State of Incentive Mechanism - Debt Ledger
PTN is transitioning to act more like a prop firm, and a prop firm of prop firms with some upcoming feature releases.
This change emphasizes capital efficiency and ensures payouts are tied directly to real, risk-adjusted profits that traders (miners) generate for the network.
In this new model, PTN rewards direct measurable performance aligning with existing models.
Traders are paid on what they produce for the network, mirroring how successful proprietary trading firms operate.
Background — How Prop Firms Operate
Traditional proprietary trading firms (prop firms) allow traders to pay a registration or evaluation fee in exchange for access to simulated capital under strict rules.
Traders earn payouts from simulated profits but face hard limits on the amount of capital they can access (typically $100K–$400K).
However, the majority of retail-focused prop firms are predatory:
- They profit from registration fees rather than trading success.
- Their rules are designed to eliminate traders before payouts occur.
- They risk becoming illiquid if too many traders succeed.
PTN approaches this differently:
- It is open-source, on-chain, and trust-less — payouts and rules are fully verifiable.
- Deposits are collateral, not fees.
- Traders can deposit up to their individual capacity limits (per miner basis).
- There is no take on profits, 100% goes to the trader after risk adjustments.
- We live trade the top miners on the network and buy back alpha to ensure accuracy, liquidity, and profit matching.
This structure redefines how a prop firm should operate.
Comparison — Traditional Prop Firm vs PTN
| Category | Traditional Prop Firm | PTN |
|---|---|---|
| Funding Source | Simulated capital | On-chain collateralized alpha |
| Fee Structure | Upfront registration fee | No fee — collateral deposit only |
| Transparency | Private PnL & opaque rules | Fully open-source & on-chain |
| Payout Basis | Simulated PnL | Realized, risk-adjusted PnL |
| Max Funding | $100K–$400K | $150K–$500K equivalent |
| Ownership of Loss | Simulated funds (covered by registration fee) | Trader’s collateral |
| Incentive Alignment | Often misaligned | Fully aligned (network-verified) |
| Verification | Internal accounting | On-chain, auditable ledger |
| Profit Split | Take a % of generated profit | No take on profit |
Rules
Currently, all traders on PTN are categorized as individual miners, submitting live orders within their asset class (FX or crypto) for one account.
Performance is evaluated in near-real-time based on risk-adjusted metrics.
A miner’s collateral and performance jointly determine their funding capacity and payout eligibility.
-
Collateral Requirement:
For every 1 alpha deposited, the miner receives $500 in trading capacity.
At the current alpha price of $11, this represents ~45× leverage with a 10% drawdown limit.
A ratio of 30-50x will be maintained through adjustment to trading capacity value (CPT) over time based on the sustained price of alpha.
-
Collateral Range:
- Minimum: 300 alpha (~$150K funding)
- Maximum: 1,000 alpha (~$500K funding)
-
Challenge Period:
New miners enter a 60–90 day challenge.
After this period, if the miner qualifies amongst the top 25 miners by average daily PnL in their respective asset class, they exit challenge and become eligible for payouts.
Failure results in deposit forfeiture, which is currently burned.
-
Probation:
If a miner drops out of the top 25, they enter a 60-day probation window to regain standing.
The percentage drawdown (as a % of the max 10%) is slashed from their collateral and burned by the network.
For example, if they’re in 3% drawdown, 30% of their collateral is burned.
Debt Ledger
The Debt Ledger is the foundation of PTN’s accounting system.
It records all open losses, closed losses, and closed profits for every miner.
- Payouts are made only on net closed profits.
- Open positions (even profitable ones) do not count toward payouts until fully closed.
- This ensures payouts reflect realized performance and not temporary market swings.
Payout Rules
Timing:
Payouts occur monthly at the beginning of each month based on the previous month’s performance.
Eligibility:
Only miners with positive realized PnL (after deducting ALB and open losses) receive payouts.
Calculation:
Payout = (Realized Profits (closed positions) - Accumulated Loss Balance (ALB) - Unrealized losses from open positions) * Risk-related penalties (martingale, RAP)Refunds:
If a prior deduction (for unrealized loss) reverses i.e., the position later closes profitably, the deducted amount is refunded in the next cycle.
Loss Carry Forward:
Closed-trade losses not offset in the same month become part of the Accumulated Loss Balance (ALB), which must be repaid by future realized profits before any payout.
No Negative Payouts:
Payouts are always ≥ $0.
Penalties — Risk Adjusted Performance (RAP)
Miners are penalized for excessive risk.
Their payout depends on whether they meet or fall below Risk-Adjusted Thresholds (RAT).
Principles:
- Extreme values are capped to avoid distortion using a sigmoid curve.
- Miners meeting or exceeding RAT receive 100% of PnL.
- Minimum RAP Penalty = 0.2 → Even poor performers receive 20% of the full amount (PnL - ALB - unrealized losses), ensuring fairness and incentive continuity.
📊 Major Accounting Terms
| Term | Definition |
|---|---|
| Refund | Credit returned for previously deducted unrealized losses that later closed profitably. |
| Accumulated Loss Balance (ALB) | Rolling balance of closed losses carried forward to offset future profits. |
| Outstanding Deductions | Unrealized losses from open positions temporarily reducing payouts. |
| Realized PnL | Total net profit/loss from fully closed positions during the month. |
| Payout | Final monthly payment (always ≥ $0). |
Example Scenarios
Scenario 1 — All Positions Closed
| Position ID | Type | PnL |
|---|---|---|
| 1 | Closed | +5,000 |
| 2 | Closed | −2,000 |
-
Realized PnL: +$3,000
-
ALB: 0 → 0
💰 Payout: +$3,000
Scenario 2 — Closed (+), Closed (−), Open (+)
| Position ID | Type | PnL |
|---|---|---|
| 1 | Closed | +5,000 |
| 2 | Closed | −2,000 |
| 3 | Open | +4,000 |
💰 Payout: +$3,000
Scenario 3 — Closed (+), Open (−)
| Position ID | Type | PnL |
|---|---|---|
| 1 | Closed | +8,000 |
| 2 | Open | −5,000 |
💰 Payout: +$3,000
Scenario 4 — All Open, One Loss
| Position ID | Type | PnL |
|---|---|---|
| 1 | Open | +6,000 |
| 2 | Open | −3,000 |
💰 Payout: $0
Scenario 5 — Open Loss Reverses Next Month
Month 1
| Position ID | Type | PnL |
|---|---|---|
| 1 | Closed | +5,000 |
| 2 | Open | −4,000 |
💰 Payout Month 1: +$1,000
Month 2
| Position ID | Type | PnL |
|---|---|---|
| 2 | Closed | +2,000 |
Refund: +$4,000 (prior deduction reversed)
💰 Payout Month 2: +$6,000
Scenario 6 — Several Opens Net a Loss
| Position ID | Type | PnL |
|---|---|---|
| 1 | Closed | +10,000 |
| 2 | Open | −6,000 |
| 3 | Open | +2,000 |
| 4 | Open | −1,000 |
💰 Payout: +$5,000
Scenario 7 — All Opens in Profit
| Position ID | Type | PnL |
|---|---|---|
| 1 | Open | +10,000 |
💰 Payout: $0
Scenario 8 — Closed Flat, Open Drawdown
| Position ID | Type | PnL |
|---|---|---|
| 1 | Closed | +5,000 |
| 2 | Closed | −5,000 |
| 3 | Open | −2,000 |
💰 Payout: $0
Reference
All current PTN rules and documentation are open-source and available here:
https://github.com/taoshidev/proprietary-trading-network
If you have any questions please visit our discord and we’ll be happy to discuss.