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hummingbot - Coggle Diagram
hummingbot
Automated Market Makers
use a mathematical formula to define the price depending on each asset’s balance deposited on the liquidity pool
On the Ethereum for example, every transaction participates in an auction, where the users compete to see who will pay more to have their transactions validated first.
If you set your gas price too high, your transaction will be processed faster, but you risk overpaying for it and increasing the cost of executing the arbitrage.
For the Ethereum blockchain, a site like ETH Gas Station can help you estimate the ideal gas price you should use for your transactions, based on the average speed of past blockchain interactions.
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Notes
This is the main reason that to execute an arbitrage strategy with Hummingbot you must have funds deposited on both exchanges or wallet so that you can do both buy and sell transactions at the same time.
Transaction Order
Two orders will be executed when an arbitrage opportunity is detected, and there are two ways that Hummingbot can send the orders, and they are chosen through the concurrent_orders_submission configuration.
Parallel order execution
When concurrent_orders_submission is set as True, the bot will create both orders at the same time.
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Slippage Buffer
To avoid having your order not being properly executed due to a change in price between the time that the bot create the order and the moment when the order is executed, you can set a slippage buffer using the config market_#_slippage_buffer.
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