Arbitrageurs
As the volatility tokens can be traded in both the CVI platform and Dexes such as Uniswap, it creates a unique and incredible landscape for arbitrageurs to constantly build different strategies and profit from the price difference between both markets. This incentivizes the market to self-adjust while keeping the tokens pegged to the index.
In other words, the arbitrageur's role is to close the temporary differences between the Volatility tokens’ values in the primary and secondary markets, and profit while doing so by keeping the difference in value between both markets.

As shown in the image above, the main arbitrage opportunities in our Ecosystem are:

  • If the price of the volatility token is higher on the CVI platform, an arbitrager can purchase the volatility token with USDC at a lower price on Uniswap, go to the CVI platform and burn the tokens to gain more USDC than the amount he had prior to the process.
  • If the price of the volatility token is lower on the CVI platform, an arbitrager can mint the volatility tokens (by paying USDC), followed by selling the tokens on Uniswap to gain more USDC than the amount he had prior to the process.
These arbitrage opportunities will ensure the price of the Volatility Token on the secondary market is closely tied with the one on the primary platform, thus reflecting the relevant CVI Index.
In addition, arbitrage-related operations on the main platform (mint \ burn) will result in an increase of collected fees distributed to GOVI stakers in the platform.
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