Intelligent System for Arbitrage Situations Searching in the
Cryptocurrency Market
Roman Levus
1
, Andrii Berko
1
, Lyubomyr Chyrun
2
, Valentyna Panasyuk
3
and Mykhailo
Hrubel
4
1
Lviv Polytechnic National University, S. Bandera street, 12, Lviv, 79013, Ukraine
2
Ivan Franko National University of Lviv, University street, 1, Lviv, 79000, Ukraine
3
West Ukrainian National University, Lvivska Street, 11, Ternopil, 46004, Ukraine
4
Hetman Petro Sahaidachnyi National Army Academy, Heroes of Maidan Street, 32, Lviv, 79012, Ukraine
Abstract
This paper contains research work and development details of an information system for
finding and executing arbitrage opportunities in the cryptocurrency market. In particular, the
cryptocurrencies concept and its functional aspects are reviewed. Furthermore, the factors
regarding price formation, the idea of arbitrage and its methods in the cryptocurrency market
are presented. During the design of the system described in this paper, a comparative analysis
of analogue systems and systems similar to the designed one is performed. The advantages of
those systems have been taken into consideration during the software development of the
projected system and the found solutions of identified problems of such systems. The most
optimal type of system using the methods of system analysis is determined for the designed
one among the chosen analogues, for which a tree of goals was built as well as to highlight the
main goals and specific actions for each stage of system development to fully perform, selected
evaluation criteria, etc. Data-flow diagrams have been created to describe the primary process
that runs in the system and smaller ones, which do a necessary job for the successful
functioning of the immediate circle and the system in general. Also, a diagram of the hierarchy
of tasks is built. Before the direct development of the software of the designed system, a
comparative analysis is performed to determine which programming language is best suited
for such system, necessary frameworks and libraries to use, integrated development
environment and other software to be used in the development of the system.
As a result of the development of the system, a client-server architecture application running
on the Node.js platform is created. The main task that solves the developed software is finding
and executing arbitrage opportunities in the cryptocurrency market among a wide range of
popular cryptocurrency exchanges. The server component of the system performs data
processing and computing of all the necessary tasks. The system is managed via a web page or
bot in Telegram messenger. The paper contains user instructions regarding the usage of the
developed software, its primary purpose, available functionality, logical structure, features, etc.
Keywords
1
The cryptocurrency market, information system, arbitrage opportunity, arbitrage transaction,
arbitrage situation, projected strategy, software solution, API key, cryptocurrency exchange,
telegram messenger, web application, hierarchy analysis method
MoMLeT+DS 2021: 3
rd
International Workshop on Modern Machine Learning Technologies and Data Science, June 5, 2021, Lviv-Shatsk,
Ukraine
EMAIL: romanlevus@gmail.com (R. Levus); Andrii.Y.Berko@lpnu.ua (A. Berko); Lyubomyr.Chyrun@lnu.edu.ua (L. Chyrun);
v.panasiuk@tneu.edu.ua (V. Panasyuk); m.g.grybel@gmail.com (M. Hrubel)
ORCID: 0000-0002-4855-1472 (R. Levus); 0000-0001-6756-5661 (A. Berko); 0000-0002-9448-1751 (L. Chyrun); 0000-0002-5133-6431 (V.
Panasyuk); 0000-0002-4820-6935 (M. Hrubel)
2021 Copyright for this paper by its authors.
Use permitted under Creative Commons License Attribution 4.0 International (CC BY 4.0).
CEUR Workshop Proceedings (CEUR-WS.org)
1. Introduction
Arbitrage is a logical sequence of actions on a particular asset, leading to an increase in its number.
For example, this happens if the same asset is traded at different prices in different markets.
The concept of arbitration is far from new and has existed for an extended period. Banks and other
financial institutions worldwide have been using this practice in the stock markets, Forex and others for
decades. The cryptocurrency market is no exception to the existence of arbitrage opportunities. Features
of the functioning of cryptocurrencies, the youth of the market, and many trading platforms make it
particularly attractive for financial speculators and traders. Binance, Coinbase, Kraken, Bittrex are just
a few of the list of popular cryptocurrency exchanges that are unique platforms for trading
cryptocurrencies. These exchanges provide their users with the opportunity to apply a software solution
for conducting trading. Each user has access to the API, which is a set of methods for interacting with
the exchange. Thus, the trader can receive and analyze data from the business and conduct various
operations in automatic mode, having compiled and programmed an algorithm for performing actions.
Therefore, it is possible and appropriate to create an information system that can identify arbitrage
opportunities in the cryptocurrency market and conduct them independently.
With the rapid development and popularization of cryptocurrencies in recent years, many new stories
of virtual money have appeared, which has led to the emergence of a large number of cryptocurrency
exchanges. The phenomenon of decentralization of cryptocurrencies, the lack of proper regulation by
the state, high volatility, etc. – all these factors create challenging conditions for the existence of a single
price and, accordingly, form many arbitrage opportunities in the cryptocurrency market.
The purpose of the work is to create an information system that identifies arbitrage opportunities in
the cryptocurrency market among a wide range of exchanges and has the functionality to automatically
conduct such transactions with the user's consent and report on completed transactions.
The task of the work is to analyze literature and other sources closely related to the subject, disclose
the main concepts and terms; describe arbitration methods, in particular in the cryptocurrency market;
conduct a comparative analysis of existing trading systems, highlight the main advantages and
disadvantages, implement their strengths and solve the identified problems during the development of
a software solution for the system. The object of research is the phenomenon of Arbitration in the
cryptocurrency market. The subject of the study is methods of finding, conducting and eliminating
arbitrage opportunities in the cryptocurrency market. The practical significance of the results consists
of applying data obtained based on collection and analysis by the system for information or management
purposes with the possibility of automatic arbitration transactions by the user.
2. Related works
2.1. Cryptocurrency. Definition of the concept
Throughout its history, money had changed a lot and has gone through many stages of development:
starting with its very appearance, when its function was performed by various kinds of items: shells,
precious metals or stones and the banal conduct of barter, exchange of one product for another, to a
significant displacement of cash from circulation and the transition to contactless payments. Today, the
rapid development of Information Technologies has given an impetus to the next stage of changing
money and even the beginning of transforming the economic system as a whole. One reason for such
significant changes is the emergence of electronic money and cryptocurrencies [1].
The first cryptocurrency to be born is Bitcoin. The concept of cryptocurrency is usually defined as
a virtual currency that works on encryption methods for generating monetary units, verifying its
transfer. It does not depend on a central management body, such as a bank [2]. One of the main features
of cryptocurrency is its decentralization due to blockchain technology and the absence of the need to
attract third parties to conduct transactions since the network ensures equality of all participants (peer-
to-peer technology) [3]. However, cryptocurrency cannot be classified as a classic category of money
due to the lack of legal status in many countries [4].
In October 2008, a developer or group of developers (unknown for sure) under the pseudonym
Satoshi Nakamoto presented the so-called White Paper, which described the concept of the Bitcoin
network and aspects and principles of its functioning. In early 2009, the first version of the source code
of this system was published on the Internet and subsequently, the first transaction was successfully
carried out. The transfer of funds in the network is carried out using special software and the principle
of asymmetric encryption. The public key is the wallet address, a generated string of characters and
numbers that does not require input identification data from the user, thus ensuring anonymity. Thanks
to blockchain technology, transaction transparency is also provided: you can track all wallet operations,
but it is pretty challenging to establish a connection with the owner. The number of new address
generations per user is unlimited. Transactions on the network are irreversible [5].
With the advent of the first cryptocurrency, other projects soon appeared. Since the source code of
the Bitcoin network is freely available, some are almost a complete copy of the so-called fork. However,
some cryptocurrencies are radically different in architecture. An example of such a network can be
considered Ethereum, which occupies the second line among the popularity and capitalization of the
cryptocurrency market. Ethereum is an open software platform based on blockchain technology that
allows you to create decentralized applications, implement so-called smart contracts, which is a specific
contract, the execution, modification or termination of which is carried out only with the help of pre-
defined software tools. Such instructions are created using the Solidity programming language, similar
to JavaScript [6].
2.2. Price formation in the cryptocurrency market
Before the appearance of money in the form in which it exists today, without performing the function
of a "measure" of value, the value of goods was determined in specific equivalent values of another
commodity. Today, the purchasing power of money depends on the specifics of the sphere of
circulation, where it is used and can be exchanged for authentic goods. The principle of supply and
demand determines the price of a particular cryptocurrency and any other physical or virtual asset.
Pricing is affected by the need for people to exchange cryptocurrencies for other goods. Since virtual
assets do not directly depend on a particular country's economic processes or policies, a significant
factor affecting its price is the interest of people. Public interest in new, decentralized money and
contactless payment is growing every year. Distrust of the government, political instability, significant
loss of purchasing power of fiat currencies against the background of economic crises – all these factors
force people to look for an alternative and diversify their assets, particularly by investing in
cryptocurrencies [7]. Attractive features of many cryptocurrencies, in particular Bitcoin, for ordinary
users are conducting transactions on the network without intermediaries and a limited number of units
in circulation, which means the almost complete absence of inflation. The maximum number of coins
is 21,000,000. The first cryptocurrency is mined by mining – a process in which the user uses specific
equipment to solve a cryptographic equation. For this, he receives a reward in the form of a certain
amount of BTC. Every four years, the value of the prize drops, and mining becomes more complex,
which in theory should stimulate the growth of the price of cryptocurrencies. The direct factor for price
formation is the mining of Bitcoin itself (the cost of equipment and its efficiency, electricity, reward
value, etc.). So, by analogy with precious metals and minerals, the first cryptocurrency is also
characterized by a limited resource. Thus, Bitcoin is a kind of "digital gold"[8].
Just over a year after the launch of the Bitcoin network, the first recorded exchange of
cryptocurrency for a physical commodity took place: this happened on May 22, 2010, in Florida, USA.
A local programmer paid 10,000 BTC for two pizzas. This event later went down in history under the
name "Bitcoin Pizza Day" [9]. Today, cryptocurrencies are already accepted by thousands of
establishments and services worldwide. Their number is growing every day: restaurants, cafes, gas
stations, electronics stores and online game purchases, hosting services, mobile phone replenishment,
and so on. There are already thousands of cryptocurrency conversion points and terminals in the world
that can be used to purchase cryptocurrency for cash. In particular, many of them are already located
on the territory of Ukraine. Also, payment card systems are developing that work like regular bank
cards, converting from the user's account the amount in the selected cryptocurrency, equivalent to the
payment value, into fiat money, allowing you to pay in any store where regular bank cards are accepted
[10]. The beginning of the formation of the cryptocurrency market began with the appearance of the
first cryptocurrency – Bitcoin. Although it was difficult to estimate its value at first due to the then low
prevalence, the price did not exceed a few cents. Bitcoin experienced significant changes in the price a
year after the network's launch, with the appearance of the first cryptocurrency exchange – Mt.Gox.
And already in early 2011, the cost of the first cryptocurrency crossed the mark of 1 US dollar.
Over time, Bitcoin has become widespread, and since 2012, more and more retailers have started
implementing cryptocurrency payments as an alternative payment method. At the end of 2013, the price
of 1 BTC crossed the 1,000$ mark for the first time, thanks to the popularization of Bitcoin in China,
the opening of new exchanges and the beginning of cryptocurrency mining on an industrial scale.
The cryptocurrency market has experienced many ups and downs in its history. In the beginning,
the cryptocurrency industry was subjected to numerous attacks that significantly affected pricing. So,
in 2014, due to the lack of a proper security system and proper management, the most popular exchange
at that time, Mt.Gox, filed for bankruptcy due to the theft of about 850,000 BTC. This is the most
significant cryptocurrency theft in history. Users are still trying to get their funds back today. After
these events, the price for 1 Bitcoin dropped to 580$ and continued its prolonged fall for almost two
years to 315$. In early 2017, the price of Bitcoin returned to 1,000$. The emergence and development
of new projects, such as Litecoin, Ripple, Ethereum and others, the boom of the so-called initial coin
offering (English ICO – initial coin offering) - a form of attracting initial investment in a project similar
to the initial public offer of shares on the stock market, contributed to another rapid growth in the
capitalization of the cryptocurrency market. Over the years, interest in cryptocurrencies has grown not
only among ordinary users but also among financial institutions worldwide. A significant event was
introducing Bitcoin futures contracts on the Chicago Mercantile Exchange, which made it possible to
attract traders from traditional stock and Forex markets to the cryptocurrency market and significantly
increase trading volumes. In December 2017, the cryptocurrency market's capitalization reached a peak,
and the price for 1 Bitcoin reached almost 20,000$ – its historical maximum [11]. Today, more and
more countries are trying to legally regulate and legalize working with cryptocurrencies and their legal
status, and financial institutions from different parts of the world are developing and implementing
systems that would enable ordinary users to invest in cryptocurrencies and use them. The emergence of
hundreds of cryptocurrency exchanges, margin trading, futures, derivatives and other trading
instruments indicates an increase in public interest in cryptocurrencies. In recent years, there has been
a correlation with stock indexes of securities, which means the arrival of investors and traders from
traditional markets. The cryptocurrency market's capitalization as of the end of April 2020 is about 265
billion US dollars [12]. Projects of state-owned digital currencies are emerging, and testing of the
national cryptocurrency has even begun in China, which indicates the inevitable transformation of the
global economic system using digital money.
2.3. Arbitration. Features of Arbitration in the cryptocurrency market
Eliminating the price difference with profit extraction by performing a specific sequence of actions
that start and end with the same asset, which, if completed, leads to its increase at the end of this
sequence, is called arbitrage. For example, if we buy share A for 10$ on exchange X and sell it on
exchange Y for.10.30$, we will get 0.30$ in profit, excluding commissions [13].
The concept of arbitrage is not new, and various types of price discrepancies exist in all financial
markets, including stock exchanges and currency markets. This trading principle has been used for
many years by banks and other financial institutions around the world. For example, currency arbitrage
involves buying and selling currency pairs from different brokers to take advantage of the price
difference to make a profit [14]. The cryptocurrency market is no exception to Arbitration, where these
discrepancies are even more significant compared to traditional markets. Today, there are about 4,000
cryptocurrencies. A side effect of this was a similar increase in the number of cryptocurrency
exchanges. Binance, Coinbase, Kraken, Bitfinex, Bittrex are just a few of the many popular businesses
that exist. Low level of state regulation, decentralization, a large number of speculators seeking to make
money, high volatility – all these factors create difficult conditions for the existence of a single price
and make arbitration in the cryptocurrency market particularly attractive [15].
Arbitrage in the cryptocurrency market almost entirely works on the same principles as in traditional
markets, but with a different asset. Significant price discrepancies between exchanges, on a large scale,
often occur against the background of political instability. So, in August 2019, in Argentina, against the
backdrop of a sharp drop in the national currency, the price for 1 Bitcoin was 4% higher than on
international platforms in terms of US dollars. But even if you remove extreme economic and political
events, price differences among exchanges occur more often than they seem. There are many reasons
for arbitrage situations in the cryptocurrency market: from a sharp collapse or increase in prices on one
of the exchanges, the price reaction to the news, to the so-called "fat-finger error", when a user
accidentally entered incorrect data from the keyboard or mistakenly clicked the mouse, which led to the
execution of an order at an undesirable price or volume [16].
Operations related to crypto fraud trading are conducted on unique platforms – cryptocurrency
exchanges (or crypto exchanges). A crypto exchange operates similarly to a currency or stock exchange
[17]. Discussions introduce the concept of a currency pair – a pair consisting of two currencies that are
traded against each other. The first currency is usually called the base currency, and the second – the
quota [18]. For example, if you want to buy BTC for USD, you need to find the BTC/USD pair. In
addition to cryptocurrency/fiat currency pairs, cryptocurrency/cryptocurrency pairs are also popular on
most exchanges, which are often even more in demand than fiat money pairs due to certain features of
this market. All user requests fall into the so-called "exchange glass" - a list of recommendations for
buying and selling a particular cryptocurrency, organized by price level. Such a list lists the amount of
a particular cryptocurrency that is sold or offered for purchase at each price, forming the depth of the
market [19]. The critical feature of cryptocurrency exchanges is that users can easily quickly access the
vast majority of them. At minimal cost, transfer the purchased cryptocurrency to their wallet for storage,
thereby not depending on third parties or another exchange, which brokers and currency exchanges or
stock exchanges cannot boast of, due to high commissions, lack of decentralization of traded assets, a
fixed work schedule and a long transaction time. Arbitration methods that can be applied in the
cryptocurrency market are presented in the paragraphs below.
2.3.1. Spatial arbitration
This technique involves extracting profit from the difference in prices for buying and selling a
particular cryptocurrency traded on two different exchanges. For example, if exchange a can offer BTC
for 6,500$ and the price on sale B reaches.6,700$, a trader can take advantage of this 200$ by buying
on exchange A and selling on exchange B – effectively moving funds from one platform to another.
Given the degree of decentralization in cryptocurrencies, such disagreements may occur more often
than you might think. Do not forget about the commission for conducting trading operations and
transaction costs for withdrawing cryptocurrency from exchanges, the time of cryptocurrency transfer
is also essential. The longer it is, the more risky the opportunity to make a profit is [20]. An example of
performing spatial arbitration is shown in Fig. 1.
Figure 1: Example of spatial arbitration
2.3.2. Intra-exchange arbitration
A special feature of this method is that it occurs within only one exchange. Its principle is to conduct
a sequence of trading operations starting and ending with the same currency. For example, in three
markets traded on the exchange, with different quotas, the following rates are: BTC/USD = 6726.94,
ETH/USD = 141.58 and ETH/BTC = 0.0214. We sell 1 BTC for USD, get 6726.94 USD, for the
received USD, we buy 47.5133 ETH and sell ETH for BTC – get 1.0167 BTC, the profit is 0.0167
BTC. This type of arbitration is also called "Triangular" (Fig. 2) [21].
Figure 2: Example of intra-exchange arbitration
It is worth noting that this method of arbitration requires speedy data collection and analysis and,
accordingly, the execution of all necessary trading operations. It is also essential to take into account
trading commissions and types of order execution. To find such arbitrage situations, various algorithms
are often used to find the shortest path in a weighted graph, from one vertex to all the others.
2.3.3. Statistical arbitration
This method of arbitrage is considered a high-tech strategy, usually involving mathematical
modelling. This type of arbitration is based on maintaining a historical ratio between the value of
identical or similar assets on different trading platforms. This method does not require the transfer of
cryptocurrency from one exchange to another, thereby reducing the time for performing arbitrage
operations by several times, and works as follows: when the price difference between two exchanges is
higher than their historical ratio, two functions will be performed simultaneously: selling on the first
exchange and buying on the second, and vice versa – when the price difference is lower than the
historical ratio. When the price ratio approaches its typical values, positions are closed. Using this
method, market risks are almost nonexistent since the aggregate function consists of multidirectional
parts on the same asset, which protects against unpredictable market fluctuations. The only risk of such
a strategy is a change in the historical ratio value between instruments [22].
It should be noted that arbitration in the cryptocurrency market is a rather risky type of earnings,
which depends on financial literacy, user skills in working with cryptocurrency, experience, speed of
action, and often even banal luck [23].
2.4. Automated trading. Overview of existing trading systems
At the end of the last century, with the development of Information Technologies, the sphere of
trading on the stock and foreign exchange markets also underwent computerization. As a result, almost
all trading operations are carried out using electronic means: personal computers, tablets, smartphones,
etc. Today, the user can perform all trading operations using the web interface of a broker or exchange,
use special trading terminals with extensive functionality, or develop their software that will serve the
algorithm of actions specified by the user without his participation.
At the beginning of the XXI century, automated trading, or the so-called "robot trading", began to
develop rapidly. The Trader no longer has to monitor changes in the price and sit on the charts for days
because it is possible to implement his strategy using unique trading systems. Such automated systems
collect data from exchanges. Then, according to pre-set instructions, they perform a specific algorithm
that serves the entire sequence of actions instead of the user, according to pre-set instructions [24].
The advantages of this approach to trading are the ability to obtain and analyze a massive amount of
data and check many market conditions in seconds, which is beyond the power of a person. At the same
time, the risk of manual errors when performing trading operations is also reduced. Most importantly,
this eliminates the emotional impact on the trading process, which often leads to losses. Thus,
algorithmic trading provides a systematic and unchanging approach to active trading, compared to a
person. Today, many automated trading systems allow users to create their algorithms for trading to
make a profit. Such procedures cover the performance of a specific sequence of actions, depending on
the results of volume calculations using complex mathematical formulas and initial rapid receipt and
processing of the necessary information. In particular, the use of such a system will be effective in
finding and executing arbitrage opportunities in the cryptocurrency market. Access to the required data
and the ability to automate trading operations is provided by cryptocurrency exchanges using the API
(Application Programming Interface) – an application software interface that is a set of methods for
working with the business [25]. Several popular trading systems for the cryptocurrency market are
presented in the paragraphs below.
2.4.1. Arby.Trade
Search service for arbitrage situations in the cryptocurrency market. It helps beginners and advanced
users find the most profitable and reliable arbitrage opportunities. The system collects up-to-date and
necessary search data online (prices, trading volumes, technical characteristics of currencies, etc.) from
the most popular crypto exchanges, analyzes them and offers users the most favourable options for
arbitrage transactions. The result of the system is displayed in the form of a table in which the user can
set their parameters for the search – profit, transaction volume, transaction time, degree of reliability of
the operation, as well as develop a list of exchanges where you need to search for transactions. The
service provides search for spatial and intra-exchange arbitrage situations. The system is implemented
as a web service that offers cross-platform performance. It is possible to send notifications about the
discovery of arbitrage opportunities. Conducting arbitrage situations automatically and the possibility
of implementing your trading algorithms is absent [26]. The main service page is shown in Fig. 3.
Figure 3: Arby.Trade interface
2.4.2. Blackbird
A trading system is written in C++ that detects arbitrage situations on more than five crypto
exchanges and automatically executes them. The system's main task is to find and eliminate price
differences in the market by selling cryptocurrencies on one exchange and buying on another. A low-
market risk strategy is used, similar to statistical arbitrage, which involves trading activities involving
parallel purchases and sales on two different exchanges without the need to transfer cryptocurrency
from business to exchange. There is a minimal graphical interface. The main number of instructions
from the user comes via the command line. [27].
2.4.3. Gekko
A free and open-source trading system is that supports several popular cryptocurrency exchanges. It
is written in JavaScript and runs on Node.js. The main task of the plan is to automate your trading
strategies. Gekko provides an opportunity to create trading strategies using popular technical analysis
indicators or use ready-made ones. To check and identify the optimal strategy, it is possible to simulate
trading using historical market data. There is also a system of plugins that allows you to add your
functionality [28]. A view of the system interface is shown in Fig. 4.
Figure 4: Gekko Interface. Checking your strategy based on historical data
2.4.4. Zenbot
The trading robot is written in JavaScript and runs on the Node platform.js using the MongoDB
database. Implemented support for a wide range of functionality is for use among more than 12
cryptocurrency exchanges. The system provides an opportunity to create your trading strategies based
on technical analysis. The plugin support architecture offers the ability to add new discussions
independently and develop new functionality and process. Zenbot provides the ability to create buy or
sell orders with many configurations, which allows the system to work as a trading terminal. It is
possible to conduct trading simulations to test strategies based on historical data. The system works
according to the user's instructions via the terminal [29].
Most of the existing systems are paid to use, with the need for a monthly subscription fee. Some
works allow you to develop, test and implement your trading strategies. However, few systems can
identify or execute arbitrage opportunities in the market and even collect all the necessary data to
implement such operations successfully. Also, there is no technical implementation of the transfer of
cryptocurrencies from exchange to exchange automatically in any of the systems, which excludes the
possibility of conducting classical spatial arbitration. The disadvantages of the designs are also a small
number of supported exchanges and a fixed list of cryptocurrency pairs, which reduces the number of
arbitrage opportunities found. Critical for arbitrage search systems is sending notifications about such
situations and managing the system remotely.
Based on the conducted comparative analysis of trading systems for the cryptocurrency market, it
can be concluded that the current system for finding and executing arbitrage transactions will be a cross-
platform system with support for a wide range of exchanges and all possible cryptocurrency pairs, with
the possibility of remote management, user notifications about such found situations, with the
possibility of their settings, and most importantly with a component for automating the execution of a
sequence of operations, which will fully collect information for successful arbitrage. Furthermore,
implementing your custom and trading strategies is not mandatory since the method of spatial
arbitration in the cryptocurrency market is chosen for the projected system.
Table 1
Comparison of system capabilities
Functionality /
System name
Arby.Trade
Gekko
Blackbird
Zenbot
Collecting data on
prices and
volumes
Yes
Yes
Yes
Yes
Collecting
technical data on
cryptocurrencies
Yes
No
No
No
Search for
arbitration
situations
Yes
No
Yes
Yes
Ability to perform
arbitrage
transactions
No
No
Yes
Yes
Ability to
implement your
trading algorithms
No
Yes
No
Yes
Cross-platform
Yes
Yes
Yes
Yes
Push notifications
Yes
Using plugins
No
Using plugins
In the first chapter, information about the system being projected was reviewed and analyzed, which
is the first step for its future development. The concept of cryptocurrency, principles and aspects of its
functioning are revealed. The factors influencing price formation and the role of cryptocurrencies in
everyday life are considered. The features of conducting arbitration in the cryptocurrency market are
displayed, and popular methods are described. Existing trading systems are analyzed, their capabilities
and functionality are reviewed, and strengths and weaknesses are highlighted. Based on the analysis,
the necessary functionality and problems that the developed information system should solve are
determined.
3. Material and methods
3.1. System analysis of the research object
To start developing an information system, it is necessary to analyze the research object, identify
and classify several current problems, and find solutions. One of the methods for solving such problems
is to build a goal tree. A goal tree is a hierarchical diagram consisting of relationships and subordinates
of the system's goals, which reflect the distribution of the system's goals into sub-goals and tasks or
individual actions. This method is based on decomposition and is universal, and is one of the main ones
in systems analysis. Decomposition is a way of dividing a system into its components. The goal tree
method is used to establish the relationship between the main goal and the ways to achieve it, which
are presented in specific actions or tasks. The main principle of building a goal tree is to simplify a
complex process to its elementary components. To comply with this rule, follow the following
approach:
a goal located at the highest level is the basis and a kind of reference point for separating goals
situated at the lowest level;
goals that are at the lowest level are means of implementing the task at the highest level and
are presented so that their unification provides for the fulfilment of the main goal [30].
The result of building a system goal tree is shown in Fig. 5.
Figure 5: Goal tree
The main goal specified by the goal tree construction method is to create an information system for
searching for arbitrage situations in the cryptocurrency market. This problem can only be solved after
all its sub-goals are completed. Therefore, the constructed tree has four levels: the primary goal, sub-
goals, tasks that need to be completed, and criteria for evaluating the quality of execution. As a result
of creating the goal tree, the following sub-goals were formed:
Collection and processing of information;
Application of system analysis methods;
Developing a software solution for the system.
Consider the first sub-goal - "Collecting and processing of information". At this stage, the analysis
of requirements and relationships between the components of the system is carried out, an analytical
review of the literature and other sources related to the subject area and the projected plan of direction
is carried out. Based on the analysis, several such tasks were identified:
Research of arbitration methods. To create an information system for searching for arbitration
situations, correctness, completeness and accuracy of calculations in such a system, it's needed to
familiarize yourself with the very concept of Arbitration, possible methods of conducting it and its
features in the cryptocurrency market;
Collecting data on working with exchanges. This task provides for familiarization with the
principle of operation on cryptocurrency exchanges, analysis of the technical documentation of the
API of exchange methods for the successful creation of appropriate modules, high-quality typing
and implementation in the system;
Analysis of existing solutions. To create a high-quality and multifunctional product, it's needed
to analyze existing software solutions that solve similar problems or are close to the projected
system. Highlight their strengths and weaknesses, functionality, and so on.
Create the correct functional model of the projected system, use the analyzed systems' found
advantages, solve the found problems, and present their solutions in your system.
For the first sub-goal, we selected such quality assessment parameters as relevance and usefulness,
which are the main properties for collecting and analyzing information. The second sub-goal
is"Application of system analysis methods". Before creating an information system, you need to select
alternative systems, determine the optimal information system among them, and design its central
processes, functions, and tasks to solve. The result of this sub-goal is to determine the type of
information system that is being projected and a series of diagrams to explain the processes that are
taking place. This sub-goal provides for solving several such tasks:
It is determining the type of Information System. This task involves applying the hierarchy
analysis method. By performing paired comparisons of the values of quality ratings among
alternative systems, the most optimal version of the system is selected;
Building a context diagram. To display the primary process or function of the system and its
details, it's needed to create a context diagram DFD or IDEF0;
Building process decomposition diagrams. Based on the context diagram, you need to
decompose it to create subsequent charts that specify lower-level processes and details of their
implementation.
Optimality and adaptability were chosen as the criteria for evaluating this sub goal.
The last sub-goal for achieving the main goal is "Developing a software solution for the system",
which includes performing the following actions and tasks:
Selection of software implementation tools for the system. Based on the prototype of the
system, it's needed to choose the development environment and software implementation tools that
are best suited for its development to meet the requirements and tasks that this system should
perform;
Creating a software component of the system. This task consists of writing the code of the
necessary modules for the full functioning of the system using pre-selected software implementation
tools;
Performing tests and troubleshooting. This task involves checking and debugging identified
problems in the software development process;
Support for system updates. It is necessary to provide the information system with support for
the software product and its updating, which is extremely necessary in cases of changes in the
operation of exchanges or the emergence of new arbitration methods, ideas for expanding the
functionality to ensure the relevance of the system, and so on. Also, do not forget about the
possibility of anomalies during the system's operation, which must be detected and eliminated.
The selected criteria for evaluating the quality of execution of this sub-goal are scalability and
performance because these properties play a crucial role during the system's functioning and for its
further development in the future. The hierarchy analysis method is chosen to determine the type of
Information System. This method is used to solve many practical problems at different stages of system
design. The essence of the process is to use paired comparisons of criteria for evaluating the quality of
execution of sub-goals to select priority solutions.
Three types of information systems were chosen as alternatives:
Information and management (A1);
Information and search engine (A2);
Information and reference system (A3).
Determining the most optimal type of Information System be projected is carried out by using pre-
selected six quality criteria:
Relevance (C1);
Usefulness (C2);
Optimality (C3);
Adaptability (C4);
Scalability (C5);
Performance (С6).
Since the system's goal tree has already been constructed, it is now necessary to create a matrix of
paired comparisons of criteria and determine the values of eigenvalues (HF) and eigenvectors (HV)
used in the following analysis. Calculating the importance of priorities will be determined by finding
the relationships of criteria using scores to evaluate them ranging from 1 to 9, where 1 is the equilibrium
criteria, and 9 is the absolute advantage of one standard over another.
The values of eigenvalues are calculated using the Formula 1:
,
(1)
where: – is several criteria;
– is a relation of specific criteria;
– is a product of all relations of a specific criterion with other criteria.
The values of eigenvectors of criteria can be calculated using Formula 2:
,
(2)
where:
– is an eigenvalue value of a particular criterion;
– is a sum of the eigenvalues of all criteria.
Table 2 below shows the values of paired comparison matrices for the relations of each of the criteria.
Table 2
Matrix of paired comparisons
Criteria
C1
C2
C3
C4
C5
C6
HF
HV
C1
1.00
0.50
0.25
0.33
0.25
0.14
0.34
0.04
C2
2.00
1.00
0.25
2.00
0.33
0.16
0.61
0.07
C3
4.00
4.00
1.00
3.00
0.50
0.33
1.41
0.17
C4
3.00
0.50
0.33
1.00
0.25
0.20
0.54
0.07
C5
4.00
3.00
2.00
4.00
1.00
0.33
1.78
0.22
C6
7.00
6.00
3.00
5.00
1.00
1.00
3.52
0.43
The next step in the hierarchy analysis method is to construct paired comparison matrices for the
selected alternatives A1, A2, and A3, for each criterion and relative to the general goal. The values are
calculated using the same principle and formulas as for the matrix of paired comparisons. The
calculations for each of the criteria and the general goal are presented in the corresponding tables below.
Table 3
Matrix of paired comparisons of alternatives
relevance
A1
A2
A3
HF
HV
A1
1.00
0.50
0.33
0.55
0.16
A2
2.00
1.00
0.50
1.00
0.30
A3
3.00
2.00
1.00
1.82
0.54
usefulness
A1
A2
A3
HF
HV
A1
1.00
3.00
2.00
1.82
0.54
A2
0.33
1.00
0.50
0.55
0.16
A3
0.50
2.00
1.00
1.00
0.30
optimality
A1
A2
A3
HF
HV
A1
1.00
4.00
6.00
2.88
0.70
A2
0.25
1.00
2.00
0.79
0.19
A3
0.16
0.50
1.00
0.43
0.10
adaptability
A1
A2
A3
HF
HV
A1
1.00
2.00
3.00
1.82
0.54
A2
0.50
1.00
2.00
1.00
0.30
A3
0.33
0.50
1.00
0.55
0.16
scalability
A1
A2
A3
HF
HV
A1
1.00
6.00
5.00
3.11
0.75
A2
0.16
1.00
0.20
0.32
0.08
A3
0.20
2.00
1.00
0.74
0.18
performance
A1
A2
A3
HF
HV
A1
1.00
7.00
8.00
3.83
0.83
A2
0.14
1.00
3.00
0.75
0.16
A3
0.13
0.33
1.00
0.04
0.01
general goal
A1
A2
A3
HF
HV
A1
1.00
0.33
2.00
0.87
0.23
A2
3.00
1.00
5.00
2.47
0.65
A3
0.50
0.20
1.00
0.46
0.12
Based on the obtained results of calculations of eigenvalues and eigenvectors for alternatives, it is
necessary to construct the following generalized matrix of their comparisons and determine the most
optimal information system for searching for arbitrage situations in the cryptocurrency market. The
alternative comparison matrix is shown in Table 4.
Table 4
Generalized alternative comparison matrix
Criteria and
alternatives
C1
C2
C3
C4
C5
C6
Priority
value
A1
0.16
0.54
0.70
0.54
0.75
0.23
0.49
A2
0.30
0.16
0.19
0.30
0.08
0.65
0.28
A3
0.54
0.30
0.10
0.16
0.18
0.12
0.23
Using the hierarchy analysis method, the most optimal type of Information System with the highest
coefficient of 0.49 was determined – information and management, which most corresponds to the type
of system being projected.
To specify the functioning of the projected system, it's needed to build a contextual diagram. Such
a diagram is created according to the IDEF0 standard and is used for the most general description of
processes in the system. A characteristic feature of such a diagram model is the emphasis on the
hierarchical structure of representation of system objects and the definition of logical relationships
between processes, which gives a better understanding of the project being developed [31].
The context diagram for the projected system (shown in Fig. 6) describes the system's most general
and essential process – conducting an arbitration transaction.
The user initially provides API keys to their exchange accounts to the system so that a particular
component of the system can perform the actions necessary to execute an arbitrage transaction
successfully. Also, when selecting an arbitrage situation to fulfil, the user provides its identification
code and indicates the desired transaction volume by clicking on the corresponding button.
After constructing a context diagram describing the most general process of the system, you need to
perform a functional decomposition process to separate the individual components of the system. The
result of this process will be the first-level decomposition diagram shown in Fig. 7. According to some
rules, the process of "Generate data to search for arbitrage opportunities" involves collecting the
necessary data from exchanges and converting it to the desired form in JSON format, according to some
rules, for further transmission to the next process "Search and detect arbitrage opportunities". The
resulting data is analyzed in this process, resulting in an array of data with the found arbitrage
capabilities.
The last process, "Perform a series of actions to make an arbitrage transaction", receives data from
the previous method that will be used for the final stage of the primary system process. This process
involves several smaller tasks related to performing manipulations on the user's exchange accounts.
Again, the user's choice with the identification code and transaction volume is taken into account. This
process will be the formation of data on the conduct and completion of an arbitration transaction. After
performing the first-level decomposition, each process obtained in this way can be divided into smaller
ones, resulting in second-level decomposition diagrams. A diagram of this type for the "Generate data
to search for arbitrage opportunities" process is shown in Fig. 8. The second-level decomposition
diagram for the "Search and detect arbitrage opportunities" function is shown in Fig. 9.
Figure 6: Context diagram
Figure 7: First-level decomposition diagram
Figure 8: The decomposition diagram for "Generate data to search for arbitrage opportunities"
Figure 9: The decomposition diagram for the "Search and detect arbitrage opportunities" process
The process of "Perform a series of actions to make an arbitration transaction" involves several small
functions. These processes perform manipulations with the user's account and transmit intermediate
data, the results of performing certain operations, among themselves. The input data for the following
action is the output data of the previous one. At the end of the process, the arbitration transaction is
generated, and a notification is sent to the user. The second-level decomposition diagram for the
"Perform a series of actions to perform an arbitrage transaction" process is shown in Fig. 10.
Figure 10: The decomposition for "Perform a series of actions to make an arbitrage transaction"
By constructing a hierarchy of processes of the projected system, its hierarchical structure is
reflected, and various tasks are demonstrated. The process hierarchy diagram shows all the tasks
necessary for the full functioning of the system and their relationships with each other.
The main goal in this diagram is the main task of the system "Conduct an arbitration transaction",
which is divided into three smaller tasks that are the main components of the system: generate data to
search for arbitration opportunities, search for and identify arbitration opportunities, perform several
actions to make an arbitration transaction. The tasks listed above apply a certain number of necessary
functions for the entire operation of the system. The first task, "Generate data to search for arbitrage
opportunities", performs the tasks of collecting data from exchanges, analyzing them, and generating
data in the necessary, structured form. The second task, "Search and detect arbitrage opportunities",
takes the generated data obtained to solve the previous problem as input and analyses it. The result of
this analysis is an array of data with the arbitrage capabilities found.
The third task, "Perform a series of actions for the implementation of an arbitration transaction",
involves obtaining data from the previous component and the user, after which, following specific
instructions, it manipulates exchange accounts, which ultimately leads to the completion of the
arbitration transaction, the result is formed with detailed data. Finally, a notification about the product
is sent to the user, which is the designed system's general goal.
In this chapter, we performed system analysis methods for the projected system. A goal tree is built,
the general goal and sub-goals are defined, and individual actions and tasks that need to be performed
to complete the main goal successfully are defined. Several alternative systems were selected, and the
most optimal type of Information System was determined among them, using the analytical hierarchy
method, by constructing matrices of paired comparisons of criteria for evaluating sub-goals and
alternatives. The best option for the designed system is an information and management system.
Figure 11: Task hierarchy diagram for the projected system
A context diagram is constructed depicting the primary relationships in the system. Then, its
decomposition of two levels is carried out to display more detailed data on small actions and processes
occurring in the design, creating a task hierarchy diagram for the projected plan.
3.2. Software tools for solving the problem
One of the most important decisions before starting software development, which should be made
as soon as possible, is the choice of software tools that will be used to create the system. Software tools
include the programming language itself (or languages, if there are several of them), libraries and
frameworks, the operating system, the development environment, testing software, and so on.
The most important factor influencing the choice of programming language is directly the projected
system itself, for whom it is created and what tasks it should solve and what to work. The next factor is
the type of system in which it should be implemented: mobile application, console application, browser
extension, web application, website, etc. An equally important factor to consider when choosing a
programming language is the popularity of the selected language. It is closely related to the number of
available frameworks and libraries, language support, and future development. Choosing a popular
programming language will make it easier to update and develop the projected system. In addition to
selecting a programming language, you should choose a set of necessary tools for software construction:
the development environment and other software used in the project creation process.
3.2.1. Comparison of Node.js and Python
Before we talk about Node.js, it is necessary to mention the JavaScript programming language itself
directly. JavaScript is a programming language created by Netscape Communications in 1995. During
these years, there was a need to make web pages dynamic for implementing animations, interacting
with the user, etc. So, there was a need to create a scripting programming language for solving such
problems. The similar syntax and rapid growth in the popularity of Java have given the programming
language an appropriate name. But JavaScript was very slow compared to traditional compiled
programming languages. Years of research and development have taken the programming language to
a new level and made it possible to create large-scale applications such as Google Maps.
For a long time, JavaScript was executed only in the browser. However, in 2009, a framework called
Node.js appeared, which allowed you to play JavaScript code on the server. Node.js is a platform written
in C++ that will enable you to execute JavaScript files. It allowed JavaScript to use this platform to
perform several actions, such as performing activities on system files that are not available in the
browser version. Node.js is based on the V8 engine developed by Google. It is a fast and progressive
virtual machine with a built-in interpreter that compiles JavaScript to native code. Unlike programming
languages such as C++, C#, Java, Python, etc., JavaScript on the Node.js platform is an event-driven
programming language that provides asynchronous input and output capabilities. Each process is called
when a specific event occurs, which means that none of the methods blocks the flow. Because
JavaScript code is executed outside of the browser on the Node.js platform, the performance of this
programming language becomes significantly higher, as the V8 engine allows you to use resources
more efficiently. In addition, the event-driven, flow-free platform architecture will enable you to
process multiple requests simultaneously, which positively affects efficiency and speeds up code
execution.
Syntax in Node.js is almost no different from browser-based JavaScript. Also, Node.js provides the
ability to use heavily typed TypeScript. In Node.js, when developing an application, it is preferable to
create a set of modules and microservices that communicate with each other using a specific mechanism
and perform their processes separately. It makes the Node.js platform's development process quite
flexible since there is no need to create a monolithic system, and you can always easily add a new
module. An active and numerical community creates a significant advantage for Node.js - the
availability of tens of thousands of modules and libraries to facilitate work and solve various publicly
available tasks. In Node.js, modules are managed using the npm package manager, where instructions
are executed by entering specific commands in the terminal.
Scope of application of Node.js is basically the development of the server-side of web applications.
However, the platform provides all the opportunities for creating mobile applications, desktop
applications, cloud services, solutions for the Internet of Things segment, etc. Also, a significant
advantage of Node.js is cross-platform, meaning the created application will run on such popular
operating systems as Windows, Linux, Mac, etc. [32].
The development of the Python programming language began at the end of 1989, when Guido van
Rossum, a Dutch programmer from the Center for mathematics and computer science (CWI) in
Amsterdam, started working on the project. Initially, development was considered a hobby, and the
software solution itself was intended to solve existing problems and become a successor to the ABC
Language. The first version, 0.9.0, of the Python programming language was published in 1991. It
differs significantly from languages such as Java or C++. The main task during its development was to
create a language whose code is straightforward to read. In 2000, Python 2.0 was released. With the
release of this version, the functionality of the programming language was quite expanded: a garbage
collector appeared, which automatically performed operations on Ram, Unicode support, and so on.
Today, Python is a high-level open-source programming language. The latest version of the language
at the time of writing is Python 3.8. Python is a reasonably popular language and has an active audience.
Because of this, there are also many open-access libraries for solving various tasks. The installation and
management of additional packages and libraries in Python are managed by a system that runs on the
command line and is called pip. Applications created in Python will run on major popular operating
systems, as the language is cross-platform. It can be used for both server-side and client-side tasks.
One of the most important advantages and features of the Python programming language is its
syntax. The language is relatively concise and straightforward and does not require square brackets but
instead correct tabs or spaces. Because of these features in the language's syntax, it is elementary for
specialists of various levels to read and understand. The design of the Python language involves the use
of a monolithic model in development. Of course, by using specific libraries and packages, you can
build applications that allow you to write asynchronous code and manage events in the program. But
this is not a native solution for the language, and debugging, in this case, takes quite a long time. The
Python programming language is an interpreted programming language and is slower than traditional
languages whose code compiles. This language does not support multithreading, but only works with
one thread, due to the technical features of the language. However, again, using a certain number of
libraries, you can reproduce certain multithreading functionality. Still, the interpreter – Gil mechanism
that uses Python does not allow you to perform specific tasks simultaneously but will enable you to
perform operations on only one thread at a time [33].
Table 5
Comparative characteristics of Node.js and Python
Criteria
Node.js
Python
Architecture
Event-driven doesn't block the
flow
Synchronous code execution
blocks the flow
Performance
Multithreading support
Single-threading
Syntax
Similar to browser-based
JavaScript
Concise, tab-based, and easy
to read
Scalability
Easily scalable, microservices
model
Hard-to-scale, monolithic
model
Libraries
Large number
Large number
Versatility
Ability to develop web
applications, desktop and
mobile applications
Ability to build web
applications, desktop and
mobile applications
Popularity and community
High
High
Application
Complex single-page web
applications, Internet of
things, real-time operation
Big data, 3D modelling,
artificial intelligence
When choosing the programming language that will be used to develop the software solution of the
projected system, preference was given to JavaScript.
Thanks to the features of the Node.js architecture, this platform, because it is event-based, is best
suited for developing applications that will frequently perform numerous parallel queries and
communicate between the client and the server in real-time. Although the JavaScript and Python
languages are dynamically typed, however, using the microservices approach in Node.js, unlike the
monolithic model in Python, is a more appropriate option for the scalability of the developed system.
Furthermore, this approach will be better for developing extensible projects, making it easier to work,
and giving you a better understanding of the system when it is maintained. The Node.js platform, unlike
Python, is multithreaded, and requests are processed much faster, which makes this platform, due to
better performance, a favourite choice for creating a web system [34].
3.2.2. Using auxiliary modules
Express.js. Express.js is one of the most popular server frameworks for the Node.js platform
used in web application development. It is a kind of "backbone" in development when creating the
server part of a web system. Provides a wide range of features for creating single-and multi-page web
applications. This framework is flexible and does not impose any specific correct way to perform a
particular task. This module allows you to quickly develop an application software interface (API) and
create mechanisms for processing various query methods, such as GET, POST, PUT, DELETE, and
others [35].
Request. Request module for Node.js is in demand when working with HTTP requests. Although
it is a wrapper around the native HTTP module Node.js, it is much easier to operate. The module
provides the ability to send different types of requests, use proxies, other network adapters when
sending requests, TSL/SSL, and choose different configurations. Given its functionality, this module is
a good solution for implementing data collection methods by the server and creating an API for the
client part of the system [36].
Fs. The fs module (from the file system) is one of the most basic and necessary Node.js modules.
This library of functions is used when working with operating system files. The set of methods in this
module allows you to perform various manipulations with files and with the computer's file system:
read, write, supplement the File, Create, Edit and delete directories, and so on. Each method has two
versions to work with: synchronous and asynchronous, depending on the need. With even such a concise
set of plans, this module provides the program with the ability to perform all basic operations on
operating system files or their directories [37].
3.2.3. Atom development environment
Creating and editing code- Atom, the development environment for creating the projected
information system, was chosen as a text editor. The first version of this software appeared in 2014 and
has undergone several updates, and has gained considerable popularity since then. The program is
developed by one of the largest software development communities – GitHub. This software product is
completely free and can be used on operating systems such as Windows, Linux, Mac and others.
The main advantage of Atom is the ability to install third-party packages that significantly modify
the editor, making it a full-fledged development environment. Today, there are about 9,000 modules
for Atom in the public domain, helping developers solve various tasks and software development. In
addition, the editor can also directly modify any developer settings because the program is open-source
and written using technologies such as JavaScript, CSS, and HTML.
This program is suitable for developing a graphical user interface and creating the server part of web
applications. Atom already has a basic wide range of valuable tools and functions and the ability to
create your functionality or add existing ones by installing the necessary package.
Atom provides the ability to easily and quickly navigate through project files, use auto-completion
technology (also known as IntelliSense) for popular programming languages, quickly edit HTML and
CSS files and view changes on the page in real-time, edit many files at the same time, execute console
commands and run programs without leaving the program environment, etc. [38]. For example, the
program interface is shown in Fig. 12.
Figure 12: Atom development environment interface
3.2.4. Postman testing software
Since the software solution of the projected system provides for the availability and development of
an application software interface API, sending many requests, there is a need to use software for testing
for such tasks. Postman was chosen as such software – a program that is a good tool for testing ready-
made or personally created APIs. The main number of necessary functions in this software is free of
charge. The program provides a user-friendly interface with extensive functionality that allows you to
conduct testing over the API, namely, send HTTP requests without first writing program code. The
principle of operation in Postman is quite simple: type the link to which the request will be sent, select
a method, fill out the form or headers if necessary, and send a proposal that will return the status code,
response time, and response from the server with detailed data. It is also possible to install monitoring
[39]. The program interface is shown in Fig. 13.
Figure 13: Postman program interface
3.2.5. Technical characteristics of the selected development software tools
The JavaScript programming language and Node.js platform were chosen to develop a software
solution for the arbitrage search information system [40-42], which is the most optimal choice based on
the analysis performed. The system will be implemented as a web application with a client-server
architecture. Asynchronous code execution capability, event-driven platform environment, high
performance in real-time client-server communication tasks, and support for node platform
multithreading.js make it the best choice for software implementation of the system. A significant
advantage is also the popularity of the language and the size of its community, which ensures further
updates and the availability of a large number of ready-made solutions in the public domain [43-47].
The following main modules were selected to work with [48-55]:
express – to create an application software interface and provide communication between the
client and server;
request – for sending and processing submissions by the server part of the system;
fs – for working and manipulating operating system files.
Atom, a free and open-source text editor from GitHub with the ability to install additional packages,
was chosen as the software development environment. This program provides all the necessary
functionality for developing and partially debugging the server component of the system, the ability to
auto-complete code, easy navigation through the project, creating web pages and viewing their changes
in real-time, and so on. To conduct testing on personally designed application interfaces of the program
and check sending requests to existing third-party APIs, The Postman program was chosen, the free
functionality of which fully copes with the tasks set. In this chapter, comparative analysis and chapter
of the programming language for its further application in creating a software solution of the system
were carried out. The type of architecture of the projected system was selected – a client-server web
application. The necessary modules and frameworks for the chosen programming language that will be
used during development are established. Finally, the development environment is selected, and its
primary functions and advantages are described.
4. Experiments, results and discussion
4.1. Description of the created software application
The software solution of the information system for searching for arbitrage situations in the
cryptocurrency market is called "arbitrage". The source code of the developed software is contained in
a folder with the appropriate name. The project is written in JavaScript and runs on the Node.js platform
v8. 11. 3. the operating system used in the test operation is Microsoft Windows [Version
10.0.17134.407]. The main tasks of the developed software are to collect, analyze and process data from
a wide range of exchanges, identify arbitrage opportunities based on the study of pre-generated data,
and conduct arbitrage transactions. Thus, the created system is both informational and managerial: the
existing functionality provides tools for searching and selecting arbitrage situations in the
cryptocurrency market for further analysis and can automate such transactions with the user's approval.
The software solution is presented in a web system written in JavaScript and running on the Node.js
platform using several frameworks and libraries. Partial functionality and system management are also
available via the Telegram messenger, with the appropriate user settings.
Figure 14: Project structure
The software structure looks like this:
arbitrage – the project's root folder contains all the necessary components of the developed
software;
automation – a folder containing all the files required to ensure the operation of the module for
automating arbitrage transactions (methods for working with private APIs of exchanges, program
instructions for conducting arbitrage transactions, a file with the values of API keys from the user's
exchange accounts);
data – folder with saved data (results of specific processes), which are output, in JSON format;
exchanges – this folder contains definitions of exchange objects and their methods necessary
for data collection, processing, analysis, and generation;
modules – folder containing self-written modules for system operation;
node_modules – folder containing libraries and frameworks for system operation;
public – a folder containing Cascading Style Sheet files, HyperText Markup files, fonts, and
JavaScript scripts to enable client-server interaction;
app.js – the main file that is the entry point of the system, which is used to launch it;
index.html – HyperText Markup file for the system home page;
package.json – a file containing metadata about the project: application name, description,
version, list of dependent modules, and so on.
The developed system can be divided into four main components::
Data collection and processing component;
Analytical and computational part;
Arbitrage transaction component;
GUI and user interaction component.
The first component is responsible for receiving, analyzing, and processing data coming from
exchanges. The result of this component is filling exchange objects with data. This process for each
sale starts with executing the Exchange.build() method.
This method sends a certain number of requests (on average from 2 to 5) for each object (exchange)
to the servers of the related businesses to receive data. This data includes the values of the exchange's
trading commissions, available markets for trading, a list of available cryptocurrency pairs, prices,
technical data on the specifics of depositing and withdrawing cryptocurrencies from exchanges, and so
on. After successful receipt of the response, i.e. arrays or objects of the required data, they are converted
to JSON format (if necessary) and converted to a general structured form, which is the same for all
exchanges. Example of the object structure of one of the exchanges:
{ "name": "Bittrex",
"url": "https://bittrex.com/",
"apiPublicURL": "https://bittrex.com/api/v1.1/public/",
"marketURL": "https://bittrex.com/Market/Index?MarketName=",
"tradeFee": 0.25,
"minTradeSize": 0.0005,
"quotes": [ "BTC", "ETH", "USDT", "USD"],
"assets": [],
"exceptions": { "BITS": "Bitswift", "MOC": "Mossland", "SLT": "Smartlands", "GTO": "GTO_ERC-20" },
"disabledWallets": [ "EMC2", "GRIN", "IOTA" ],
"disabledMarkets": [ "BTC-GRIN", "USDT-GRIN", "BTC-CPT*" ],
"timeStamp": "2020-03-07T16:02:00.870Z",
"readinessStatus": true,
"requests": 3,
"responses": 3,
"responsesData": {}
}
The "assets" property, exchange objects, contains an array of things filled with data about the
technical features of a particular cryptocurrency on the corresponding exchange. Namely: ticker, the
full name of the currency, the number of confirmations in the network for crediting the deposit, the
value of the withdrawal Commission, minimum deposit, the minimum and maximum amount for
withdrawal, data on the operability of the withdrawal or deposit of cryptocurrency, particular
information messages, a list of pairs against which the cryptocurrency is traded, the purchase and sale
price and the last operation performed, links to trades, etc. The structure of such objects looks like this:
{ "id": "LTC",
"ticker": "LTC",
"name": "Litecoin",
"depositConfirmations": 4,
"txFee": 0.002,
"minDeposit": 0,
"withdrawalPrecision": 8,
"minWithdrawal": 0.004,
"maxWithdrawal": 150,
"depositsEnabled": true,
"withdrawalsEnabled": true,
"markets": {
"BTC": {"isTraded": true, "marketName": "LTC-BTC",
"marketURL": "https://crex24.com/exchange/LTC-BTC", "isActive": true,
"timeStamp": "2020-03-07T16:02:04Z", "ask": 0.00688, "bid": 0.00687, "last": 0.00688,
"orderBook": { "buy": [], "sell": [] }, "minTradeSizeBase": 0.001 },
"USD": { "isTraded": false, "orderBook": { "buy": [], "sell": [] }
}
}
}
The second analytical and computational component is necessary for analyzing the data obtained
due to the operation of the first component. Analysis of this data involves searching for similar
cryptocurrencies and their trading pairs on different exchanges. After this search, a particular
cryptocurrency pair's purchase and sale prices are compared on the deals where matches were found. If
a higher purchase price and a lower sale price are detected on different exchanges, the system performs
the following action – the so-called "in-depth" analysis. This method sends two requests for detailed
data on buy and sells orders on the two corresponding exchanges, containing the price and volume of
transactions. After receiving and processing this data, the calculation process is carried out – the result
is information about the maximum amount of cryptocurrency that can be purchased on the exchange,
how much quota currency is needed, potential profit, and so on. The results are displayed on the main
page of the web system. In addition, they can be sent to the Telegram messenger immediately after the
analysis, provided that the system user has the appropriate settings. An object that contains data on the
results of calculations and performing several studies has the following structure:
{ "id": 1588999027620
"done": true,
"success": true,
"responses": 2,
"currentResult": {
"changePercents": "2.82",
"exchangeToBuy": {
"name": "Bittrex",
"asset": { "ticker": "SOLVE", "name": "Solve.Care", "status": "Online", "txFee": 1.25 },
"market": { "URL": "https://bittrex.com/Market/Index?MarketName=BTC-SOLVE",
"ask": "0.00000888", "base": "BTC", "status": "Online" }
},
"exchangeToSell": {
"name": "HitBTC",
"asset": { "ticker": "SOLVE", "name": "Solve", "status": "Online", "depositConfirmations": 20 },
"market": { "URL": "https://hitbtc.com/exchange/SOLVE-to-BTC",
"bid": "0.00000917", "base": "BTC", "status": "Unknown" }
}
},
"profitByVolume": [ {
"quoteQuantity": 0.09519300000007454, "quoteQuantityInUSD": 685.3896000005367,
"assetQuantity": 10689.786877642566, "assetQuantityReceived": 10688.536877642566,
"quoteQuantityReceived": 0.0978830878942926, "profitQuote": 0.0026900878942180684,
"profitUSD": 19.368632838370093, "profitPercentage": 2.825930366955518,
"firstPrice": 0.00000888, "lastPrice": 0.00000892
},
{
"quoteQuantity": 0.07037200000004971, "quoteQuantityInUSD": 506.67840000035795,
"assetQuantity": 7908.925225230812, "assetQuantityReceived": 7907.675225230812,
"quoteQuantityReceived": 0.07242185464070117, "profitQuote": 0.0020498546406514523,
"profitUSD": 14.758953412690456, "profitPercentage": 2.912883875191838,
"firstPrice": 0.00000888, "lastPrice": 0.00000888
}
]
}
The arbitrage transaction component automates the sequence of actions required to eliminate the
price difference between two exchanges. The input data of this component is the results of calculations
and analysis obtained as a result of the operation of the previous element. This data provides instructions
on how to perform the arbitrage transaction module. The process of conducting an arbitration
transaction is started exclusively by the system user. On the main page of the web system, in the section
with the found arbitrage capabilities, there is an interface for conducting a transaction. The user "gives
the go-ahead" to complete the selected transaction and specifies the desired volume. Starting this
process, with the appropriate settings, is also available via the Telegram messenger: the user receives a
notification about finding an arbitration situation with an interface that provides the ability to "respond":
start the execution process, or they ignore a specific arbitration situation for a selected period. This
component performs several actions that are necessary for a full-fledged arbitration transaction, namely:
checking balances on exchange accounts, obtaining an address for depositing cryptocurrency on an
exchange with a higher price, creating and cancelling purchase and sale orders, sending
cryptocurrencies, transferring funds between accounts of one exchange account, conducting interim
settlements, and so on. Upon completion of an arbitration transaction, the object with all data on its
conduct has the following structure:
{ "id": 1589147511273,
"code": "STEX:PART/BTC-HitBTC:PART/BTC",
"stage": "SELL_ORDER_CALCULATED",
"time": { "start": "2020-05-10T21:56:27.074Z", "end": "2020-05-10T22:07:44.356Z" },
"exchangeToBuy": { "name": "STEX", "balances": {
"quote": { "ticker": "BTC", "name": null, "beforeBuy": 0.09863381, "afterBuy": 0.09243302,
"spent": 0.006200789999999998 },
"base":{"ticker":"PART","name":"Particl","beforeBuy":0,"afterBuy":154.01681657,
"bought": 154.01681657, }
},
"order": { "id": 239086323, "filled": true, "canceled": false },
"withdrawal": { "id": 1303657, "success": true }
},
"exchangeToSell": { "name": "HitBTC", "balances": { "trade": {
"quote": { "beforeSell": 0.09769798088, "afterSell": 0.10413836945 },
"base": { "beforeTransfer": 0, "afterTransfer": 154.00681657, "transferred": 154.00681657,
"beforeSell": 154.00681657, "afterSell": 0 }
},
"main": { "base": { "beforeDeposit": 0, "afterDeposit": 154.00681657 } },
"quote": { "ticker": "BTC", "name": null, "beforeSell": 0.09769798088,
"afterSell": 0.10413836945, "received": 0.006440388570000011 },
"base": { "ticker": "PART", "name": "Particl", "depositAddress": {
"address": "Pe1747PokyVHULxz7Tecy29Kog5KtsESmg", "paymentIdRequired": false,
"addressGenerationRequired": false, "generationRequestSent": false, "addressGenerated": false},
"beforeDeposit": 0, "afterDeposit": 154.00681657, "received": 154.00681657,
"transferred": 154.00681657, "afterSell": 0.00681657, "sold": 154.00681657 }
},
"transfer": { "id": "50ee9ed5-660e-4654-843c-7ee862bf8b9b", "success": true },
"order": { "id": "fda3563905d917f5ebbf9a7b5bda02ca", "filled": true, "canceled": false }
},
}
The last component concerns the GUI and user interaction. It contains instructions on how the client
part interacts with the server part. Implemented functionality is for data transfer and system
management using created APIs. The developed software product is intended for use on servers or
personal computers. The software will run on all operating systems that support the Node platform.js
(Linux, Windows, Mac, and others). Since the software tool sends requests for information at very short
intervals and is faced with processing a large amount of data, the system's speed on which the software
will run plays a significant role. Recommended technical requirements:
Processor: 4 GHz;
Amount of RAM: 16 GB;
The presence or absence of a graphics module does not affect the operation of the system;
Free disk space: 32 GB;
Internet connection: 50 Mbps and low latency.
The source files of the system software are located in the "arbitrage" folder. Before launching the
software solution of the information system for searching for arbitrage situations in the cryptocurrency
market, you must install the Nod.js platform version 8.11.3 or later. To start the system, go to the
project's root folder and in the console and run the command " node app.js». At the first launch, all the
necessary modules will be installed to work (if required). After that, it will be launched.
There are no system inputs because the entire sequence of actions is set in the system's program
code, and other processes are automated. Therefore, only API keys from exchanges and the created bot
in the Telegram Messenger are input data. The user must generate them on the corresponding sales in
the Settings section to get these keys, granting certain access rights necessary to execute an arbitrage
transaction successfully. Also, the input data can be System Settings-Filters for searching for arbitrage
situations, which the user sets. The source data in the program are messages received in the Telegram
messenger and located on the main page of the system, exchange objects, copies of which are stored in
a file containing the results of calculations and the results of an arbitration transaction. In addition, files
are stored in the data folder with specific system settings.
4.2. User manual
The developed software product is designed to find and perform arbitrage opportunities in the
cryptocurrency market among several popular exchanges.
The created application was called "arbitrage" and written in JavaScript running on the Node.js
platform. Several popular frameworks are used, including request, express, fs, and others. The system
was created using the Atom development environment. The developed software implementation of the
program can be used as an information system for searching and analyzing arbitrage opportunities in
the cryptocurrency market among a wide range of exchanges and as a management system – for
automating and monitoring or reporting on arbitrage transactions. To use this system, namely the
component for automating arbitrage transactions, you must provide API keys from exchanges with
permission to conduct trading, check balances, generate and receive addresses for depositing
cryptocurrency, and consent to withdraw funds from the sale. You can also manage the system using
third – party software-The Telegram messenger, after creating a bot in it and providing the system with
its API key. To understand the ongoing processes and manage the system, you need basic knowledge
about the specifics of the principles of functioning of cryptocurrencies and a minimal understanding of
the operation of trading markets in general. The software runs on such operating systems as Windows,
Linux, Mac and all others that support installing the Node.js platform.
The created software solves several tasks, resulting in identifying arbitrage situations in the
cryptocurrency market among a certain number of exchanges, and it is also possible to automatically
conduct such transactions. After the user starts the system, the program makes a series of requests to
the servers of exchanges to collect the necessary information, which will be used in the formation of a
structured data set that will contain information about price changes in the cryptocurrency market on
each of the exchanges presented in the system, technical data on the features of cryptocurrencies on
these exchanges, and so on. Then, based on the previously described data, they are analyzed by one of
the system components, which is the identification of arbitrage opportunities. When the user agrees, the
system executes the found arbitrage transactions and notifies the user about their progress, from start to
finish, in a detailed form by sending informational notifications. Special features of the program are
that it can work in two modes:
As an information system;
As an information and management system.
In the first case, the system works purely as an information system when the user does not provide
API keys from exchanges. Then the software only provides the user with the ability to view the found
arbitrage opportunities and other data that can be used for any purpose. In the second case, the system
provides the same functions as in the first case. Still, if you provide API keys from exchanges, the user
can automatically conduct arbitrage transactions, thus managing the process and performing operations
on their exchange accounts. Furthermore, the system checks whether actions are performed correctly
by the system itself. If an error occurs, the system user will receive a detailed information message with
its description. The user himself can practically not influence the program's correct operation in any
way since the input data and certain functionality do not affect the principles of operation of the system.
To use this software, it's needed a device running on Windows, Linux, Mac, or any other operating
system that supports the Node.js platform. As for the technical requirements, for the productive
functioning of the system, it is necessary to have a device with a sufficient amount of RAM and a
modern processor to ensure fast calculation of operations, processing and analysis of information. In
addition, it is essential to have high-speed internet access, without which the system will not receive
data and find solutions to tasks and will generally be useless. Before starting the system itself, if you
use a module that automates arbitrage transactions, the user must provide the system with API keys to
their exchange accounts with permissions to conduct a certain number of operations (the ability to
conduct trades, receive account information, withdraw cryptocurrencies) and an API key from the
previous created bot in the Telegram messenger, for the possibility of notifications and remote
management of the system. API keys are stored in the arbitrage/automation/keys file.json (Fig. 15).
Figure 15: Structure of the file containing API keys
Next, it's needed to install the Node.js platform version 8.11.3 or later. Then, the system itself is
started using the console. It's required to go to the project's root folder (arbitrage) and run the command
"node app.js". If necessary, the system will load all the necessary modules for its functioning at the first
launch. After their successful installation, the system itself starts working directly.
Immediately after its launch, the system sends requests (Fig. 16) to the exchanges' servers to obtain
the necessary data and further analysis and processing. The corresponding objects of sales will be
generated. After that, the data contained in the exchange objects are analyzed, and price differences are
searched. The next step is to run the analysis "in-depth" and generate the results of the work. The output
of messages about the application of this analysis is shown in Fig. 17.
Figure 16: Sending requests by the system
Figure 17: Performing deep analysis by the system
The results are presented on the main page of the system, located at 127.0.0.1:3000 (Fig. 18). On
the main page, the user can disable or enable periodic data updates, hide the result of calculations "in-
depth", and set filters: select a list of exchanges for buying and selling, set the status of cryptocurrency
wallets of businesses, the ability to conduct trading, select quota currencies, etc. (Fig. 19).
Figure 18: System home page
Figure 19: Filters for selecting results (the wallet status filter is open)
Below on the page, there is an arbitration table (Fig. 20). It provides data on the found arbitrage
situations, without analyzing "in-depth", without considering the volumes, but only the lowest selling
price and the highest buying price in the stock exchange glass.
Figure 20: Arbitration table
The type of presentation of data on the found arbitration situations with "in-depth" analysis is shown
in Fig. 21.
Figure 21: Search result Figure 22: Telegram Messenger interface
Such a message consists of: the name of the cryptocurrency pair, the names of exchanges for buying
and selling, the terms of cryptocurrencies on various exchanges and their tickers, a direct link to trading
on these exchanges, the volume that can be purchased, the amount of purchase and sale, potential profit,
the approximate time of the transaction and the number of necessary confirmations in the
cryptocurrency network required by the exchange, where it is transferred, and so on. When you provide
an API key to the bot in the Telegram messenger, the user immediately receives notifications about
finding an arbitration situation based on pre-set criteria. The message being sent (Fig. 22) is identical
to the information provided on the system's main page. Sending notifications to the messenger
eliminates the need for the user to constantly be at the monitor screen to wait for the arbitrage transaction
to be found. Both on the system's web page and with the help of a bot in the Telegram messenger, the
user can conduct an arbitration transaction. It is done by clicking the corresponding button located under
the message. You can also ignore a specific transaction. For one reason or another, an arbitrage
opportunity with the specified parameters will be missed by searching for the selected period.
Provided that the user has decided to conduct an arbitration transaction and clicked on the
corresponding button, the messenger receives a message about its successful acceptance for processing
by the system (Fig. 23). The following notification to the user is a notification about the volume of
purchased cryptocurrency and the quota currency spent (Fig. 24).
Figure 23: Notification of acceptance Figure 24: Notification of purchased cryptocurrency
The last notification is the result of an arbitrage transaction (Fig. 25). The message consists of the
following data: transaction ID, name of the cryptocurrency, its ticker, terms of exchanges for buying
and selling, realized profit, conversion of realized profit to the dollar (at the current rate or rate specified
in the system code), the percentage change in balance, amount of purchased cryptocurrency, amount of
received quota, amount of cryptocurrency that was not sold, transaction time, initial parameters for
buying and selling, etc. If an error occurs at any stage of the transaction, the user receives a message
with a detailed description of it (Fig. 26).
Figure 25: Notification of the completion Figure 26: Notification when an error occurs
You can terminate the program by pressing Ctrl + C in the console with the system running.
This chapter describes the developed software solution of the information system for searching for
arbitrage situations in the cryptocurrency market. According to the requirements, the description of the
software implementation is carried out according to the standard (GOST 19.402-78). The programming
language used in system development, frameworks, development environment, and other technologies
used in system development are specified. Technical requirements for the installation and proper
functioning of the developed system are defined. A user manual has been created that contains the
necessary information about the operation features of this software. The functionality of the developed
system, principles and elements of operation, and its purpose are considered. The input and output files,
contents, and the structure of intermediate data used by the system in the main processes are described.
A control example of using the program is given, and the process of starting and installing the system
is considered. The work aims to create an information system for finding arbitrage situations in the
cryptocurrency market. The system's main task is to collect, process, and analyze data from a wide
range of cryptocurrency exchanges. The software product under development aims to find arbitrage
opportunities in the cryptocurrency market and access this data conveniently to the user. In addition to
the search function, the system can perform a management function with the user's consent: conduct
arbitrage transactions automatically and notify about their execution results. During its history, money
has undergone many stages of change: once its role was played by random, today almost priceless items,
and now we can observe how even cash is gradually disappearing from circulation, as contactless
payments are gaining more and more popularity.
The rapid development of Information Technologies, which gave an impetus to drastic changes in
the global economy, also showed its impact on the financial sector. A significant event, in particular, is
the emergence of electronic money and cryptocurrencies.
Cryptocurrency is usually called a virtual currency that works using cryptography methods and
blockchain technology. A characteristic feature of most cryptocurrencies is decentralization. To conduct
transactions on the network, you do not need to contact a third party or a central management body,
such as a bank, since the system ensures equal rights for all its participants. Due to the lack of a legal
framework and the low degree of settlement by the state, cryptocurrency cannot be attributed to the
classic concept of money in this sense. Although for almost ten years, cryptocurrency as an alternative
payment method has been accepted by hundreds of institutions and services worldwide.
The first cryptocurrency was Bitcoin, which appeared in early 2010. Soon there were many other
projects related to the development of cryptocurrencies. Today there are more than several thousand of
them. This number of projects has also led to the rapid growth of unique trading platforms – crypto
exchanges. The growing popularity of the market, a large number of businesses and projects, the lack
of a legal component for proper settlement, the phenomenon of decentralization of cryptocurrencies,
high volatility, etc. – all these reasons contribute to the emergence of Arbitration situations in the
cryptocurrency market. Arbitrage refers to performing a sequence of actions to eliminate profit when
one asset is traded on two different platforms at different prices. Arbitration in the cryptocurrency
market, compared with traditional markets, does not differ in the method of conducting and is even
more attractive in the emerging market. So, this topic is relevant today. Therefore, there is a need to
create a system for finding arbitrage opportunities in the cryptocurrency market. The software solution
will be helpful for both experienced traders and beginners in this field.
5. Conclusions
In this paper, research, project and development of a software solution for the information system
for finding arbitrage situations in the cryptocurrency market were conducted.
The analysis of literature and other sources closely related to the subject area of the projected system
was carried out. The concept of cryptocurrencies, features of their operation and aspects of functioning
are revealed. The factors influencing pricing in the cryptocurrency market are described and evaluated.
The idea of Arbitration and the basis of its methodology are considered, and examples are given. The
features of conducting arbitration in the cryptocurrency market are also described. A comparative
analysis of existing trading systems is carried out, their weaknesses and strengths are highlighted. A
number of problems were found, the solution of which was presented in the designed system and the
useful functionality of existing systems implemented during development was determined.
An information system for searching for arbitrage situations in the cryptocurrency market was
designed by conducting a system analysis. One of the most critical methods of system analysis was
used – the goal tree. Using the constructed tree, the system's primary goal, its sub-goals, and specific
actions that must be performed to solve all tasks and implement the system in full successfully are
defined. Criteria for assessing the system's quality are highlighted, with the help of which, and by
applying the hierarchy analysis method, a comparison was made, and the most optimal type of
information system was selected among the previously proposed alternatives. A contextual diagram has
been created to specify the functioning of the projected system and the most general description of
processes. The first and second levels of the designed system are decomposed to divide it into separate
components and specify the functions. A hierarchy of tasks is constructed to structure the process of
implementing the projected system and determine the main functionality that should be created in the
software solution. The system's leading tools for software implementation are identified: the
programming language, auxiliary libraries, the development environment, and other software used
during development. A comparative analysis was carried out, based on which the previously proposed
software tools for implementing the development of the projected system were selected. The technical
characteristics of the selected software tools and their features are described, and their application in
specific cases is considered. The client-server architecture is preferred. The developed software is
described in accordance with the standard. General information about the program and its purpose is
provided. The logical structure, input and output data are described. A user manual has been created to
help you operate the system and understand the features and flow of the designed software product. The
features of the developed software solution are considered, and an example of application is given with
an analysis of the results, which proves the legal capacity of the system. The costs of developing a
design solution for an information system for searching for arbitrage situations in the cryptocurrency
market are calculated, and its economic feasibility is proved.
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