports equilibrium across markets.
Arbitrage opportunities occur when a DEX pool displays a price premium, meaning the output value of swapping asset A to B exceeds the input value.
Example: Swapping 100 tgUSD returns stgUSD worth $100.53—indicating an arbitrage window.
As part of the system’s design, platforms like Torch Stable Swap and DeDust can exhibit price discrepancies that enable user-driven arbitrage and contribute to peg stability.
How Arbitrage Works
Detect Price Discrepancy Monitor quotes across DEXs. Arbitrage becomes viable when the price difference exceeds the combined cost of swap fees and gas.
Execute the Trade Swap the undervalued asset for the overvalued one in the pool showing the premium.
Calculate Profit Profit = Price premium − Swap fee − Gas cost
Arbitrage is highly competitive. If another user front-runs the opportunity or prices shift during your transaction, actual profit may be lower than expected—or result in a loss.
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