What is MOSDEX?
Sequel to a successful funding round in June 2022, MOSDEX has set out to improve the overall experience of arbitrage traders in terms of trading profitability and simplification of the trading process. Despite numerous goals and products that support them, MOSDEX’s arbitrage trade tool stands out.
But what is MOSDEX and the MOSDEX arbitrage protocol?
What is MOSDEX?
Your arbitrage trading career rightly takes off when you understand the basis of arbitrage trading and how interested traders can profit from it. If this is you, then understanding MOSDEX will be a pretty easy exercise. For noobs in arbitrage trading, this is still true.
For a tool that serves a purpose of this level of importance, MOSDEX comes off as a very simplified concept.
On the surface, MOSDEX is a tool that helps traders maximize their profits through arbitrage trading while minimizing the hassles they go through to bring this to fruition. MOSDEX is designed to serve minimalist and institutional investors all in one like.
MOSDEX incorporates the services of independent protocols, products, and algorithms to deliver a solution like this. These entities work in synergy to deliver an efficient tool for every investor who crabe a better way to run cryptocurrency trades.
The MOSDEX facility consists mainly of an Arbitrage trading protocol, a decentralized cryptocurrency exchange powered by the Atomic swap technology, and a custodial wallet that lets users store and move assets between themselves, their peers, and the MOSDEX facility as well. While the wallet and the swap infrastructures optimize users’ experience, the Arbitrage protocol is the core of MOSDEX.
MOSDEX’s Arbitrage Protocol.
The Arbitrage protocol collates the trading prices of an asset across different exchanges and compares them. It detects the difference between the prices of the asset on these trading platforms and swiftly trades the arbitrage by buying on the cheaper exchange and selling on the costlier exchange. It is built to seamlessly traverse between exchanges and employs profit management strategies to ensure that every trade is completed with a net profit.
The Arbitrage protocol works on centralized exchanges and decentralized exchanges. The technique differs for both but the basics remain the same.
How MOSDEX’s Arbitrage protocol works on centralized exchanges.
MOSDEX’s arbitrage protocol is deployed on multiple centralized exchanges to check the prices at which an asset trades on these exchanges and compare presiding prices to evaluate an arbitrage opportunity.
Arbitrage can result sometimes from variation in the purchasing power of traders on an exchange or simply a random lax in price development across these exchanges.
When the shift is detected, the protocol moves to buy and sell the asset on the exchange with a lower sell price and the exchange with a higher buy price, respectively. This yields profit relative to the arbitrage gap and the capital committed to the trade.
This seamless trading across exchanges is made possible through API-powered orderbook system. The Arbitrage protocol gains access to the exchange’s orderbook through the exchange’s API and conducts trades through empirically developed strategies.
The functionality of MOSDEX’s arbitrage protocol is powered by Artificial intelligence algorithms, Machine learning protocols, and Oracle protocols that service different aspects of the application. Artificial intelligence algorithms are employed to take cognizance of the market structure. It studies related moves and takes note of the price development pattern and the arbitrage pattern as well, data collected from this study is fed to the protocol and is used to determine the protocol’s next move.
These instructions are translated into machine languages by the Machine learning protocols. They are translated into code bits that can be recognized by the rest of the system. The learning and information translation process between the AI algorithms and the machine learning protocols is tightly regulated to ensure that the Arbitrage protocol doesn’t malfunction due to an erroneous encoding.
Asset Price data for the arbitrage protocol are presented via oracle protocols that feed the protocol with various prices from tracking platforms and trading platforms integrated into it. The trading direction might be multi-directional or triangular.
Multidirectional Arbitrage trading on MOSDEX
For multidirectional trades, the trading occurs between all integrated exchanges. The protocol screens the exchanges for arbitrage opportunities and trades between the two best options. The trade is rotated as the profitability changes as well.
Triangular Arbitrage trading on MOSDEX
In a triangular trade, the protocol earmarks three distinct exchanges and trades arbitrage that occurs between them. The triangular is used when the system of the trader wishes to limit the scope of the protocol to fewer exchanges for certain reasons such as a reduced risk of failure.
DeFi Arbitrage trading with MOSDEX arbitrage protocol
The arbitrage protocol isn’t limited to centralized exchanges alone. The protocol is also adapted to decentralized exchanges through a relatively different technique. The protocol identifies crypto assets listed on decentralized exchanges using their smart contract addresses. The prices of these assets across different decentralized are evaluated for arbitrage opportunities.
The arbitrage can trade arbitrages across decentralized exchanges on different blockchain networks and also between centralized and decentralized exchanges in case a more profitable arbitrage occurs between these two platforms.
To use the arbitrage protocol, an investor stakes their asset to the MOSDEX arbitrage protocol. The protocol manages the trading procedure and returns profits to the investors. The profits vary according to the profitability of the arbitrage traded.
The Arbitrage protocol is supported by the MOSDEX wallet and MOSDEX swap.
MOSDEX wallet
The MOSDEX is a complete cryptocurrency wallet created to allow a self-custody of assets for users of the MOSDEX platform. The MOSDEX wallet supports peer-to-peer transactions and simple cryptocurrency safekeeping. The MOSDEX wallet currently supports BTC and USDT which are also the two principal assets on the MOSDEX platform.
Platform users can transfer their bitcoin and USDT stablecoin to the MOSDEX for easier interaction with the arbitrage protocol and other applications on the platform.
MOSDEX swap
MOSDEX also features an asset swap platform powered by atomic swap. Atomic swap is a smart-contract technology that enables secure and time-bound asset exchange without using intermediaries, such as 3rd party exchanges. Atomic swap transactions are smart-contract events within the respective blockchains involving only the exchanging parties in a cryptographically secure manner. With the atomic swap technology, assets are exchanged with blockchain-level security.
Atomic swap’s workflow is simple. To exchange specified tokens, the seller locks a certain number of tokens in his/her wallet using a random secret number. This number must be revealed to the second party for this swap to occur. To reveal this number to the second party, the second party must satisfy their part of the agreement. This could be a contract agreement, asset exchange, or even more. The time lock is set to a specified time after which the transaction is invalid.
A user on the MOSDEX platform can perform swaps between Bitcoin and USDT using the swap application as a more secure and regulated means of swapping crypto assets.
MOSDEX revenue system
To maintain the protocol and develop it further, MOSDEX developers will seek to generate consistent revenue through the existing protocol. The current revenue system is dependent on funds remitted by users through some recurrent and one-time fees.
MOSDEX charges a $5 fee for unstaking funds from the Arbitrage protocol and a percentage of the profit made from each arbitrage trade. Investors will also have a fee to withdraw their funds from the platform. The generated fees are channeled to the project’s treasury and will be used to fund future developmental plans.
Current Limitations of MOSDEX’s arbitrage application
The MOSDEX Arbitrage protocol and other applications on the MOSDEX platform might show great levels of competence, however, they still face a few limitations in ability due to a number of factors.
The structure of the cryptocurrency market and space makes it harder for applications like this to work at full speed. MOSDEX developers claim to be optimizing the application to be even more responsive so as to withstand the difficulties posed by cryptocurrency’s volatility and under-regulation.
Final thoughts
Cryptocurrency and blockchain technology are both penetrating the financial sphere. Each one plays a role, applications delivered by the different projects operating in this space have shown the potential to solve real-life problems.
For MOSDEX, the arbitrage protocol is of great utility for experienced traders and traders with relatively lesser experience. However, it is important to note that this tool is still in its early stage of development and is prone to dysfunctions, some of which might not be pleasant to the users. It is advisable to apply caution while using young and innovative protocols to limit losses in case of dysfunctions.
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