Arbitrage Opportunities

Virtue’s architecture creates several avenues for low-risk arbitrage, particularly using Flash Minted VUSD and cross-chain price spreads.

A. Stability Pool Arbitrage

If the Stability Pool lacks sufficient VUSD during liquidation, users can:

  • Flash Mint VUSD

  • Deposit into the Stability pool to trigger liquidations

  • Receive underpriced collateral

  • Swap it back to VUSD

  • Repay the mint and keep the arbitrage gain

This rewards participants for supporting system health and provides decentralized liquidation coverage.

B. Cross-Chain Arbitrage (Mainnet → IOTA EVM)

Due to price differences across chains, VUSD may trade below $1 on IOTA Mainnet. In this case:

  1. Buy discounted VUSD on a DEX (e.g., 0.97)

  2. Bridge VUSD to IOTA EVM using the native IOTA cross-chain bridge

  3. Swap VUSD → USDC.E via a DEX on IOTA EVM

  4. Profit from the price gap (e.g., 1.00 vs. 0.97)

These opportunities encourage active market participants to enforce the peg and ensure liquidity across environments.

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