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