Arbitrage

Intrachain Liquidity Balancing

The CryptoLink DEX will utilize Balancer v2's Smart Order Router (SOR) for intrachain liquidity balancing. For given input and output tokens, the SOR finds the optimal trades whether that is a direct swap in one pool, or a combination of trades hopping through multiple pools. For example, Assume CryptoLink has two liquidity pools, PAPER-Native and INK-PAPER, and there is a significant price impact on the PAPER-Native pool, the SOR will automatically arbitrage that liquidity on trades. Liquidity is arbitraged intrachain.

Cross-Chain Arbitrage Opportunities for the Community

The price of the $PAPER token may fluctuate between chains. If there is ever a price imbalance between chains, the community can buy $PAPER on the cheaper chain, and sell it on the more expensive chain… stabilizing the price between chains while profiting from the arbitrage. This stabilization effect happens naturally.

Arbitrage opportunities between chains will exist. This action encourages an equilibrium of token prices across supported chains.

This also means that if a chain dies or is hit with a major attack, PAPER is braced by the remaining chains that CryptoLink is on, bracing CryptoLink with it.