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Terra-Based Arbitrage Platform White Whale Launches UST Vault

3 mins
Updated by Shilpa Lama
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[Panama City, Republic of Panama, February 15, 2022] – White Whale, a unique platform that empowers retail investors to benefit from seigniorage arbitrage and other complex trading strategies, has launched its first arbitrage vault – the UST Vault.

In addition to providing individual traders with opportunities usually reserved for a limited group of whale investors, White Whale technology makes the entire Terra Ecosystem more secure, robust, and efficient for all users.

A wider Terra Community has been building up anticipation around White Whale’s UST Vault, and the game-changing impact it will have on the Terra Ecosystem. UST, also known as TerraUSD, is an algorithmic stablecoin built on Terra that is pegged to the value of the U.S. Dollar. As an algorithmic stablecoin, UST does not have collateral to support its peg but rather uses an incentive mechanism to balance its supply and demand.

At any time, users on Terra can burn $1 of LUNA to mint 1 UST, or burn 1 UST to redeem $1 worth of LUNA. As a result, it relies on arbitrageurs to profit off occurring differences and simultaneously support the peg. However, retail investors usually lack access to sophisticated technology and sufficient capital required to make reasonable profits. This is where White Whale’s UST Vault comes in. 

UST Vault offers an easy user experience on the front end, while simultaneously utilizing complex bot infrastructure behind the scenes that yields arb returns. Users can deposit any amount of UST into the Vault, and withdraw their individual capital at any time.

The Vault is designed to spot arbitrage opportunities and execute trades using the deposited capital across Terra decentralized exchanges including Astroport and TerraSwap – yielding considerable arbitrage profits for White Whale users and aiding UST in avoiding a de-pegging event.   

Arbitrage opportunities usually occur due to overall volatility in the market, and/or occasional inefficiencies. As arb opportunities are dependent on the market, the White Whale team has integrated Anchor Protocol for its Vault that will guarantee a passive 19.5% at all times, until arbitrage opportunities present themselves. Consequently, UST Vault returns Anchor + Arbitrage profits.

To ensure a smooth transition between Anchor Protocol and arb opportunities, White Whale has implemented flash loans – marking the first time roll out of this technology on Terra. 

The project’s development team explains the integration of flash loans: “The UST Vault is designed in such a way that if an arbitrage opportunity is spotted by the arb bots, the Vault then shoots a flash loan to the bot to execute that trade. The loan and the profits from the trade are then sent back to the Vault in the same transaction”. 

In layman’s terms, this is what happens when an individual investor deposits UST into the Vault. Once a user adds his/her funds, The Vault automatically transfers them into the Anchor Protocol where they earn a passive 19.5% yield.

When the sophisticated bot infrastructure finds an arb opportunity, the smart contract linked to the strategy asks for a flash loan from the UST Vault. The UST Vault will then withdraw the UST from Anchor Protocol and provide the contract with borrowed money to execute the arbitrage. After the arbitrage, all funds are returned to the Vault. However, in case the arbitrage trade was not profitable, White Whale has incorporated a mechanism that reverts the whole transaction – protecting the depositors. 

The UST Vault launch is an important strategic milestone for White Whale that marks the first step in the decentralization of peg enforcement. As the project continues its growth, it will open additional vaults with other assets and expand its operations to more exchanges and blockchains. 

About White Whale

White Whale is an arbitrage platform built on Terra, a public blockchain protocol deploying a suite of algorithmic decentralized stablecoins. The platform empowers retail investors to keep the UST peg via L1 seigniorage arbitrage as well as participate in other complex automated trading strategies through a simple user-friendly experience. ​​By empowering the community to keep the peg through L1 seigniorage arbitrage, White Whale contributes to making the entire Terra Ecosystem more secure, robust, and efficient.

Find White Whale on social media:

Website | Litepaper | Twitter  | Medium 


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