decred.org/dcrdex@v1.0.3/client/mm/mm_simple_arb.go

// This code is available on the terms of the project LICENSE.md file,
// also available online at https://blueoakcouncil.org/license/1.0.0.

package mm

import (
	"bytes"
	"context"
	"fmt"
	"math"
	"sort"
	"sync"
	"sync/atomic"

	"decred.org/dcrdex/client/core"
	"decred.org/dcrdex/client/mm/libxc"
	"decred.org/dcrdex/dex"
	"decred.org/dcrdex/dex/calc"
	"decred.org/dcrdex/dex/order"
)

// SimpleArbConfig is the configuration for an arbitrage bot that only places
// orders when there is a profitable arbitrage opportunity.
type SimpleArbConfig struct {
	// ProfitTrigger is the minimum profit before a cross-exchange trade
	// sequence is initiated. Range: 0 < ProfitTrigger << 1. For example, if
	// the ProfitTrigger is 0.01 and a trade sequence would produce a 1% profit
	// or better, a trade sequence will be initiated.
	ProfitTrigger float64 `json:"profitTrigger"`
	// MaxActiveArbs sets a limit on the number of active arbitrage sequences
	// that can be open simultaneously.
	MaxActiveArbs uint32 `json:"maxActiveArbs"`
	// NumEpochsLeaveOpen is the number of epochs an arbitrage sequence will
	// stay open if one or both of the orders were not filled.
	NumEpochsLeaveOpen uint32 `json:"numEpochsLeaveOpen"`
}

func (c *SimpleArbConfig) Validate() error {
	if c.ProfitTrigger <= 0 || c.ProfitTrigger > 1 {
		return fmt.Errorf("profit trigger must be 0 < t <= 1, but got %v", c.ProfitTrigger)
	}

	if c.MaxActiveArbs == 0 {
		return fmt.Errorf("must allow at least 1 active arb")
	}

	if c.NumEpochsLeaveOpen < 2 {
		return fmt.Errorf("arbs must be left open for at least 2 epochs")
	}

	return nil
}

// arbSequence represents an attempted arbitrage sequence.
type arbSequence struct {
	dexOrder       *core.Order
	cexOrderID     string
	dexRate        uint64
	cexRate        uint64
	cexOrderFilled bool
	dexOrderFilled bool
	sellOnDEX      bool
	startEpoch     uint64
}

type simpleArbMarketMaker struct {
	*unifiedExchangeAdaptor
	cex              botCexAdaptor
	core             botCoreAdaptor
	cfgV             atomic.Value // *SimpleArbConfig
	book             dexOrderBook
	rebalanceRunning atomic.Bool

	activeArbsMtx sync.RWMutex
	activeArbs    []*arbSequence
}

var _ bot = (*simpleArbMarketMaker)(nil)

func (a *simpleArbMarketMaker) cfg() *SimpleArbConfig {
	return a.cfgV.Load().(*SimpleArbConfig)
}

// arbExists checks if an arbitrage opportunity exists.
func (a *simpleArbMarketMaker) arbExists() (exists, sellOnDex bool, lotsToArb, dexRate, cexRate uint64, err error) {
	sellOnDex = false
	exists, lotsToArb, dexRate, cexRate, err = a.arbExistsOnSide(sellOnDex)
	if err != nil || exists {
		return
	}

	sellOnDex = true
	exists, lotsToArb, dexRate, cexRate, err = a.arbExistsOnSide(sellOnDex)
	if err != nil || exists {
		return
	}

	return
}

// arbExistsOnSide checks if an arbitrage opportunity exists either when
// buying or selling on the dex.
func (a *simpleArbMarketMaker) arbExistsOnSide(sellOnDEX bool) (exists bool, lotsToArb, dexRate, cexRate uint64, err error) {
	lotSize := a.lotSize
	var prevProfit uint64

	for numLots := uint64(1); ; numLots++ {
		dexAvg, dexExtrema, dexFilled, err := a.book.VWAP(numLots, a.lotSize, !sellOnDEX)
		if err != nil {
			return false, 0, 0, 0, fmt.Errorf("error calculating dex VWAP: %w", err)
		}
		cexAvg, cexExtrema, cexFilled, err := a.CEX.VWAP(a.baseID, a.quoteID, sellOnDEX, numLots*lotSize)
		if err != nil {
			return false, 0, 0, 0, fmt.Errorf("error calculating cex VWAP: %w", err)
		}

		if !dexFilled || !cexFilled {
			break
		}

		var buyRate, sellRate, buyAvg, sellAvg uint64
		if sellOnDEX {
			buyRate = cexExtrema
			sellRate = dexExtrema
			buyAvg = cexAvg
			sellAvg = dexAvg
		} else {
			buyRate = dexExtrema
			sellRate = cexExtrema
			buyAvg = dexAvg
			sellAvg = cexAvg
		}

		// For 1 lots, check balances in order to add insufficient balances to BotProblems
		if buyRate >= sellRate && numLots > 1 {
			break
		}

		dexSufficient, err := a.core.SufficientBalanceForDEXTrade(dexExtrema, numLots*lotSize, sellOnDEX)
		if err != nil {
			return false, 0, 0, 0, fmt.Errorf("error checking dex balance: %w", err)
		}

		cexSufficient := a.cex.SufficientBalanceForCEXTrade(a.baseID, a.quoteID, !sellOnDEX, cexExtrema, numLots*lotSize)
		if !dexSufficient || !cexSufficient {
			if numLots == 1 {
				return false, 0, 0, 0, nil
			} else {
				break
			}
		}

		if buyRate >= sellRate /* && numLots == 1 */ {
			break
		}

		feesInQuoteUnits, err := a.core.OrderFeesInUnits(sellOnDEX, false, dexAvg)
		if err != nil {
			return false, 0, 0, 0, fmt.Errorf("error getting fees: %w", err)
		}

		qty := numLots * lotSize
		quoteForBuy := calc.BaseToQuote(buyAvg, qty)
		quoteFromSell := calc.BaseToQuote(sellAvg, qty)
		if quoteFromSell-quoteForBuy <= feesInQuoteUnits {
			break
		}
		profitInQuote := quoteFromSell - quoteForBuy - feesInQuoteUnits
		profitInBase := calc.QuoteToBase((buyRate+sellRate)/2, profitInQuote)
		if profitInBase < prevProfit || float64(profitInBase)/float64(qty) < a.cfg().ProfitTrigger {
			break
		}

		prevProfit = profitInBase
		lotsToArb = numLots
		dexRate = dexExtrema
		cexRate = cexExtrema
	}

	if lotsToArb > 0 {
		a.log.Infof("arb opportunity - sellOnDex: %t, lotsToArb: %d, dexRate: %s, cexRate: %s: profit: %s",
			sellOnDEX, lotsToArb, a.fmtRate(dexRate), a.fmtRate(cexRate), a.fmtBase(prevProfit))
		return true, lotsToArb, dexRate, cexRate, nil
	}

	return false, 0, 0, 0, nil
}

// executeArb will execute an arbitrage sequence by placing orders on the dex
// and cex. An entry will be added to the a.activeArbs slice if both orders
// are successfully placed.
func (a *simpleArbMarketMaker) executeArb(sellOnDex bool, lotsToArb, dexRate, cexRate, epoch uint64) {
	a.log.Debugf("executing arb opportunity - sellOnDex: %v, lotsToArb: %v, dexRate: %v, cexRate: %v",
		sellOnDex, lotsToArb, a.fmtRate(dexRate), a.fmtRate(cexRate))

	a.activeArbsMtx.RLock()
	numArbs := len(a.activeArbs)
	a.activeArbsMtx.RUnlock()
	if numArbs >= int(a.cfg().MaxActiveArbs) {
		a.log.Info("cannot execute arb because already at max arbs")
		return
	}

	if a.selfMatch(sellOnDex, dexRate) {
		a.log.Info("cannot execute arb opportunity due to self-match")
		return
	}
	// also check self-match on CEX?

	// Hold the lock for this entire process because updates to the cex trade
	// may come even before the Trade function has returned, and in order to
	// be able to process them, the new arbSequence struct must already be in
	// the activeArbs slice.
	a.activeArbsMtx.Lock()
	defer a.activeArbsMtx.Unlock()

	// Place cex order first. If placing dex order fails then can freely cancel cex order.
	cexTrade, err := a.cex.CEXTrade(a.ctx, a.baseID, a.quoteID, !sellOnDex, cexRate, lotsToArb*a.lotSize)
	if err != nil {
		a.log.Errorf("error placing cex order: %v", err)
		return
	}

	dexOrder, err := a.core.DEXTrade(dexRate, lotsToArb*a.lotSize, sellOnDex)
	if err != nil {
		if err != nil {
			a.log.Errorf("error placing dex order: %v", err)
		}

		err := a.cex.CancelTrade(a.ctx, a.baseID, a.quoteID, cexTrade.ID)
		if err != nil {
			a.log.Errorf("error canceling cex order: %v", err)
			// TODO: keep retrying failed cancel
		}
		return
	}

	a.activeArbs = append(a.activeArbs, &arbSequence{
		dexOrder:   dexOrder,
		dexRate:    dexRate,
		cexOrderID: cexTrade.ID,
		cexRate:    cexRate,
		sellOnDEX:  sellOnDex,
		startEpoch: epoch,
	})
}

func (a *simpleArbMarketMaker) sortedOrders() (buys, sells []*core.Order) {
	buys, sells = make([]*core.Order, 0), make([]*core.Order, 0)

	a.activeArbsMtx.RLock()
	for _, arb := range a.activeArbs {
		if arb.sellOnDEX {
			sells = append(sells, arb.dexOrder)
		} else {
			buys = append(buys, arb.dexOrder)
		}
	}
	a.activeArbsMtx.RUnlock()

	sort.Slice(buys, func(i, j int) bool { return buys[i].Rate > buys[j].Rate })
	sort.Slice(sells, func(i, j int) bool { return sells[i].Rate < sells[j].Rate })

	return buys, sells
}

// selfMatch checks if a order could match with any other orders
// already placed on the dex.
func (a *simpleArbMarketMaker) selfMatch(sell bool, rate uint64) bool {
	buys, sells := a.sortedOrders()

	if sell && len(buys) > 0 && buys[0].Rate >= rate {
		return true
	}

	if !sell && len(sells) > 0 && sells[0].Rate <= rate {
		return true
	}

	return false
}

// cancelArbSequence will cancel both the dex and cex orders in an arb sequence
// if they have not yet been filled.
func (a *simpleArbMarketMaker) cancelArbSequence(arb *arbSequence) {
	if !arb.cexOrderFilled {
		err := a.cex.CancelTrade(a.ctx, a.baseID, a.quoteID, arb.cexOrderID)
		if err != nil {
			a.log.Errorf("failed to cancel cex trade ID %s: %v", arb.cexOrderID, err)
		}
	}

	if !arb.dexOrderFilled {
		err := a.core.Cancel(arb.dexOrder.ID)
		if err != nil {
			a.log.Errorf("failed to cancel dex order ID %s: %v", arb.dexOrder.ID, err)
		}
	}

	// keep retrying if failed to cancel?
}

// removeActiveArb removes the active arb at index i.
//
// activeArbsMtx MUST be held when calling this function.
func (a *simpleArbMarketMaker) removeActiveArb(i int) {
	a.activeArbs[i] = a.activeArbs[len(a.activeArbs)-1]
	a.activeArbs = a.activeArbs[:len(a.activeArbs)-1]
}

// handleCEXTradeUpdate is called when the CEX sends a notification that the
// status of a trade has changed.
func (a *simpleArbMarketMaker) handleCEXTradeUpdate(update *libxc.Trade) {
	if !update.Complete {
		return
	}

	a.activeArbsMtx.Lock()
	defer a.activeArbsMtx.Unlock()

	for i, arb := range a.activeArbs {
		if arb.cexOrderID == update.ID {
			arb.cexOrderFilled = true
			if arb.dexOrderFilled {
				a.removeActiveArb(i)
			}
			return
		}
	}
}

// handleDEXOrderUpdate is called when the DEX sends a notification that the
// status of an order has changed.
func (a *simpleArbMarketMaker) handleDEXOrderUpdate(o *core.Order) {
	if o.Status <= order.OrderStatusBooked {
		return
	}

	a.activeArbsMtx.Lock()
	defer a.activeArbsMtx.Unlock()

	for i, arb := range a.activeArbs {
		if bytes.Equal(arb.dexOrder.ID, o.ID) {
			arb.dexOrderFilled = true
			if arb.cexOrderFilled {
				a.removeActiveArb(i)
			}
			return
		}
	}
}

func (a *simpleArbMarketMaker) tryArb(newEpoch uint64) (exists, sellOnDEX bool, err error) {
	if !(a.checkBotHealth(newEpoch) && a.tradingLimitNotReached(newEpoch)) {
		return false, false, nil
	}

	exists, sellOnDex, lotsToArb, dexRate, cexRate, err := a.arbExists()
	if err != nil {
		return false, false, err
	}
	if a.log.Level() == dex.LevelTrace {
		a.log.Tracef("%s rebalance. exists = %t, %s on dex, lots = %d, dex rate = %s, cex rate = %s",
			a.name, exists, sellStr(sellOnDex), lotsToArb, a.fmtRate(dexRate), a.fmtRate(cexRate))
	}
	if exists {
		// Execution will not happen if it would cause a self-match.
		a.executeArb(sellOnDex, lotsToArb, dexRate, cexRate, newEpoch)
	}

	return exists, sellOnDex, nil
}

// rebalance checks if there is an arbitrage opportunity between the dex and cex,
// and if so, executes trades to capitalize on it.
func (a *simpleArbMarketMaker) rebalance(newEpoch uint64) {
	if !a.rebalanceRunning.CompareAndSwap(false, true) {
		return
	}
	defer a.rebalanceRunning.Store(false)
	a.log.Tracef("rebalance: epoch %d", newEpoch)

	actionTaken, err := a.tryTransfers(newEpoch)
	if err != nil {
		a.log.Errorf("Error performing transfers: %v", err)
	} else if actionTaken {
		return
	}

	epochReport := &EpochReport{EpochNum: newEpoch}

	exists, sellOnDex, err := a.tryArb(newEpoch)
	if err != nil {
		epochReport.setPreOrderProblems(err)
		a.unifiedExchangeAdaptor.updateEpochReport(epochReport)
		return
	}

	a.unifiedExchangeAdaptor.updateEpochReport(epochReport)

	a.activeArbsMtx.Lock()
	remainingArbs := make([]*arbSequence, 0, len(a.activeArbs))
	for _, arb := range a.activeArbs {
		expired := newEpoch-arb.startEpoch > uint64(a.cfg().NumEpochsLeaveOpen)
		oppositeDirectionArbFound := exists && sellOnDex != arb.sellOnDEX

		if expired || oppositeDirectionArbFound {
			a.cancelArbSequence(arb)
		} else {
			remainingArbs = append(remainingArbs, arb)
		}
	}
	a.activeArbs = remainingArbs
	a.activeArbsMtx.Unlock()

	a.registerFeeGap()
}

func (a *simpleArbMarketMaker) distribution() (dist *distribution, err error) {
	sellVWAP, buyVWAP, err := a.cexCounterRates(1, 1)
	if err != nil {
		return nil, fmt.Errorf("error getting cex counter-rates: %w", err)
	}
	// TODO: Adjust these rates to account for profit and fees.
	sellFeesInBase, err := a.OrderFeesInUnits(true, true, sellVWAP)
	if err != nil {
		return nil, fmt.Errorf("error getting converted fees: %w", err)
	}
	adj := float64(sellFeesInBase)/float64(a.lotSize) + a.cfg().ProfitTrigger
	sellRate := steppedRate(uint64(math.Round(float64(sellVWAP)*(1+adj))), a.rateStep)
	buyFeesInBase, err := a.OrderFeesInUnits(false, true, buyVWAP)
	if err != nil {
		return nil, fmt.Errorf("error getting converted fees: %w", err)
	}
	adj = float64(buyFeesInBase)/float64(a.lotSize) + a.cfg().ProfitTrigger
	buyRate := steppedRate(uint64(math.Round(float64(buyVWAP)/(1+adj))), a.rateStep)
	perLot, err := a.lotCosts(sellRate, buyRate)
	if perLot == nil {
		return nil, fmt.Errorf("error getting lot costs: %w", err)
	}
	dist = a.newDistribution(perLot)
	avgBaseLot, avgQuoteLot := float64(perLot.dexBase+perLot.cexBase)/2, float64(perLot.dexQuote+perLot.cexQuote)/2
	baseLots := uint64(math.Round(float64(dist.baseInv.total) / avgBaseLot / 2))
	quoteLots := uint64(math.Round(float64(dist.quoteInv.total) / avgQuoteLot / 2))
	a.optimizeTransfers(dist, baseLots, quoteLots, baseLots*2, quoteLots*2)
	return dist, nil
}

func (a *simpleArbMarketMaker) tryTransfers(currEpoch uint64) (actionTaken bool, err error) {
	dist, err := a.distribution()
	if err != nil {
		a.log.Errorf("distribution calculation error: %v", err)
		return
	}
	return a.transfer(dist, currEpoch)
}

func (a *simpleArbMarketMaker) botLoop(ctx context.Context) (*sync.WaitGroup, error) {
	book, bookFeed, err := a.core.SyncBook(a.host, a.baseID, a.quoteID)
	if err != nil {
		return nil, fmt.Errorf("failed to sync book: %v", err)
	}
	a.book = book

	err = a.cex.SubscribeMarket(ctx, a.baseID, a.quoteID)
	if err != nil {
		bookFeed.Close()
		return nil, fmt.Errorf("failed to subscribe to cex market: %v", err)
	}

	tradeUpdates := a.cex.SubscribeTradeUpdates()

	var wg sync.WaitGroup
	wg.Add(1)
	go func() {
		defer wg.Done()
		defer bookFeed.Close()
		for {
			select {
			case ni := <-bookFeed.Next():
				switch epoch := ni.Payload.(type) {
				case *core.ResolvedEpoch:
					a.rebalance(epoch.Current)
				}
			case <-ctx.Done():
				return
			}
		}
	}()

	wg.Add(1)
	go func() {
		defer wg.Done()
		for {
			select {
			case update := <-tradeUpdates:
				a.handleCEXTradeUpdate(update)
			case <-ctx.Done():
				return
			}
		}
	}()

	wg.Add(1)
	go func() {
		defer wg.Done()
		orderUpdates := a.core.SubscribeOrderUpdates()
		for {
			select {
			case n := <-orderUpdates:
				a.handleDEXOrderUpdate(n)
			case <-ctx.Done():
				return
			}
		}
	}()

	a.registerFeeGap()

	return &wg, nil
}

func (a *simpleArbMarketMaker) registerFeeGap() {
	feeGap, err := feeGap(a.core, a.CEX, a.baseID, a.quoteID, a.lotSize)
	if err != nil {
		a.log.Warnf("error getting fee-gap stats: %v", err)
		return
	}
	a.unifiedExchangeAdaptor.registerFeeGap(feeGap)
}

func (a *simpleArbMarketMaker) updateConfig(cfg *BotConfig) error {
	if cfg.SimpleArbConfig == nil {
		// implies bug in caller
		return fmt.Errorf("no arb config provided")
	}
	a.cfgV.Store(cfg.SimpleArbConfig)
	return nil
}

func newSimpleArbMarketMaker(cfg *BotConfig, adaptorCfg *exchangeAdaptorCfg, log dex.Logger) (*simpleArbMarketMaker, error) {
	if cfg.SimpleArbConfig == nil {
		// implies bug in caller
		return nil, fmt.Errorf("no arb config provided")
	}

	adaptor, err := newUnifiedExchangeAdaptor(adaptorCfg)
	if err != nil {
		return nil, fmt.Errorf("error constructing exchange adaptor: %w", err)
	}

	simpleArb := &simpleArbMarketMaker{
		unifiedExchangeAdaptor: adaptor,
		cex:                    adaptor,
		core:                   adaptor,
		activeArbs:             make([]*arbSequence, 0),
	}
	simpleArb.cfgV.Store(cfg.SimpleArbConfig)
	adaptor.setBotLoop(simpleArb.botLoop)
	return simpleArb, nil
}