Frequently Asked Questions (FAQ)

Incentive

What is the network model?

The network model combines the strategies of top miners on PTN into a unified strategy. In its simplest form, the network model uses the incentive weights of each miner to determine their influence on the overall outputs of the network. You can learn more about it here.

Why can miners retain top positions for long periods of time?

Miners are ranked based on their returns relative to the risk they assumed, measured by max drawdown. Miners with consistent returns over time demonstrate their ability to generate sustainable returns, leading to higher representation and influence within the network model.

What is the incentive for miners on the network, and how does the incentive mechanism operate?

We aim to reward miners who achieve sustained returns, particularly those with a favorable ratio of gains to losses. Successful traders in our system consistently predict and trade market movements. Our incentive mechanism assesses miners’ returns to distribute incentives, taking into account both long-term and short-term performance, as well as their gains/losses ratio.

To evaluate a miner’s risk, we normalize their returns by their max drawdown. Max drawdown tracks the largest portfolio value drop overseen by the miner, including both closed and open positions, on a second-by-second basis. For example, if a portfolio value drops from 100% to 99% of its original value, the max drawdown is 1% over the specified period (currently 30). Normalizing returns by this drawdown helps determine their risk-adjusted return. For instance, if a miner achieves a 2% return over 30 days with a 1% drawdown, their risk-adjusted return would be 2R, which is likely to be competitive within our system.

Why are all types of trading strategies allowed, even those considered high risk?

We define risk to the system as abnormal utilization of portfolio margins. Controlling an abnormal portion of the portfolio compared to the miner’s typical position size may expose copy-trading consumers to undesirable risk levels. If a miner’s portfolio starts to decrease in value and accumulate drawdown, their risk-adjusted return will decrease, leading to a reduction in their score within our system. The network model determines its leverage utilization based on a combination of each miner’s individual leverage usage and their current weight within the system. As a result, abnormal leverage utilization will lead to the system pruning the miner from the network, even in the middle of a position.

Trading Architecture

What are checkpoints?

We look at the miner’s behavior on a second by second basis to determine their portfolio value change. Raw storage and compute against second by second information would pose a prohibitively expensive storage cost for our validators, and slow down compute speeds. As a form of compression, we bucket all movement information against the miner’s portfolio value into six hour windows which we call “checkpoints”. Each checkpoint contains information about the raw movement of the miner’s positions, number of update intervals overseen, and duration of open positions. We use these checkpoint objects to determine the miner’s success over the prior periods.

What kind of trade pairs or symbols are allowed to be traded and why?

We only list trade pairs with high liquidity to ensure macro-level strategy application and mitigate risks associated with volatile, low-volume currencies.

Why is there a challenge period?

The challenge period on PTN allows us to filter miners based on specific criteria such as returns and a minimum number of trades. Miners receive a small incentive during this period to prevent immediate deregistration after registration, providing them an opportunity to ramp up their strategies and compete effectively with top miners.