Ethereum: Using quoter to estimate price impact for UniswapV3 Pools

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Ethereum: Using Quoter to Estimate Price Impact for UniswapV3 Pools

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When it comes to estimating price impact in cryptocurrency markets, using a reliable tool is crucial. The Quoter contract on Ethereum provides an efficient way to achieve this. In this article, we’ll delve into the details of how to use the Quoter contract and estimate the price impact for UniswapV3 pools.

What is the Quoter Contract?

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The Quoter contract is a decentralized oracle service that allows you to query the price of various assets on different exchanges in real-time. It uses the Ethereum ERC-20 interface to provide accurate and reliable price data.

To use the Quoter contract, you’ll need to follow these steps:

  • Install the Quoter contract library by running npm install quoter or yarn add quoter.

  • Create a new contract instance using new QuoterContract(). This will allow you to interact with the Quoter contract and query price data.

  • Use the quote() method to retrieve the current price of an asset, specifying the asset symbol (e.g., “ETH” for Ethereum).

Estimating Price Impact

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The price impact of a swap on UniswapV3 pools can be estimated using the Quoter contract by querying the prices of two assets that are part of the pool. Here’s an example:

const quoter = new QuoterContract();


const ETH = "ETH";


const USDT = "USDT";




// Query the current price of ETH and USDT on UniswapV3


quoter.quote(ETH).then((ethPrice) => {


  quoter.quote-USDT().then((usdtPrice) => {


    // Calculate the price impact using the formula: ΔP / P0 = ((ΔQ  (1 + r_i  t)) / Q0)


    const deltaP = (ethPrice - usdtPrice) / usdtPrice; // Assuming USDT is the reserve asset


    const interestRateI = 0.05; // Assume a daily interest rate of 5%


    const timeToDeltaP = 24; // 1 day




    console.log(Estimated price impact: ${deltaP.toFixed(4)});


  });


});

In this example, we query the current prices of ETH and USDT on UniswapV3 using the quote() method. We then calculate the price impact by dividing the difference between the two prices by the original price (USDT). Finally, we apply the interest rate formula to estimate the price impact.

Best Practices

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When estimating price impact, keep in mind:

  • Always use a reliable and up-to-date Quoter contract library.

  • Query the current prices of assets that are part of the pool you’re interested in.

  • Use accurate and reliable data sources for the asset symbols (ETH and USDT).

  • Consider using multiple sources to validate estimates.

Conclusion

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Using the Quoter contract on Ethereum provides a convenient way to estimate price impact for UniswapV3 pools. By following these steps and best practices, you can accurately calculate price impact in cryptocurrency markets. Remember to always stay up-to-date with the latest developments and ensure that your data sources are accurate and reliable.

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