Market Maker Bot

BARK | Market Maker Bot Documentation

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Introduction

The BARK Market Maker Bot is crafted to automate trading strategies on the Solana blockchain using the Jupiter swap protocol. The bot's main objective is to manage a balanced portfolio across token pairs such as BARK, SOL, and USDC. It executes trades based on predefined strategies and market conditions to ensure reduced slippage, efficient order execution, and market stability.

Purposes

The BARK Market Maker Bot serves the following purposes:

1. Support a Smooth Trading Experience:

   • Reduce Slippage: By providing consistent liquidity, the bot helps minimize slippage, ensuring transactions occur at predictable prices.

   • Efficient Order Execution: Automates the process of buying and selling assets for faster, more reliable trades.

   • Market Stability: Helps stabilize token prices by smoothing large price swings and maintaining orderly markets.

2. Automatic Liquidity Provision:

   • Continuous Liquidity: Automatically places buy and sell orders to provide liquidity, even during low trading activity.

   • Spread Management: Adjusts bid-ask spreads dynamically to balance supply and demand efficiently.

   • Inventory Balance: Maintains a balanced token inventory to ensure liquidity is available on both sides of the market.

Features

• Automated Trading: Executes trades with minimal manual intervention.

• Portfolio Balancing: Keeps a balanced portfolio among specified tokens.

• Predefined Strategies: Utilizes user-defined strategies for making trading decisions.

• Real-time Market Data: Accesses live market data to inform trading actions.

• Solana & Jupiter Protocol Integration: Operates on the Solana blockchain and utilizes the Jupiter swap protocol for efficient trade execution.

• Configurable Risk Management: Allows for setting risk parameters to control exposure and manage potential losses.

Project Structure

The project is organized as follows:

.
├── package.json
├── package-lock.json
├── src
│   ├── api
│   │   ├── jupiter.ts          # Jupiter API client
│   │   └── solana.ts           # Solana blockchain interaction utilities
│   ├── constants
│   │   └── constants.ts        # Project-wide constants (e.g., token addresses)
│   ├── main.ts                # Entry point of the application
│   ├── strategies
│   │   └── basicMM.ts          # Basic market-making strategy implementation
│   ├── utils
│   │   ├── convert.ts          # Utility functions for token unit conversions
│   │   ├── getSignature.ts     # Utility for transaction signature handling
│   │   └── sleep.ts            # Asynchronous sleep utility
│   └── wallet.ts               # Wallet and keypair management utilities
└── tsconfig.json

Architecture

Components

1. Trading Engine: Executes trades based on strategies, interacts with the Market Data Module to obtain necessary information, and sends orders to the Solana blockchain and Jupiter protocol.

2. Market Data Module: Fetches and processes real-time market data for trading decisions.

3. Strategy Module: Contains logic for different trading strategies and generates trading signals.

4. Portfolio Manager: Manages and maintains the balance of token holdings.

5. Solana Integration: Handles interactions with the Solana blockchain for secure transactions.

6. Jupiter Protocol Adapter: Manages token swaps and liquidity using the Jupiter protocol.

Architecture Diagram

How It Works

1. Initialization: Set up connections to Solana and Jupiter protocols, load configurations and strategies.

2. Market Data Acquisition: Continuously gather market data for the specified tokens.

3. Strategy Evaluation: Evaluate trading strategies using the latest market data.

4. Trade Execution: Execute trades based on strategy outputs and update the portfolio.

5. Portfolio Balancing: Adjust holdings to maintain the desired balance across token pairs.

6. Logging & Monitoring: Record all transactions and monitor performance metrics.

Installation

Prerequisites

• Node.js: Required to run the bot.

• Solana CLI: Needed for interacting with the Solana blockchain.

• Jupiter SDK: For facilitating swaps with the Jupiter protocol.

• Git: For cloning the repository and managing version control.

Steps

1. Clone the Repository:

   git clone https://github.com/barkprotocol/bark-market-maker-bot.git

2. Install Dependencies:

   cd BARK-Market-Maker-Bot
   npm install

3. Configure Environment: Create a .env file with the following content:

   SOLANA_NETWORK=mainnet-beta
   JUPITER_API_KEY=your-jupiter-api-key
   TRADING_PAIRS=BARK,SOL,USDC
   BARK_KEYPAIR_PATH=/path/to/bark-keypair.json

4. Run the Bot:

   npm start

Configuration

Environment Variables

• SOLANA_NETWORK: Specify the Solana network (e.g., mainnet-beta, devnet).

• JUPITER_API_KEY: Your API key for the Jupiter protocol.

• TRADING_PAIRS: Comma-separated list of trading pairs (e.g., BARK,SOL,USDC).

• BARK_KEYPAIR_PATH: Path to the BARK keypair JSON file.

BARK Keypairs

Generating a BARK Keypair: Generate a new keypair using the Solana CLI:

solana-keygen new --outfile /path/to/bark-keypair.json

Configuring the Bot: Set the BARK_KEYPAIR_PATH in the .env file to point to your keypair file:

BARK_KEYPAIR_PATH=/path/to/bark-keypair.json

The bot will use this keypair for signing transactions and authenticating with the Solana blockchain.

Usage

1. Start the Bot: Run npm start to launch the bot.

2. Monitor Performance: Review logs for real-time updates on trades and portfolio status.

3. Adjust Strategies: Modify src/strategies/basicMM.ts to change trading behavior.

Basic Market Maker (basicMM)

The Basic Market Maker (basicMM) strategy is designed to:

• Bid-Ask Spread: Place buy orders below and sell orders above the current market price.

• Inventory Management: Adjust order sizes based on current holdings and desired balance.

• Dynamic Pricing: Update order prices according to market movements.

Strategy Configuration

Customize the market-making strategy in src/strategies/basicMM.ts by defining:

• Spread Percentage: Percentage difference between buy and sell orders.

• Order Size: Size of each buy and sell order relative to portfolio size.

• Risk Management: Maximum exposure and stop-loss limits.

Implementation: File: src/strategies/basicMM.ts Function Signature: function executeBasicMM(marketData, portfolio) { /* logic */ }

Strategies

Current Strategies

1. Mean Reversion: Buy low and sell high based on moving averages.

   • Objective: Capitalize on price deviations from the average.

   • Configuration: Set moving average window and deviation thresholds.

2. Momentum Trading: Buy into upward momentum.

   • Objective: Profit from sustained price movements.

   • Configuration: Define momentum indicators and entry/exit criteria.

3. Arbitrage: Exploit price differences across exchanges.

   • Objective: Capitalize on price discrepancies.

   • Configuration: Set thresholds for minimum price differences and transaction costs.

Strategy Implementation: File: src/strategies/strategies.ts Function Signature: function executeStrategy(marketData, portfolio) { /* logic */ }

Strategy Optimization

1. Backtesting: Test strategies using historical data to evaluate their performance.

2. Parameter Tuning: Adjust parameters based on backtesting results for optimal performance.

3. Market Conditions: Adapt strategies to varying market conditions for increased robustness.

References

Future Enhancements

1. Advanced Strategy Implementation:

   • AI and Machine Learning: Incorporate machine learning models to predict market trends and adjust strategies.

   • Backtesting Framework: Develop a comprehensive framework for simulating strategies with historical data.

2. Enhanced Risk Management:

   • Dynamic Stop-Loss and Take-Profit: Implement mechanisms that adjust based on market volatility.

   • Position Sizing: Use advanced algorithms for position sizing based on risk tolerance.

3. Scalability and Performance:

   • Asynchronous Processing: Improve performance with asynchronous programming techniques.

   • Load Balancing: Implement load balancing for stability under high loads.

4. Security Enhancements:

   • Hardware Security Modules (HSM): Use HSMs for secure key management.

   • Regular Security Audits: Conduct audits to identify and mitigate security risks.

5. User Interface Improvements:

   • Dashboard for Monitoring: Create a user-friendly dashboard to track bot performance.

   • Notification System: Implement alerts for significant events.

6. Integration and Compatibility:

   • Multi-Exchange Support: Expand compatibility to include multiple exchanges and protocols.

   • API Enhancements: Improve API integration for better performance and features.