DEX Arbitrage

AI-Driven Cross-Market Efficiency Capture

Amplified Protocol’s DEX Arbitrage framework is a precision-engineered system designed to identify, validate and execute profitable arbitrage opportunities across decentralized exchanges. Built with institutional-grade risk controls and AI optimization, it transforms fragmented market inefficiencies into consistent, risk-adjusted yield - without relying on manual intervention.

Arbitrage Opportunity Detection Engine The foundation of the system is real-time scanning across correlated assets and derivative pairs on major DEXs.

• Cross-DEX Price Monitoring: Tracks price deviations between identical or highly correlated assets (e.g., wstETH on Uniswap vs Balancer)

• TWAP Deviation Alerts: Filters out volatility spikes by comparing instantaneous prices to time-weighted averages

• Slippage-Adjusted Opportunity Scoring: Evaluates net profitability after expected slippage and gas costs

• Latency-Optimized Feeds: Uses high-frequency on-chain data to detect opportunities before they close

Only opportunities exceeding predefined risk-adjusted thresholds are passed to validation.

AI Validation Layer Before execution, all arbitrage signals undergo rigorous analysis.

• Profitability Simulation: Models expected PnL under current network conditions

• MEV Risk Assessment: Flags transactions vulnerable to frontrunning or sandwich attacks

• Liquidity Confirmation: Validates that target pools can absorb the trade without excessive impact

• Gas Cost Forecasting: Dynamically estimates execution cost based on mempool congestion

This ensures capital is only deployed when edge is statistically significant and execution risk is bounded.

Execution Optimization Framework Approved trades are routed through a gas- and slippage-minimized execution layer.

• Atomic Transaction Bundling: Executes multi-hop arbitrages in single atomic bundles to eliminate settlement risk

• Dynamic Router Selection: Chooses optimal DEX routing path based on fee structure and depth

• Timing Intelligence: Delays execution during high-gas periods unless urgency threshold is met

• Position Sizing Engine: Adjusts trade size to balance fee capture against impermanent loss exposure in LP positions

All operations are executed via modular, audited smart contracts with embedded fail-safes.

Risk & Capital Efficiency Controls Arbitrage is not risk-free—Amplified enforces strict guardrails.

• On-Chain VaR Modeling: Daily recalibration of maximum allowable exposure per strategy class

• Circuit Breakers: Automatically pauses arbitrage during extreme volatility or oracle deviation

• Max Drawdown Limits: Hard caps on cumulative loss thresholds per agent cluster

• veLLT Governance Overrides: Emergency intervention rights preserved for decentralized governance

Capital is never overcommitted; position sizing adapts to available buffer and market stability.

AI Agent Swarm Coordination The system operates as a distributed intelligence network.

• Discovery Agents: Scan 50+ pools across Ethereum and select L2s every 3 seconds

• Validation Agents: Run simulations and approve/reject based on net-positive expectancy

• Execution Agents: Submit transactions via private mempool channels when available

• Feedback Agents: Log outcomes to improve future opportunity scoring and reduce false positives

This swarm architecture enables scalability across assets and venues without linear cost increase.

Forward-Looking Integration Next-phase development includes:

• Synthetic Arbitrage Pairs: Expanding into perp-futures basis trades and cross-chain derivative mispricings

• CFMM-AMM Convergence Strategies: Exploiting inefficiencies between constant function and dynamic pools

• AI-Predictive Arbitrage: Using time-series models to anticipate price divergences before they occur

This framework establishes DEX arbitrage not as a speculative tactic, but as a systematic, data-anchored yield stream - scalable, secure, and sustainable within institutional DeFi portfolios.