On-chain primary markets

Creation/redemption arbitrage is usually restricted to authorised participants (APs) in traditional markets.

Reward-bearing tokens like cbETH, rETH, and wstETH often trade at a premium due to their yield-accruing nature. The introduction of staking DTPs on-chain creates new arbitrage opportunities for market makers, with primary market trading offering the most lucrative arbitrage potential.

If a staking DTP is trading below the price of a CEX, a trader can:

1. Buy the DTP off of Uniswap using USDC

2. Withdraw the DTP for 1:1 bitcoins + rewards

3. Sell Bitcoin for USDC

4. Profit

If a staking DTP is trading above the price of a CEX, a trader can:

1. Mint DTP using Bitcoin Remap (bitcoin remains in control of solo staker)

2. Sell DTP on Uniswap for USDC

3. Profit

You'll notice it is beneficial for market makers to keep some staking remaps deployed as it creates leveraged arbitrage opportunities. For example, if bitcoin minted as a DTP is still non-custodial, the USDC profit is a leveraged trade. The same remaps can be used to execute a withdraw when it is profitable to buy DTP and withdraw.

The trade becomes even more profitable when you introduce lending markets in the arbitrage.

If a staking DTP is trading above the price of an external market, a trader can:

1. Borrow DTP depositing USDC as collateral

2. Sell DTP to a Uniswap pool for USDC at a premium (profit)

3. Mint DTP by depositing Bitcoin

4. Repay borrowed DTP withdrawing USDC

If a staking DTP is trading below the price of an external market, a trader can:

1. Borrow DTP depositing USDC as collateral

2. Buy cheap DTP from Uniswap pool using USDC

3. Repay borrowed DTP

4. Profit

What happens in a black swan event?

Since there is no centralized exit queue, everyone can independently unstake and withdraw their Bitcoin during a black swan event.