How to create your own Market Maker Bot - Q&A and a video walkthrough by Dr. Lars Brünjes and the Genius Yield Team

On the 8th of January 2024, Dr. Lars Brünjes, Attila Bujaki, and Sourabh Aggarwal conducted a workshop “How to create your own Market Maker Bot on Genius Yield’s DEX”. Today we present to you a recording of this workshop, together with a list of questions asked by participants, and answers by Dr. Lars and the Genius Yield Team.

[Link to YouTube video: https://www.youtube.com/watch?v=OCXVMmOB108 ]

Questions and Answers

Question: In terms of the profitability of running MMB — it is the spread percentage you set in the param, right? Trying to estimate earnings.

Answer: The profitability of the Market Maker Bot depends on a lot of different factors. One of these factors is the chosen market maker strategy and the configuration of the strategy. The fixed spread vs. market price strategy has many different parameters that can be customized. All of these play an important role in the profitability of the market maker bot. Choosing the spread parameters has a significant impact on the behavior of the market maker bot. So this parameter should be chosen wisely after careful consideration. Market conditions also play a significant role. The configuration of the Market Maker Bot might need to be adjusted according to the changing market conditions. Also see this section to learn about fees which a Market Maker Bot incurs.

Question: Is there a way to have a custom price feed, instead of using Maestro?

Answer: Yes, any custom price feed can be added, but at the moment only the Maestro price feed is supported out of the box, but since the software is open source and can be modified, anybody could add a custom price feed provider. For the price feed provider implementation please see the Price.hs file

Question: How can you estimate or determine if you are making profit or loss, while market making? Compared to just holding the coins?

Answer: Market marking and algorithmic trading strategies on decentralized marketplaces is fascinating and new. Market Maker bot logs “equity” which is the ADA plus ADA equivalent of commodity tokens. These “equity” logs can be seen as a beacon to see if the bot is making a profit or loss in terms of ADA. We soon plan to give a UI dashboard to better monitor bot’s performance.

For the costs incurring due to the operations, please see the Operational Costs chapter of the official readme file.

Question: What are the minimal system requirements of running a Market Maker Bot?

Answer: The Market Maker Bot has the following system requirements:

Minimum System Requirements:

Memory: 500 MB
CPU: 0.5vCPU (2.25 GHz CPU Base Frequency)
Reliable and fast internet connection

Recommended System Requirements:

Memory: 1GB
CPU: 1vCPU (2.25 GHz CPU Base Frequency)
Reliable and blazingly fast internet connection

The Market Maker Bot does not require much resources. If you choose to use the Kupo provider and run the Cardano Node yourself, that needs much more resources, especially on the Cardano Mainnet. For the exact requirements please see current Cardano Node documentation

Question: Do I need a dedicated server to run a Market Maker Bot?

Answer: No. It is possible to run the Market Maker Bot on your workstation, a Raspberry PI or any other computer. However, if you are planning to engage in Market Making activities; it is highly recommended to make sure that the Market Maker Bot is run in a reliable manner. This can be only guaranteed with some redundancy in place, which can be easily achieved by hosting the Marker Maker on a Cloud Platform Provider. A managed Kubernetes Platform or alternatively a Cloud VM might be a good choice and this is what we recommend.

Question: Do I need to run my own Cardano Node to be able to run a Market Market Bot?

Answer: No. It is not necessary to run your own Cardano Node. You could rely fully on the infrastructure services provided by Maestro. This way Maestro takes care of all the heavy lifting and you can concentrate on your task at hand and do the Market Making on the Genius Yield Decentralized Marketplace without needing to take care of Cardano Node updates, infrastructure management and all the fuss that comes with managing your own Cardano Node.

Disclaimer: The market maker bot and smart order router code is provided open source as-is, with no warranties or guarantees of any kind, either expressed or implied, and is not intended to be used as a substitute for professional investment advice. It doesn’t include official technical support. The user does not receive any investment advice from Genius Yield in connection with any trades, and no suitability review or similar of any trades or strategy is conducted by the Genius Yield team. The use of this bot is entirely at the user’s own risk. The user assumes all risks associated with the use of this bot, including but not limited to financial losses, tokens losses, loss of data, business interruption, and other unforeseen circumstances. The user is solely responsible for the final configuration and operation of this bot, and it’s recommended to seek professional trading advice before using it in mainnet.