TradingStrategy.ai is a protocol for running active trading strategies on-chain. It takes DeFi to the next maturity level from passive yield farming profits to active trading. It looks to disintermediate hedge funds and replace investment managers with software.
What it does
Anyone can launch an active trading strategy on the top of the protocol. Off-chain oracle network reads decentralised exchange trades and turns them into trading data (so-called candles). Then oracles feed the trading data to algorithms, written in Python, which decides on the next trading strategy position. Then an on-chain judge smart contract executes the trade and checks oracles were not faulty. The trading strategies are active and directional: long or short strategies, momentum, index, mean reversion and such.
In this hackathon, we build a trading strategy that keeps money in the Aave USDC pool when the trading strategy does not have an open position. The trading strategy is a simple boomer strategy called "Double 7" that buys in after 7 red candles and sells after 7 green. This enables greater trading capital efficiency than in the CeFi markets, because the CeFi markets lack money legos.
How we built it
We get raw trades and swaps and historical Aave interest rates from TheGraph protocol. These events are turned into trading data (candlestick chart). Then we backtest the strategy using Python algorithmic trading frameworks.
The actual trading happens on 1inch on Polygon network. We have a hedge fund smart contract written ins Solidity where users can invest and withdraw. The oracle network then instructs this smart contract to buy ETH when it is going up and sell ETH when it is going down. The decision is made by + 100 MB trading data from the oracle network.
Used infrastructure: Aave, TheGraph, 1inch, Polygon, MetaMask.
Challenges we ran into
Aave subgraph was undocumented and even Aave developers did not know how it works. DeFi protocols need to invest in developer documentation more.
Accomplishments that we're proud of
We are one of the first DeFi protocols doing active trading. Yield farming rewards will end one day. We will be ready and then you will come to us.
We go for an open trading position to interest rate pool in one transaction, never missing a heartbeat of interest. This kind of efficiency is not possible on traditional financial markets, because DeFi money legos, public ledger, open source and real-time transactions do not exist.
What we learned
Using Aave USDC pool with variable interest rate increases moderate efficient trading strategy profitability from 17% to 21% which is considerable for low profitability, low risk, strategy.
Building an off-chain specialised oracle system is hard, but we can easily beat ones like ChainLink.
What's next for TradingStrategy.ai
We are raising a seed round and start live trading strategies in 1-2 months.
If you are an Defi angel investor contact us.