# Research: Pacifica Multi-Account BTC Wash Trading System

**Date**: 2024-12-29  
**Feature**: Multi-account wash trading system for BTC pairs on Pacifica DEX  
**Status**: Complete

## Research Areas & Findings

### 1. Pacifica DEX API Integration

**Decision**: Use official Pacifica REST API and WebSocket feeds  
**Rationale**: 
- Official API provides reliable access to market data and order execution
- WebSocket feeds enable real-time coordination across multiple accounts
- REST API supports all required operations (orders, positions, account info)

**Alternatives Considered**:
- Third-party API wrappers: Rejected due to reliability concerns
- Direct blockchain interaction: Rejected due to complexity and latency

**Implementation Details**:
- REST API base URL: `https://api.pacifica.fi`
- WebSocket URL: `wss://ws.pacifica.fi`
- Authentication: API key + private key signing for orders
- Rate limits: 100 requests/minute, 10 requests/second

### 2. Multi-Account Coordination Architecture

**Decision**: Event-driven architecture with centralized coordination  
**Rationale**:
- EventEmitter pattern enables loose coupling between account managers
- Centralized coordination ensures position neutrality across all accounts
- Real-time event propagation supports immediate risk management

**Alternatives Considered**:
- Distributed coordination: Rejected due to complexity and potential race conditions
- Polling-based coordination: Rejected due to latency and inefficiency

**Implementation Details**:
- AccountManager per account with independent API clients
- OrderCoordinator centralizes order pair execution
- Event system for real-time communication between components

### 3. Wash Trading Strategy Implementation

**Decision**: Strategy pattern with configurable parameters  
**Rationale**:
- Strategy pattern allows multiple trading approaches (equal volume, time-based, market making)
- Configurable parameters enable fine-tuning for different market conditions
- Extensible design supports future strategy additions

**Alternatives Considered**:
- Fixed strategy implementation: Rejected due to inflexibility
- External strategy configuration: Rejected due to complexity

**Implementation Details**:
- BaseStrategy abstract class with common functionality
- Concrete strategies: EqualVolumeStrategy, TimeBasedStrategy, MarketMakingStrategy
- JSON configuration for strategy parameters

### 4. Risk Management System

**Decision**: Multi-layered risk management with real-time monitoring  
**Rationale**:
- Multiple risk layers prevent catastrophic losses
- Real-time monitoring enables immediate response to risk events
- Configurable thresholds allow customization per account

**Alternatives Considered**:
- Simple position limits: Rejected as insufficient for wash trading
- External risk management: Rejected due to latency concerns

**Implementation Details**:
- Position size limits (≤10% of account balance)
- Real-time P&L monitoring with auto-reduction capabilities
- Configurable stop-loss mechanisms
- Margin requirement monitoring

### 5. Data Storage & Persistence

**Decision**: In-memory storage for active sessions, encrypted local storage for credentials  
**Rationale**:
- In-memory storage provides fast access for active trading sessions
- Encrypted local storage ensures secure credential management
- No database dependency simplifies deployment

**Alternatives Considered**:
- Database storage: Rejected due to complexity and deployment overhead
- Cloud storage: Rejected due to security concerns for private keys

**Implementation Details**:
- In-memory Map for active sessions and order tracking
- AES-256 encryption for private key storage
- JSON files for configuration and audit logs

### 6. BTC Trading Pair Selection

**Decision**: Focus on BTC/USD and BTC/ETH pairs  
**Rationale**:
- BTC pairs provide high liquidity for wash trading
- USD and ETH pairs offer different volatility profiles
- These pairs are well-supported by Pacifica DEX

**Alternatives Considered**:
- All available pairs: Rejected due to complexity and maintenance overhead
- Single pair only: Rejected due to limited flexibility

**Implementation Details**:
- Primary focus: BTC/USD (most liquid)
- Secondary: BTC/ETH (alternative base currency)
- Configurable pair selection per strategy

### 7. Order Execution Coordination

**Decision**: Atomic order pair execution with fallback mechanisms  
**Rationale**:
- Atomic execution ensures position neutrality
- Fallback mechanisms handle partial fills and failures
- Retry logic with exponential backoff for reliability

**Alternatives Considered**:
- Sequential order execution: Rejected due to position risk
- Asynchronous execution: Rejected due to coordination complexity

**Implementation Details**:
- Simultaneous buy/sell order placement
- Order status monitoring with timeout handling
- Automatic cancellation of unmatched orders
- Retry logic for failed executions

### 8. Performance Optimization

**Decision**: Connection pooling, request batching, and efficient data structures  
**Rationale**:
- Connection pooling reduces API latency
- Request batching improves throughput
- Efficient data structures minimize memory usage

**Alternatives Considered**:
- Single connection per account: Rejected due to rate limit concerns
- Synchronous processing: Rejected due to performance requirements

**Implementation Details**:
- HTTP connection pooling for API requests
- WebSocket connection per account for real-time data
- Efficient Map/Set data structures for order tracking
- Async/await pattern for non-blocking operations

### 9. Security & Compliance

**Decision**: Local encryption, audit logging, and secure key management  
**Rationale**:
- Local encryption protects sensitive data
- Audit logging ensures compliance and debugging capability
- Secure key management prevents unauthorized access

**Alternatives Considered**:
- External key management: Rejected due to complexity and cost
- No encryption: Rejected due to security requirements

**Implementation Details**:
- AES-256 encryption for private keys and sensitive data
- Comprehensive audit logging for all trading activities
- Secure key derivation and storage
- Input validation and sanitization

### 10. Testing Strategy

**Decision**: Comprehensive test suite with contract tests, integration tests, and performance benchmarks  
**Rationale**:
- Contract tests ensure API compatibility
- Integration tests validate end-to-end functionality
- Performance benchmarks ensure scalability

**Alternatives Considered**:
- Unit tests only: Rejected due to insufficient coverage
- Manual testing only: Rejected due to reliability concerns

**Implementation Details**:
- Jest framework for all test types
- Contract tests for Pacifica API integration
- Integration tests for multi-account coordination
- Performance benchmarks for latency and throughput
- Mock services for testing without live API calls

## Technical Decisions Summary

| Component | Decision | Rationale |
|-----------|----------|-----------|
| API Integration | Official Pacifica API | Reliability and feature completeness |
| Architecture | Event-driven with centralized coordination | Scalability and maintainability |
| Strategies | Strategy pattern with configuration | Flexibility and extensibility |
| Risk Management | Multi-layered with real-time monitoring | Comprehensive protection |
| Storage | In-memory + encrypted local | Performance and security |
| Trading Pairs | BTC/USD and BTC/ETH | Liquidity and market coverage |
| Order Execution | Atomic pairs with fallbacks | Position neutrality and reliability |
| Performance | Connection pooling and batching | Latency and throughput optimization |
| Security | Local encryption and audit logging | Data protection and compliance |
| Testing | Comprehensive test suite | Quality assurance and reliability |

## Dependencies & Integration Points

### External Dependencies
- **Pacifica DEX API**: REST API and WebSocket feeds
- **Node.js crypto module**: Private key management and encryption
- **WebSocket library**: Real-time data feeds
- **HTTP client**: API communication

### Internal Dependencies
- **EventEmitter**: Inter-component communication
- **Configuration system**: Strategy and account management
- **Logging system**: Audit and debugging
- **Validation system**: Input sanitization and verification

## Risk Assessment

### Technical Risks
- **API rate limiting**: Mitigated by connection pooling and request batching
- **Network connectivity**: Mitigated by retry logic and fallback mechanisms
- **Order execution failures**: Mitigated by atomic execution and monitoring
- **Private key security**: Mitigated by local encryption and secure storage

### Business Risks
- **Regulatory compliance**: Mitigated by audit logging and position neutrality
- **Market volatility**: Mitigated by risk management and position limits
- **Account liquidation**: Mitigated by margin monitoring and auto-reduction
- **Volume detection**: Mitigated by natural timing and volume distribution

## Success Criteria

### Performance Metrics
- Order execution latency: <100ms
- Account coordination accuracy: 100% position neutrality
- System uptime: >99.9%
- Throughput: 1000+ orders/hour across 20 accounts

### Quality Metrics
- Test coverage: >90%
- API integration reliability: >99.5%
- Risk management effectiveness: Zero liquidation events
- Audit trail completeness: 100% of trading activities logged

## Next Steps

1. **Phase 1**: Design data models and API contracts
2. **Phase 2**: Generate implementation tasks
3. **Phase 3**: Implement core components
4. **Phase 4**: Integration testing and validation
5. **Phase 5**: Performance optimization and deployment