Synthetic Trading Bots

Overview

Each strategy has a synthetic trading bot that is represented as an ERC20 token. The token’s price is derived from an artificial order history based on the trading bot’s 18 entry/exit rules. Trading bots don’t place actual trades on exchange; instead, they simulate trades based on a set of pre-defined entry/exit rules using live oracle prices.

Users can mint trading bot tokens by supplying collateral to a minter contract. The contract mints an equal dollar-value worth of trading bot tokens, allowing users to invest in bots without having to overcollateralize. Users wanting to exit their investment can burn their trading bot tokens to receive the current dollar-value of their investment in stablecoins. Trading bot tokens can only be minted or burned; they will not trade on an AMM. Trades will have zero slippage and will always execute at the derived oracle price.

To ensure that all investors in a trading bot can be paid back if the token rises in price, the protocol will allocate part of the Tradegen Reserve treasury to overcollateralizing trading bot tokens. The protocol will control the supply of mintable trading bot tokens, depending on the bot’s market cap relative to the bot’s reserve. If the market cap is too high relative to the reserve, the protocol will prevent new tokens from being minted until new collateral is added to the reserve.

Why use synthetic trading bots?

Synthetic trading bots benefit from being able to trade assets that aren’t supported on a given chain, having zero slippage, not having to pay exchange fees, supporting leveraged trading, and not being subjected to price manipulation on exchanges. Traders wanting to implement their strategies with synthetic trading bots can focus solely on finding historically profitable patterns without having to worry about the limitations of exchanges.

Since trading bots derive their price from the performance of simulated trades, instead of making actual trades on exchanges, they can trade frequently without losing money to slippage and exchange fees. Strategies that were profitable during backtests but became unprofitable after fees are now feasible due to the lack of fees. This enables on-chain scalping strategies with a short timeframe (down to 5-minute timeframe).

Architecture