Leofinance Arbitrage 2.0: Giving HBD A Boost

Some of the tools that the Leofinance team are coming out with are helping the ecosystem. Since the earliest days, the focus was multi-chain yet it seems that a lot of the attention comes back to Hive.

There is no doubt that Leofinance was one of the first to get on the bandwagon with helping out the Hive Backed Dollar (HBD). The idea of providing access to this Hive coin was paramount to the spread of the ecosystem. For that reason, a derivative was created in the form of a wrapped token. This appeared on both BSC and Polygon.

By developing LeoBridge, we can see how the reach of the ecosystem grew. This is something that of great importance especially with the disruption that was caused by the problems with the centralized exchanges. A strong case could be made that the future of Hive coins is with DEX and liquidity pools.

The latter was addressed by Leofinance.

Having multi-chain access has opened up some options. One of the biggest is the ability to arbitrage across the different financial centers.

Arbitrage 2.0

The first version of the arbitrage bot is going strong. We see from the monthly reports that the revenues generated are in the thousands. This is one of the regular contributors to the token burn taking place on Cubfinance. It is one of the separating factors of this ecosystem: generating actually revenues.

So far the bot does $HIVE, HBD, and some BTC arbitrage. The first two are done within the different liquidity pools and, if possible, on one CEX. This is going to get a major boost with the updated version.

According to what was stated on the AMAs, the new version is also going to arbitrage the Internal Exchange on Hive. This is an important step forward for a couple reasons.

To start, this provides another pool which to generate profits from due to misalignment in pricing. Arbitrage is a vital component to price discovery. However, when it comes to a stablecoin, it is imperative that we try to maintain the peg as much as possible. This is done through the buying and selling of market participants. Those who arbitrage are looking for the times when prices get out of kilter.

This means that a bot that arbitrages a stablecoin is very valuable. Price discreptioncy is something to be avoided. It is beneficial to have this in operation.

Another advantage is to increase the volume and liquidity on the Internal Exchage. We know it is one of the most active epicenters for HBD trading. Of course, it is used solely by people on Hive so outside resources are not involved.

The arbitrage bot will bring more money to the table and serve as another trading mechanism along with HBD Stabilizer. Unlike that tool, this bot will also cross reference the trades with the pricing in the liquidity pools. When there is a price mismatch, the bit will trade to counter it. This is how price gaps get filled.

Greater Activity Means More Attention

This is not to be confused with wash trading.

What we are looking at here is a legitimate increase in volume based upon the market activity at any given moment. If one of the BSC liquidity pool is awry, the bot will trade that, potentially against the bid/ask on the Internal Exchange. Being able to do both simultanously will help to pull things back in line.

Of course, there is activity in both areas, pushing volume even higher.

When transactions increase, this tends to becomes a self-fulfilling prophecy. People feel more confident holding an asset if they know they can swap out of when desired. Notice the improvement in HBD since the Stabilizer went live. This brought a great deal of liquidity to the table, something that was enhanced by other market players.

And now we will see the arbitrage bot for Leofinance involved also.

All of these are stepping stones to expanding the legitimacy of HBD as a stablecoin. While the numbers are still very small, we are building a foundation. As the money grows, we will keep moving up the scale.

Often we discuss different aspects because all of this is a multi-pronged approach. Whether it is a currency or a financial ecosystem, there are many pieces that have to be created. Few realize how much goes into these systems.

Most of us arrive onto the scene with the heavy lifting already done. After all, aspects of our existing financial system are over a century old. That is a long time to expand, adapt, and grow.

Within cryptocurrency, and especially DeFi, we are just getting stared. We are still at the phase of developing much needed infrastructure.

Nevertheless, when the new arbitrage bot from Leofinance goes live, I expect a nice boost to the viability of HBD.

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