Recently, DeFi projects on the KCC have entered an explosive stage, and projects such as Torches Finance and sKCS have been launched successively. The basic DEX, lending protocol, and liquidity staking protocol are already in place, which forms a very stable arbitrage opportunity.

I am going to share some very simple arbitrage opportunities. It is very simple. People who don’t know how to code can still use this way to get some profit from it.

Preparation

We will use three KuCoin Community Chain (KCC) Projects, Torches, sKCS and MojitoSwap, to complete the arbitrage. So, please make sure you have a KCC wallet.  If you haven’t set up your KCC wallet, you can see this tutorial to set up your KCC Wallet first.

Theory

sKCS now are available on MojitoSwap, since the price of sKCS on sKCS.io and MojitoSwap is not always the same, you can buy low and sell high to gain profits from these two platforms.

How to Arbitrage

First, the mechanism of sKCS.io is to stake KCS to get sKCS or unstake sKCS to get KCS, so we can think of it as a KCS/sKCS trading pair. Also, MojitoSwap has a KCS/sKCS trading pair. We can make an arbitrage trading program and the final profit will be received in KCS.

At the beginning of arbitrage, we need some KCS to reduce the losses caused by the price fluctuations of KCS. If you don’t have KCS,  you can deposit stablecoins such as USDT, and USDC to borrow KCS on Torches (Of course, you can also buy KCS directly with USDT, but it will involve unnecessary gas fees and swap slippage. Please do your research on this).

Finally, let's do the arbitrage programming setup.

The first step is to check whether there are any arbitrage opportunities. In other words, you should check the price of sKCS on sKCS.io and MojitoSwap. If the prices are no different, there are no arbitrage opportunities; And if the sKCS prices are different between these two platforms, the arbitrage opportunity comes and the following two scenarios apply.

The First Scenario:

In normal circumstances, sKCS will increase its price over time. If no one swaps or sells sKCS on Mojitoswap, it would cause sKCS to get cheaper on MojitoSwap. At the time, we can buy sKCS with KCS on MojitoSwap and then use these KCS to unstake the sKCS that are staking on sKCS.io to get more KCS, which makes us get a profit on the difference. Although unstaking sKCS usually takes 3-6 days, there is no loss from price fluctuation because our KCS is borrowed.

For example, the current exchange rate on sKCS.io: 1sKCS = 1.1KCS; The purchase price on MojitoSwap: 1sKCS = 0.8KCS. Our arbitrage trading program can buy a 1 sKCS on MojitoSwap with 0.8 KCS, and then unstake 1.1 KCS on sKCS.io, making a profit of 0.3 KCS (1.1 KCS - 0.8 KCS).

Of course, there is also a slippage problem with trading at MojitoSwap. For example, the average price of buying sKCS on MojitoSwap will increase with the quantity, so you also need to consider how many sKCS to buy at once to maximize the profit. 

Here you can try some possible quantities for high frequencies, for example, you can buy 10 sKCS or 50 sKCS or 100 sKCS at once and find out which is the most profitable one; Or you can also calculate it by the slippage formula of swap.

The Second Scenario (no unstaking period):

If users buy a massive amount of sKCS on MojitoSwap, it will lead to the price of sKCS on MojitoSwap being more expensive than sKCS.io. Then we can get sKCS on sKCSs.io by staking KCS and selling these sKCS on MojitoSwap to get the profit from it.

These are instant and there are no access limitations.

For instance, the current exchange ratio on sKCS.io: 1sKCS = 1.2KCS; The selling  price on MojitoSwap website:1sKCS = 1.4KCS.  We can stake 1.2 KCS on sKCS.io to get 1 sKCS, then sell 1 sKCS to get 1.4 KCS on MojitoSwap,  making a profit of 0.2 KCS (1.4KCS-1.2KCS).

The content above is from my own opinions and does not constitute any investment advice. Some screenshots of the program are attached below.

If you are also interested in arbitrage, welcome to share in the comments.