Roadmap Update, November 2024
Interpreting value contribution as a trader presents specific challenges. Among them, real-time evaluation of risk, standard evaluation over time against a variety of trading styles, different trading behaviors for various assets, etc. Our current system prioritizes miners who make more frequent, balanced trades. To accomplish this, we have used a set of criteria outlined in our “penalties”. Evidence of its success comes from the behavior of our top miners, may of which have dozens if not hundreds of trades over the course of their history on PTN.
However, in filtering for a specific class of performance, we have restricted the breadth of trading behaviors available on our platform and created a challenging system to navigate. Interpretability of our scoring mechanism and familiarity of our system to traditional traders must remain a primary focus for us, otherwise we risk alienating future talent from entering the competition or having a barrier of entry which is too high for traditional traders.
With this in mind, we are proposing a series of changes to our scoring system to better align with the following goals:
- Diversity of trading styles. Given that we operate in event-driven markets like forex, we want to provide a pathway for these traders to operate on our platform without compromising their risk assessment and future repeatability.
- Ease of entry. We want to make it as easy as possible to get acquainted with the rules of PTN for traditional traders, to reduce the barriers of entry.
- Realism and Accuracy. We want to ensure the data used for trade evaluation and mechanics of operating on PTN will translate to real exchanges.
Our initial changes will require no modification to our infrastructure for submitting orders and positions, and we hope to maintain compatibility with this system for legacy miners moving forward even as we introduce new layers of realism. We will release the proposal for phase one in the near future along with the PR for it, which will outline details on our updated approach to the main scoring mechanism.
Phase One: Scoring Mechanics
Target: Near-term
Objective
Closed position returns will be replaced with daily value change on the portfolio. Risk metrics, risk-free rate, and scoring metrics will be adjusted to reflect this change.
Details
- All scoring calculations will now use daily portfolio value change instead of per position returns. The risk-free rate will fall in line with this new formulation, as it will be adjusted to subtract a consistent daily return value from each day of trading.
- Phase one deploy corrections to our scoring metrics as we will annualize all metrics into a consistent format. This will bring our metrics more in line with intuition and should more fairly evaluate miners on our chosen scoring window.
- We will launch a number of new trading assets, to help traders have more access to new risk-hedging opportunities. This will continue over time, as we will look to greatly expand the number of assets we support.
- We will greatly simplify our penalty system, removing penalties where possible.
Benefit
Daily value change will normalize the scoring system to be more in line with traditional prop trading systems, reducing the complexity for new traders. It will also permit compatible comparisons between strategies with larger and shorter trading windows, as risk and return will now be evaluated on a daily basis. If a buy/hold trader doesn’t effectively manage their day-to-day longitudinal risk, this will be measured as part of their performance.
Phase Two: Challenge Period
Target: Q4 2024
Objective
Long term alignment between the scoring system and the challenge period. Our goal is to have miners who pass the challenge period become immediately competitive in the main scoring competition, and to dynamically adjust the challenge period to reflect the current performance of miners on the network.
Details
- Challenge period miners will be evaluated on a consistent time-interval the main scoring competition, with the same scoring metrics. This means that challenge-period will be extended to 90 days from the current 60 days.
- Reaching a percentile of performance relative to the mainnet miners will allow a miner to graduate from the challenge period. This also means that our current static criteria will be deprecated.
Benefit
A dynamic challenge period will permit new miners to be evaluated on the same criteria as existing miners. This will bring challenge period in line with our scoring system long term, such that miners who pass challenge will be well situated to compete in the main competition. In bringing the two in line, we provide some level of guarantee that miners who are not performant with our scoring system will be continually pushed towards the bottom.
Phase Three: Realistic Position Management
Target: Q4 2024 - Q1 2025
Objective
We will bring our positional mechanics in line with the cost of trading on real exchanges, to better translate our signals directly into the exchange for copy traders.
Details
- Traders will have the capacity to trade realistic sizing on assets, with things like lots in forex natively supported.
- We will build mechanics into PTN to bring our positions in line with expectations on leverage usage and portfolio allocation through things like margins on positions.
- We will make a number of under-the-hood adjustments to the way we keep records for daily value change on different asset classes, which will enable us to further refine our metrics to more accurately model risk adjusted returns between assets.
Benefit
Logical translation from existing trading systems and what exists on PTN provides a layer of mystery for new traders and for anyone consuming the outputs of our system. By bringing the portfolio and the positions sizing in line with realistic exchanges, we will make onboarding and performance evaluation more straightforward. Realistic position sizing will also help with translation of copy trading to new exchanges.
Phase Four: Cost Model Refinement
Target: Q1 2025
Objective
We will improve the quality of our underlying data to more accurately model cost of transactions and cost of carrying capital on all supported asset classes.
Details
- Realistic bid-ask data will be sourced for transaction costs.
- We will focus on translating our trades to specific exchanges, sourcing data from them to ensure quality of transfer for the strategy.
- We will source data from a set of new resources to build out more realistic pricing models on the cost of carry.
Benefit
The quality of data used for base asset pricing is essential for accurate metrics estimates and translation of our strategies to new exchanges. Improvement in its quality will help us fulfill quality long term.
Phase Five: Progressive Leverage System
Target: Q1 2025 - Q2 2025
Objective
Traders with a demonstrated track record of performance and risk mitigation will be provided a larger allocation of leverage usage, mirroring the behavior seen on other trading firms.
Details
- Leverage utilization will scale in proportion to historical performance.
Benefit
Risk of exposure from new miners will diminish, while existing, proven miners will be able to maintain a larger proportional influence on the overall network model. This will reduce the probability that a new miner may have the capacity for large impact on the system with an unsustainable strategy.
Implementation Process
Each phase will follow our established rollout process:
- Proposal and Review: Initial technical specification and community discussion
- Community Feedback: Ongoing assessment and adjustment based on network participant input
- Testing and Validation: Comprehensive testing of new features
- Staged Implementation: Careful rollout with continuous monitoring
We encourage all network participants to review these proposed changes and provide feedback through our usual communication channels. Your input is crucial in ensuring these improvements serve the entire community effectively.