“And he said unto her, Give me, I pray thee, a little water to drink; for I am thirsty. And she opened a bottle of milk, and gave him drink, and covered him.” - Judges 4:19

Hiya anon! This is your usual disclosure stating that none of the information in this article should be used as investment advice. Although you may find some of the topics covered here informational, I would not advise liberally apeing your life savings into any coins mentioned throughout this article. With that out of the way, let’s take a look at arbitrage and how we can easily perform this on the different liquidity pools hosted across the Solana blockchain :3

What the heck is an arbitrage?

An arbitrage opportunity is the act of buying and selling the same asset between two different markets when a difference in price exists. Although profits are to be made, the existence of such opportunities means that at least one pool’s exchange rate is not aligned with other potential pools (not common). As we will show in example two down below, pools do not necessarily mean only DEXs!

Example 1: $MILK

Strange huh? All jokes aside, this coin was the inspiration for this writeup, specifically v1.milkyswap.me. The private Discord channel was locked by having 8008.5 $MILK in your wallet, ~7600 more than Sere was airdropped. Not wanting to risk my stables on a community coin, there was only one way up to my goal: trade like a hero. There is a problem with just buying and selling $MILK though, there is little to no market participants moving price to make meaningful compounds on the position. Just when all hope was about to be lost, the memeDEX began testing in production. Merely launching another platform for trading a coin does not solve the volume hurdle, but it does turn it into a device we can now leverage.

Typically, when little to no market inefficiencies are present, prices between different DEXs remain consistent. If you check larger market cap coins like $BTC, $ETH, $SOL, or $LUNA market inefficiencies become hard to find because of the number of participants waiting to capitalize on market gains. However, with small coins like $MILK and a relatively unknown DEX in v1.milkyswap, we essentially have a constant pool to arbitrage against. It should be noted that the volume of these arbitrage opportunities will not be large because of the amount of liquidity locked on the v1 DEX (the pools all have TVL of under $200 at the time of publishing).

The first step in my typical process is opening two side-by-side windows with each of the links above. The v1 DEX has the most liquidity concentrated around the $WOOF and $SAMO coins, so I would suggest primarily arbing those pools. Any other pools will likely be subject to slippage on any trade, not to say you are safe on the two pools mentioned. It is possible to calculate the exact swap that would net you the maximum value, however since this activity was meant for fun we will estimate our trade sizes. Looking at the images below we can see that the v1 MILK/SAMO pool contains about 1900 $MILK to 1900 $SAMO. This means that we can currently trade at a 1:1 ratio. When we add more $MILK to the pool, by buying $SAMO, this ratio will shift in the dog coin’s favor. Now looking at jup.ag we can see that the ratio is currently 1:0.22 (4.5 $MILK per 1 $SAMO). This is an opp!! Keeping the v1 DEX’s pool sizing in mind, let’s estimate (with truncating) how many coins we can milk out before overbuying (e.g., moving the ratio past 4.5:1).

• 1923 coins ($MILK) + 1914 coins ($SAMO) = 3837 coins (total)
• 3837 coins / 5.5 (ratio total 4.5+1) = 697 coins
• 697 coins * 4.5 ratio = 3136 coins
• 3136 coins (market rate) - 1923 coins (current) = 1213 coins (to arbitrage)

Now we do a lil swap here, get hit by slippage and swap some more. Arbitrage those doggos back into freshly squeezed milk, and voilà!

I will personally slow down my trading on the v1 DEX, and performing arbitrage on the $MILK pairings there because I have already long surpassed my initial goal of increasing the number of coins in my wallet by 20x.

Example 2: $IN

As mentioned in the introduction, not all arbitrage opportunities come from pool ratio inefficiencies. In this example, we will cover an interesting arb cycle with the sol invictus redemption opportunity. Without going too much into the cursed history of this OHM fork, the DAO ended up voting to redeem the entirety of its treasury. Through the dApp, users are able to deposit 1 $IN for 38 $USDC. For whatever reason this does not appear to be knowledge to everyone as there is still volume on the IN/USDC pools across Solana. Using Jupiter Aggregator, you can attempt to snipe the price of $IN when favorable and then redeem for a safe 38 $USDC.

Example 3: $SBR

This is a speculative bet, you’ve been warned. Not long ago Sunny Aggregator launched $sunSBR, an illiquid staked 1:1 representation of the $SBR token. The purpose of this on a protocol level is to accumulate more voting power in the Saber Wars, while for holders the benefit comes in the form of high $SUNNY emissions and planned auto-compounding through $SBR emissions. Although Sunny Aggregator has no plans of launching an official liquidity pool for this pairing, the community has come together to pool a little more than $10k to bootstrap a pool on Sencha DEX. Given that auto-compounding (natively increasing value against $SBR) is not live and an deep liquidity is not established, there is little reason to forecast that $sunSBR will break above the 1:1 peg. In the few instances that it has been overtraded above a 1 $SBR value, it was quickly sold back under. The strategy with this arbitrage opportunity is two part. While the peg remains within the intended peg zone (e.g., 1 $sunSBR per 0.95 $SBR), hold $SBR in anticipation of de-peg. If the staking coin gets sold down below your target (e.g., 1 $sunSBR per 0.85 $SBR), then swap $SBR into $sunSBR to lock your trade. Unless liquidity is required, proceed to stake your now higher amount of $sunSBR for even more $SUNNY emissions.

Well that is all for tonight frens! Thank you for making it down this far and I wish you luck in finding arbitrage opportunities. Go out to suck up those gains, hopefully slippage won’t cause any pains ~