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Live DEX Price Integration - Complete ✅

Overview

Successfully upgraded the Arbitrage Monitor from hardcoded DEX prices to live market data from Spectrum Finance (Ergo's main DEX).

What Was Implemented

1. Backend API Route (app/api/dex/route.ts)

  • ✅ Created Next.js API route that fetches live pool data from Spectrum Finance
  • ✅ Fetches SigUSD/ERG pool reserves
  • ✅ Calculates real-time DEX price based on pool reserves
  • ✅ Gets oracle ERG price to convert SigUSD/ERG ratio to USD

Token IDs:

  • SigUSD: 03faf2cb329f2e90d6d23b58d91bbb6c046aa143261cc21f52fbe2824bfcbf04

Price Calculation:

// If SigUSD is token X, ERG is token Y:
sigUsdInErg = ergReserve / sigUsdReserve
priceUSD = sigUsdInErg * oracleErgPrice

Features:

  • Automatically finds SigUSD/ERG pool from Spectrum pools list
  • Handles both pool configurations (SigUSD as X or Y)
  • Graceful fallback to $1.00 on errors (doesn't break UI)
  • 15-second cache revalidation
  • Returns liquidity (TVL) and data source

2. Frontend Hook (lib/hooks/useDexPrice.ts)

  • ✅ Updated to fetch from /api/dex instead of mock data
  • ✅ Polls every 15 seconds for fresh data
  • ✅ Calculates spread: ((dexPrice - protocolPrice) / protocolPrice) * 100
  • ✅ Returns arbitrage signal based on thresholds

Arbitrage Logic:

  • spreadPercent >= 0.5% → MINT DJED (Green) - DEX price is higher, mint and sell
  • spreadPercent <= -0.5% → REDEEM DJED (Red) - DEX price is lower, buy and redeem
  • Otherwise → NO CLEAR EDGE (Gray) - Spread too small to profit

Configuration:

export const MINT_THRESHOLD_PCT = 0.5;   // 0.5% above protocol
export const REDEEM_THRESHOLD_PCT = -0.5; // 0.5% below protocol

3. Updated Component (components/MarketOpportunityCard.tsx)

  • ✅ Now displays live DEX price from Spectrum
  • ✅ Shows liquidity amount and data source
  • ✅ Signal changes dynamically based on real spread
  • ✅ Color-coded signals with glow effects

Display:

  • DEX Price: Live from Spectrum pools
  • Protocol Price: From oracle/reserves calculation
  • Spread: Absolute and percentage difference
  • Liquidity: Total value locked in pool
  • Source: "spectrum" (live) or "demo" (fallback)
  • Signal: MINT/REDEEM/NO CLEAR EDGE

How It Works

Price Discovery Flow:

  1. API fetches Spectrum pools

    GET https://api.spectrum.fi/v1/amm/pools

  2. Find SigUSD/ERG pool

    • Checks for SigUSD token ID in either X or Y position
    • Confirms other side is ERG (native token)

  3. Calculate price

    • Extract reserves: sigUsdReserve, ergReserve
    • Get price ratio: ergPerSigUsd = ergReserve / sigUsdReserve
    • Convert to USD: priceUSD = ergPerSigUsd * oracleErgPrice

  4. Frontend compares prices

    • Fetch protocol price (from reserves/oracle)
    • Fetch DEX price (from API)
    • Calculate spread percentage
    • Determine signal (MINT/REDEEM/NEUTRAL)

  5. Display arbitrage opportunity

    • Show both prices side-by-side
    • Highlight profitable direction
    • Update every 15 seconds

API Response Format

{
  "success": true,
  "price": 1.0150,
  "pair": "SigUSD/ERG",
  "liquidity": 250000,
  "source": "spectrum"
}

On Error:

{
  "success": false,
  "error": "Pool not found",
  "price": 1.0,
  "pair": "SigUSD/ERG",
  "liquidity": 0,
  "source": "fallback"
}

Arbitrage Signals Explained

🟢 MINT DJED (Green)

When: DEX price > protocol price by 0.5%+

Strategy:

  1. Buy ERG
  2. Mint SigUSD at protocol (pay $1.00 equivalent in ERG)
  3. Sell SigUSD on DEX for premium (get $1.02)
  4. Profit: 2% minus fees

🔴 REDEEM DJED (Red)

When: DEX price < protocol price by 0.5%+

Strategy:

  1. Buy SigUSD on DEX at discount (pay $0.98)
  2. Redeem SigUSD at protocol (get $1.00 equivalent in ERG)
  3. Sell ERG
  4. Profit: 2% minus fees

⚪ NO CLEAR EDGE (Gray)

When: Spread is between -0.5% and +0.5%

Meaning: Prices are too close, fees would eat profits

Testing

Live Mode (uses Spectrum API):

http://localhost:3000/?demo=false

Demo Mode (uses mock $1.02):

http://localhost:3000/?demo=true

Performance Considerations

  • ✅ 15-second polling prevents API rate limits
  • ✅ SWR deduplication prevents duplicate requests
  • ✅ Caching at API level (Next.js revalidation)
  • ✅ Graceful fallback prevents UI breaks
  • ✅ Liquidity display helps assess trade size viability

Error Handling

  1. Spectrum API down → Returns fallback price ($1.00)
  2. Pool not found → Returns fallback with error message
  3. Invalid pool data → Gracefully handles and logs error
  4. Network timeout → SWR retries automatically
  5. Demo mode → Always uses $1.02 mock price

Future Enhancements

Potential Additions:

  1. Multiple DEX support - Check prices across Spectrum, Ergodex, etc.
  2. Historical spread chart - Show arbitrage opportunities over time
  3. Profit calculator - Input trade size, see estimated profit
  4. Fee estimation - Include DEX fees and slippage in signal
  5. Notification system - Alert when profitable opportunity appears
  6. Trade execution - One-click arbitrage (requires wallet integration)
  7. Slippage warning - Show if liquidity is too low for trade size

Files Modified/Created

Created:

  • app/api/dex/route.ts - Backend DEX price API

Modified:

  • lib/hooks/useDexPrice.ts - Updated to use live API
  • components/MarketOpportunityCard.tsx - Added liquidity and source display

Technical Details

Spectrum API Integration:

  • Endpoint: https://api.spectrum.fi/v1/amm/pools
  • Method: GET
  • Response: Array of pool objects with reserves and TVL
  • Rate limit: Reasonable with 15s polling
  • No authentication required

Pool Identification:

// Find pool with SigUSD token
const sigUsdPool = pools.find(pool => {
  const hasSigUsd = 
    pool.lockedX.asset.tokenId === SIGUSD_TOKEN_ID || 
    pool.lockedY.asset.tokenId === SIGUSD_TOKEN_ID;
  
  const hasErg = /* check for ERG on other side */;
  
  return hasSigUsd && hasErg;
});

Price Formula:

Price per SigUSD (USD) = (ERG_Reserve / SigUSD_Reserve) × ERG_Oracle_Price_USD

Example Calculation

Given:

  • ERG Reserve: 100,000 ERG
  • SigUSD Reserve: 145,000 SigUSD
  • Oracle ERG Price: $1.45

Calculate:

ERG per SigUSD = 100,000 / 145,000 = 0.6897 ERG
Price USD = 0.6897 × $1.45 = $1.00

DEX Price = $1.00
Protocol Price = $1.00
Spread = 0%
Signal = NO CLEAR EDGE

If DEX had less SigUSD:

ERG Reserve: 100,000 ERG
SigUSD Reserve: 140,000 SigUSD (5,000 bought)
ERG per SigUSD = 100,000 / 140,000 = 0.7143 ERG
Price USD = 0.7143 × $1.45 = $1.036

DEX Price = $1.036
Protocol Price = $1.00
Spread = +3.6%
Signal = MINT DJED 🟢

Status: Complete and Production-Ready ✅

The Arbitrage Monitor now shows real-time arbitrage opportunities using live DEX data from Spectrum Finance!