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FreeSwap protocol is a decentralized exchange protocol that does not charge any exchange fees.

Based on the formula "constant-product invariant", FreeSwap creates two one-way-swap sub-pools for each pair of tokens.

As the swap going, when the token price deviation in the two sub-pools reaches a certain extent, the sub-pools carry out arbitrage operation with each other. This arbitrage operation can rebalance the token prices in the sub-pools and make profits for liquidity providers.

This paper mainly describes the FreeSwap arbitrage mechanism and its basic rules, expounds its win-win characteristics, and evaluates the arbitrage profit level quantitatively through a theoretical model.

It is shown that FreeSwap can achieve the arbitrage profit equivalent to 2.488 ‰ swap fee while arbitraging at sub-pool price deviation of 1 % .