The noticeable spikes in BTCBUSD volume (see pic 1 below) on first day, Oct 5 and last two days, Oct 12-13, of the first epoch are evidently caused by wash trading bot who try to cheat the system and steal rewards from real MCDEX users who traded honestly. Such practice is harming real users of MCDEX and put MCDEX name at risk, if allowed to continue.
BTCBUSD Volume 1M chart
What is wash trading:
The smart contract bot trade simultaneously between his own accounts for the only purpose of incurring large amount of trading fee to game the rewards formula, which can be easily identified by trading pattern.
To identify: First, following the days of volume spikes (pic 1 above), go to 1D chart to pinpoint the time when exactly it happened (pic 2)
Then look up tx in the Trade history by the timestamp found in pic 2. Below is just 1 set of wash trading tx for example, by no means to be exhaustive.
pic 3: Bob → Alice tx on bscscan
pic 4: Alice → Bob tx on bscscan
Why would someone engage in wash trading?
It’s all about manipulating the formula to game the system.
On 1st day, bots wash traded to establish a large Open Interest (OI). Since OI is a time weighted component in the rewards calculation. To gain an advantage in the calculation, the bot has to act on day 1. This explains the spike on day 1 volume in above pic 1.
Unlike real users who trade against AMM, where is a limited depth and spread on the order book, if we normal users were to take a BTC-BUSD order in the size of 50 BTC, we would see massive slippage, and therefore taking huge market price risk.
For the wash trading bot, the story is different. As long as his capital allows, he can put up and take any order size, flipping it instantly, and with no slippage and no risk to capital. So to him, this is a direct fee to MCB rewards exchange. Roughly it looks like this.
MCBs = Fee(wash trading incurred) * multiplier
In this case, bot has no reason to stop wash trading until multiplier is <= 1
Why should wash trading be banned?
No matter in exchange online or real world, wash trading is an illegal practice in virtually all jurisdictions.
Not fair to real MCDEX users who traded hours a day on MCDEX (me included). Those bots generate thousands of fees instantly, with no time and efforts, no risk at all to their capital.
While wash trading bring Zero value to MCDEX, we can not ignore the damage to the reputation of MCDEX, and the integrity of the trading mining if this wash trading is awarded.
A good precedent can be found from competition dYdX: When they discovered wash trading bot activities in their version of similar trade mining, they disallowed distribution of any rewards to these bot accounts.
From the spike in pic 1, the bot is trying to stay under the radar by trading only on day 1 and last two days, possibly to test the water and get the reaction of the dev team and the community. If we turn a blind eye onto it, it will only continue, and invite more bot to do the same, all that at cost of real users and MCDEX’s reputation. Therefore, I urge the community to take action now to stop wash trading on the platform immediately.