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Our next Advent instalment of DynaSet Details relates to ‘Trade Execution’.
This is one of the simpler mechanics to grasp, but one of the most challenging to design, build, implement and secure as it requires multiple smart contracts interacting with various protocols. Security, speed and cost efficiency are of utmost importance here and the team have been taking care to make certain that this is all perfect. When we launch we will of course share all Audits involved and include details regarding any third party partners that are utilised so that any relevant security audits of their code can also be inspected.
How does it work?
The DAM (Dynamic Asset Manager) receives signals from any number of different sources that our traders and/or AI algorithms are monitoring.
The DAM then attempts to execute a trade based on these signals.
There are currently two major trade types:
Market trade (on ETH)
When the DAM has established the price that needs to be hit, we need to analyse the fees and the slippage profile of the trade.
This means that if the liquidity pool is not sizable enough to easily fill our order, we could move the price significantly.
If the analysis gives a positive result, then the trade will take place, if not then we enter a cycle whereby if the order is still relevant, we will re-analyse the fees and slippage, if the results are not favourable the order will not be placed.
This variation is much like a Market trade, however there is an additional step which is the ‘price target’.
The order will be present until the target price is hit.
In this case if the price is not hit we will enter a cycle of confirmations to ascertain if the order is still relevant or not.
How do we resolve the potential liquidity and slippage issues mentioned above?
For trade execution we will integrate with the 1inch Network. We are leveraging their aggregation tools and liquidity routing mechanics to take DynaSets to the next level. The best way to manage the problem of slippage is by tapping into multiple different liquidity pools simultaneously. In a future blog we will deep dive how this works, as well as give more details on our relationship with 1inch. The larger a DynaSet becomes, the bigger trade executions we will be making at any given time. The bigger the trade, the more difficult it is to avoid running into such large slippages that our algorithms warn that the trade is not viable. Fortunately, with the assistance of 1inch we have for the most part mitigated these issues.
There is a lot more information to come so stay tuned to our social channels for all the latest.