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Taoshi Documentation

Collateral

The collateral system enables miners to access and scale capital in the network by locking Theta tokens. It introduces accountability, ensures capital discipline, and aligns long-term incentives by requiring miners to deposit Theta.

What is Collateral?

Collateral is a Theta deposit that miners must lock in a smart contract to gain access to simulated trading capital. The more Theta deposited, the more capital the miner can access. The amount of capital unlocked per Theta is based on a tokenomic valuation model.

Theta Valuation

  • The capital unlocked is initially fixed at $175 per Theta.
  • Capital access is proportional to deposited Theta.
    • Example: 1428.57 Theta * $175 capital per theta = $250,000 Capital
  • The capital valuation per theta is updated quarterly via a tokenomics pricing model that considers:
    • Token supply
    • Liquidity adjustments
    • Miner participation
    • Inflows and outflows

Rollout Phases

V1: Optional Risk-Free Transition Period

During V1, collateral will be rolling out on the mainnet and testnet. This transition period will test and demonstrate the infrastructure for interacting with and managing collateral deposits. In this phase, participation is fully optional, and collateral deposited is risk-free. All collateral deposited during this phase can be withdrawn with no penalty, even upon miner elimination.

All miners will have access to $250k capital, regardless of any collateral deposits.

The maximum allowed collateral deposit during this phase is 50 Theta. This cap is set low to allow miners to familiarize themselves with the system and with PTNCLI in a low-stakes environment.

Collateral transactions on the mainnet are recorded in a smart contract, visible here: https://evm.taostats.io/address/0xF3304Eb05D134b71EE5e40Db90ECe5C5c8C43B84

Importantly, there is no slashing in V1. All collateral deposited will be able to be withdrawn, regardless of a miner’s performance or elimination status.

V2: Mandatory Collateral, Scaled Capital

During V2, collateral deposits will become mandatory. In order to open new positions or open orders increasing the size of existing positions, miners will have to deposit enough collateral as margin to cover the notional value of open positions. Miners will also be forced to permanently select an asset class. They will only be able to submit trades in their selected asset class.

For existing open positions, the notional value will be determined from the leverage, and assumes a base account capital amount of $250k. A leverage usage of 0.5x is equivalent to a notional value of 0.5x * $250k = $125k. A leverage usage of 5x is equivalent to a notional value of 5x * $250k = $1.25M. Miners will also be able to submit orders specifying either a value or volume from which notional value can be calculated directly.

For example, a EUR/USD position with a notional value of $125k and a 10:1 allowed leverage usage for forex would require $125k / 10 = $12.5k Theta as collateral. At a rate of $175 per Theta, this requires a deposit of $12.5k / $175 = 71.42 Theta.

A BTC/USD position with a notional value of $125k and no leverage usage (only 1:1 allowed) would require $125k / 1 = $125k Theta as collateral. At a rate of $175 per Theta, this requires a deposit of $125k / $175 = 714.29 Theta.

The maximum allowable collateral and account size will also increase during this period. Upon release, collateral will be capped at $250k (1428.57) Theta. This will increase by 1000 Theta ($175k) weekly until an account size cap of $2.5M is reached.

Depositing Collateral

Before a miner can deposit or withdraw collateral, all open positions must be closed. In order to maintain consistency in daily scoring, deposits only affect capital starting at midnight UTC of the following day. Deposits made during the day (e.g., at 10AM UTC) will not affect capital allocation for that day until midnight UTC. After the release of V2 and once the maximum allowable collateral cap has been reached, the rate of change of collateral will be capped at 50% over any rolling 45-day window to enforce consistency and discourage gaming.

Withdrawing Collateral

Similarly to deposits, all open positions must be closed before a miner can withdraw collateral. The amount of collateral eligible for withdrawal depends on the miner’s returns and drawdown. If a miner is in good standing and their net returns are positive, they are eligible to withdraw their entire collateral amount. If their returns are negative, the miner is only able to withdraw a portion of their collateral, dependent on their max drawdown. If a miner is eliminated for exceeding the 10% max drawdown, 50% of their collateral is slashed, and 50% of their collateral will be returned.

Example:

  • A 2% drawdown allows 90% of collateral to be withdrawn.
  • A 6% drawdown allows 70% of collateral to be withdrawn.
  • A miner exceeding 10% drawdown will be eliminated, and 50% of their collateral will be returned.