Conclusion

In conclusion, the analysis of the liquidity of DOT token in the DOT/OSMO pool has indicated that while the number and volume of deposits have been much higher than the withdrawals in total, the share of daily withdrawals has increased in recent weeks, while having a higher average and median amount. Besides the liquidity pool, the analysis of DOT swaps has also shown that there has not been much activity during the measured period. Nearly a quarter of the total swapped volume has been tagged as arbitrages where only a few addresses conducting those transactions.

Overview of DOT Activity on DOT/OSMO Pool

The analysis of DOT deposits and withdrawals into the DOT/OSMO liquidity pool has demonstrated that while the number and volume of deposits have been much higher than the withdrawals, the number of addresses has been much closer with around 60% for deposits to 40% for withdrawals. The average amount of withdrawals has more than doubled the deposits, while its median amount has been much higher. On the contrary, the daily, weekly, and monthly average deposits have been higher than withdrawals. Overall, there have been more deposits of DOT than its withdrawals over the measured period.

Methodology

The required data for the analysis of DOT/OSMO liquidity pool and the swaps behavior of the DOT token were selected from the fact_liquidity_provider_actions and fact_swaps tables of the Core schema of the Osmosis database. Two actions of pool_joined and pool_exited were considered as providing and depriving liquidity to the pool, respectively. The transactions were filtered using the address of the DOT token and the DOT/OSMO pool ID. The swap data with the axlUSDC were used to calculate the U.S. dollar price of DOT.

Arbitrage is the process of simultaneously buying and selling assets, usually on different markets, to profit from price differences. While it usually constitutes multiple exchanges, on a decentralized exchange it can happen between different liquidity pools. Regardless, arbitrageurs conduct an incredibly high number of transactions on in short time intervals to be able to generate profits. With all that being said, two assumptions were made to determine the two-point arbitrageurs where they perform arbitrage using separate transactions: having more than 1000 transactions on a single day with an average time interval of fewer than 60 seconds between each consecutive transaction they made.

These numbers were manually selected to determine the arbitrage transactions, thus, there is the possibility that this method does not cover the precise number of arbitrageurs.

axlDOT Token Address: ibc/903A61A498756EA560B85A85132D3AEE21B5DEDD41213725D22ABF276EA6945E

axlUSDC Token Address: ibc/D189335C6E4A68B513C10AB227BF1C1D38C746766278BA3EEB4FB14124F1D858

DOT/OSMO Pool ID: 773

Introduction

Polkadot is a layer 0 metaprotocol that connects and secures a network of layer 1 parachains (parallel blockchains), to facilitate the cross-chain transfer of any data or asset types, not just tokens, thereby allowing blockchains to be interoperable with each other. DOT is the native coin of Polkadot that is used for the operations and governance of the network. The bridged DOT tokens through Axelar are available for trading through the Osmosis DEX. In this analysis, the overall stats of the DOT/OSMO pool, as well as the swap activity of the DOT token with an emphasis on the share of arbitrage trades have been investigated.

DOT Activity on DOT/OSMO Pool Over Time

The analysis of deposits and withdrawals of DOT over time has indicated that while the overall amount of deposits had been higher in the first months, withdrawals have increased, especially in the last quarter of 2022. While the daily share of both the number of transactions and addresses for withdrawals has started to equalize with the deposits, the volume of withdrawals has already surpassed the deposits in recent weeks. The daily average amount of withdrawals has also been much higher than deposits.

Swaps of DOT

Considering the assumption that was made to determine the arbitrage swaps, the data has shown that nearly a quarter of the total swaps has been arbitrage transactions. These transactions have had much higher average amounts compared to the real swaps. Also, it is worth noting that only three addresses were tagged as arbitrageurs with the mentioned method. Besides that, they were not constantly active during the whole period and there were days that only one of these addresses was conducting arbitrages. Interestingly, there have been days where the volume of arbitrages was higher than the volume of swaps conducted by real users.

Swappers vs Arbitrageurs

As previously mentioned, only three addresses were tagged as arbitrageurs. The values for swaps, volume, and average swap amount of these addresses have been relatively similar to the values for top swapper.