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Taoshi Documentation

Taoshi Network Model

What is the Network Model

The Taoshi Network Model integrates strategies from top miners within our system into a unified strategy. Our incentive mechanism forms a weighted average of miner outputs based on their performance and influence within the system. To illustrate, consider the simple example below involving three miners.

Basic Model

  • Miner 1: 1x LONG BTC, Score of 0.8, 80% of network weight
  • Miner 2: 0x BTC, Score of 0.7, 15% of network weight
  • Miner 3: 0x BTC, Score of 0.5, 5% of network weight

The final leverage of the Network Model is calculated using this logic: (0.8 * 1.0) + (0.15 * 0.0) + (0.05 * 0.0) = 0.8x LONG BTC. While this reduces the potential returns captured by a single miner, it aligns the overall system risk with the limitations applied to all miners in our network.

Evolution and Dynamism

As more miners join our network and contribute diverse talents, the distribution of incentives will shift. The network model integrates their strategies, leveraging the incentive mechanism to dynamically manage their influence. This allows the Network Model to automatically shed miners whose strategies are outperformed by newer and more effective approaches.

Risk Management

The incentive mechanism on PTN operates in real-time, continuously calculating miner portfolio values second-by-second. If a miner experiences abnormal drawdown during a position, their incentive on PTN updates immediately as their risk-normalized returns diminish. For instance, if Miner 1’s drawdown increases from 0.5% MDD to 1.0% MDD, their score, used to determine their weight, would decrease by 50%. With their previous score dropping from 0.8 to 0.4, this adjustment places them last with only 5% of network weight, thereby altering the outcome of the weighted average: (0.05 * 1.0) + (0.8 * 0.0) + (0.15 * 0.0) = 0.05x LONG BTC.

What’s Next?

Looking ahead, this Network Model is foundational, continually evolving to optimize trader portfolios. Future iterations may explore enhancing alpha uniqueness, optimizing risk exposure alignment, and refining trade pair distinctions. Our roadmap to hit our milestones. Our roadmap is constantly evolving to achieve our milestones, and we invite you to stay updated on our progress here.