Wick arbitrage

overview

Wick runs its own arbitrage infrastructure. When prices diverge across Wick pools, the Lighter orderbook, and external venues, Wick can execute internally at 0% fee, capture the spread, and keep the profit inside the protocol.

Arbitrage is not optional. It is the mechanism that keeps AMM prices aligned with the rest of the market. When prices move, the spread is captured by an external bot by default. Wick, the protocol that created the liquidity surface, can capture it instead.

Wick's answer is to capture that arbitrage in-house. Dynamic fees recover more value when volatility rises, while internal arbitrage clears residual spreads that would otherwise leak to outside bots. Captured profits become WICK buybacks, with LP incentives used where applicable.

Wick arbitrage

Wick captures spreads across its AMM pools and external venues, then routes captured value back in-protocol instead of losing value to outside arbitrageurs.

core AMM–orderbook arbitrage path

Wick's core arbitrage path is the spread between Wick AMM pools and external venues, mainly the Lighter orderbook. If the AMM quotes LIT at $1.698 while the orderbook quotes $1.702, an external bot would need to clear pool fees, venue fees, gas, priority costs, and execution risk before that trade becomes worth taking. Wick's internal path is structurally cheaper.

The bot can buy from the AMM at a 0% internal fee and sell on the orderbook atomically. That means thin discrepancies that external bots ignore can still be worth capturing for Wick. wAMM pools execute at fixed prices within each bin, which keeps internal rebalancing trades predictable and makes thin cross-venue spreads economical to capture. That is a key reason the exchange layer uses bin-based liquidity rather than a continuous tick curve.

The mechanical result is simple: the spread that would have left the system becomes protocol revenue instead.

no-arbitrage band

External bots only trade when the spread is wide enough to clear their costs. This creates a no-arbitrage band: small price differences can persist because they are not profitable after fees. Wick's internal AMM leg runs at 0%, so the band it needs to clear is much tighter. That does not mean every possible market inefficiency disappears; it means Wick can capture a much broader set of internal AMM/orderbook spreads than a normal outside arbitrageur.

Drag the slider to see how the band an external bot needs changes with the fee, and how Wick's line stays flat at zero.

multi-venue routing

The same logic extends beyond a single AMM/orderbook pool. Wick continuously monitors internal pools, Lighter markets, and external venues. When a route is executable, it captures the spread and routes captured profit back into the protocol through sWICK.

AMM/orderbook arbitrage is the core path, but it is not the only one. Wick can monitor DEX-DEX, CEX-DEX, cross-chain, and multi-step protocol routes when they connect back to Wick's liquidity surface. Deeper pools and every new serious pool, bridge connection, stable asset, wrapped asset, and venue relationship expand how many routes are worth capturing.

path scaling

Wick does not run a single arbitrage loop. It monitors internal pools, the Lighter orderbook, and external venues at once. Each connection is another capture surface where a spread can be closed in-protocol. The deeper the liquidity, the more paths are worth running. Each new pool on that mesh is another surface too: LIT/USDC, LIT/ETH, LIT against the next asset Wick lists. Every addition multiplies how many routes can connect back through the rest of the graph. Capture surface scales exponentially with each new capturable surface added.

where captured value goes

protocol routing

The baseline is simple: captured arbitrage value goes back to the protocol and LPs, not to outside arbitrageurs. Wick's fees are optimized for maximum revenue with the goal of reducing LVR as much as possible, and the internal arbitrage system captures the spread that would otherwise leak out of the pool.

LP incentives

Captured value will be used to buy back WICK through sWICK, then that WICK will be awarded as incentives to the same LPs whose pair the arbitrage touched. The arbitrage trade itself is the same; only the destination of the captured spread changes.

Wick vs fee auctions

Fee-auction designs sell the right to extract arbitrage in a block. They can route some auction revenue back to a protocol, but the liquidity that created the opportunity may still bear the repricing cost while someone else captures the auction value.

Wick takes a different approach: internalize the execution path, capture the spread directly when possible, and route captured value back into the protocol system. The tradeoff is that Wick uses privileged infrastructure; the benefit is that value capture is aligned with the venue and liquidity that created the opportunity. For the deeper LVR and auction math, see concepts.

LP protection

An LP position leaks value when the pool is slow to update its price. External arbitrageurs buy the underpriced side, sell the overpriced side, and keep the spread. Wick cannot remove the directional risk of holding a two-sided LP position, but it can reduce how much value leaks away during repricing.

internal arbitrage

When prices move, someone captures the spread between a stale pool quote and the rest of the market. Wick runs that capture in-house: internal trades on Wick pools execute at 0% fee, so spreads too thin for outside bots still get closed before value leaves the protocol. The chart below compares LP outcomes with and without that protection.

Dynamic fees raise the cost of trading against the pool when volatility rises, the first line of defense, reclaiming most extraction through the fee channel before arb even fires. See how dynamic fees protect LPs through fees.

Together, dynamic fees and internal arb keep more of the repricing value inside the system instead of handing it to outside bots.

For the underlying math (path costs vs endpoint costs, fee-arb decomposition, and liquidity asymmetry), see concepts.

protocol-owned ALM

Wick runs protocol-owned market making on its core pools, starting with LIT/USDC, so the exchange always has active, tight liquidity where it matters most. Better execution brings traders in; deeper main-pool flow generates swap fees and repricing activity that Wick's own fee and arb systems can capture instead of losing to outside bots. As Wick lists more pools and routes more volume, that revenue surface grows with the exchange.

Wick arbitrage against the Lighter orderbook also benefits from the same staked-LIT backing as wLIT. Lower fees and faster execution improve capture across the orderbook and Wick pools. See sWICK.

Most venues cannot run this in-house. Tight market making creates constant repricing flow, and in a normal setup that value leaks to outside arbitrageurs. Wick already operates the fee system and the internal arbitrage path described above. That is what makes protocol-owned ALM work here.

LIT market making

Protocol-owned liquidity on LIT/USDC stays always active through continuous rebalancing. Much of the repricing flow that would leak out in a standard tight ALM is captured in-protocol, so the position can compound instead of bleed.

On LIT/USDC, the diagram below maps the same repricing event two ways: the normal vault path on the right (value leakage, outside bots, position bleeding when fees fall short of lost value plus IL) versus Wick's center stack (dynamic fees plus internal backruns on the same pool).

Standard tight ALM can earn strong fees and still bleed. Tight depth concentrates repricing flow, but in a normal vault the LP keeps the swap fees while arbitrageurs take the spread on every move. Wick's version only works when the protocol posting the liquidity also internalizes that flow through the fee and internal-arb paths above. The protocol-owned ALM argument is worked through on the concepts page.