Fahrenheit System Pro Crypto Robot 2021Fahrenheit System Pro
Fahrenheit System Pro can manage a huge pile of crypto without difficult. Particularly if you plan to trade it for another giant pile of cryptocurrency. Investors and organizations may want to move large amounts of cryptocurrency. However, they prefer not to have an impact on the market. Paradigm Venture Fund has a fresh approach to this problem that doesn't require anyone to trust.
Called the Fahrenheit System Pro, it's an idea that assembles a variety of needs and insights from crypto's recent days and is worth unpacking.
Sometimes, an entity or individual wants to move a large amount of assets but they prefer that it has a minimal effect on the market. The chances are that the trader wants to trade at the current price. Problem is, large trades can move the price.
When people want to sell off a lot of one asset without a lot of so-called slippage, they go to specialized brokers who know how to tease out such a trade. Market makers will be more satisfied if the priority is the right price than getting it done quickly.
(Sometimes people want to move lots of assets quickly. That's another story, but not relevant here.
It's not yet possible to trade crypto in a trustless manner.
We have previously reported that we live in an age where decentralized autonomous organisations (DAOs), are thinking more strategically about how they manage their treasuries. However, they have mostly had to rely heavily on sweetheart deals with venture capitalists for governance tokens to be made into stablecoins.
Furthermore, Paradigm's idea is based on one of the biggest successes for decentralized finance (DeFi) in recent years: enabling human traders to transact with robots, known as automated market makers (AMMs). They can trust third parties instead of people.
These AMMs have internal pricing systems that can go haywire when someone trades too many assets at once.
Additionally, because these trades are transparent, Ethereum is full of hustlers trying to take value from large trades. They have all sorts of strategies that exploit market participants' announcements of their moves before a trade is closed.
Paradigm's Fahrenheit robot trading, if it is built and functions as expected, would offer traders the benefits of AMMs while allowing them large trades in a time-efficient manner that will likely cause little market fuss.
Whether or not this specific design sees fruition, it helps to illuminate the kinds of problems that entrepreneurs in decentralized finance are thinking about.
It is worth discussing because it is likely to come to fruition.
Let's talk a bit about numbers. Before we get started, I want to remind you about crypto and markets. Imagine a large curve on a graph. The curve is what you know. A collection of paired values. Let's say you have a rising and falling price and your time is moving from left to right.
If the curve forms a large upside-down U shape then you can see price rising, peaking, and then falling again until it reaches zero.
Are you with Fahrenheit System Pro so far ?
Let's assume it starts at 1 pm and ends at 10 pm. It's $100 at 5 p.m., and $0 at 10 p.m. This is the arc of a curve. These little moments are when the price is slightly higher than it was just a second ago. It's either going up or down.
Let's suppose you want to make several equally-sized purchases at different points of the curve. Even though you buy multiple times at different prices the average price is the total price for all of your individual purchases.
It doesn't matter if your first purchase was at $80, then the next at $90 and the final at $80. You would have paid $88. This is the average price. It was also the average price for all of them, from your perspective.
If things change for any reason, it's only one price per purchase.
Paradigm's proposal is based on this insight. It is more likely that it will end up forming a large decentralized exchange for transparently buying and selling large quantities of crypto.
Who would like to slowly sell lots of crypto?
If history is any indication, we will probably see more people than we think. One obvious example of a group looking to make a large sale in a transparent manner is the decentralized autonomous organisations (DAOs), which are diversifying their treasuries.
These are organizations with a large but undiversified treasury that might want to reallocate to some other asset in order to insure against a downturn or to participate in yield farming in order to cover operational costs.
While a DAO has an interest in diversification, it also has an interest in not tanking the token price and upsetting its community. It can avoid market shock by communicating clearly with the market, and keeping the sales predictable and steady.
This service might be of interest to hedge and venture funds that have made large gains in tokens and are looking to sell a portion of their position to rediversify.
It comes with some risk but it is possible to be worthwhile for certain users. Paradigm's paper notes that the Fahrenheit Pro Pro will be the biggest risk long-term traders face. This is due to the fact that they may be exposed to information when they place publicly visible orders.
For some market players, however, openness may be the key to success.
What is the secret to it?
The Fahrenheit System Pro core feature is laziness. We must first talk patience before we can get to that. The Fahrenheit System Pro This design has an AMM integrated into it. It is possible that it will be added to an existing market maker once it is built, but that would require a lot more clever engineering. The Fahrenheit Pro is currently a standalone product.
If it had two tokens in a pool and someone wanted to place an order to trade on the pool for long periods of time, then selling tons of tokens into that pool will really shift the price.
The AMMs determine the price of ETH based on the proportion of the tokens in each pool. For example, if there are 2,000 DAI and 1 ETH within a pool, ETH trades at $2,000 (or 2,000 DAI). However, the price of ETH starts to rise as users add DAI to purchase it.
The price will skyrocket if you add too many items at once.
However, if the price is out of line with the rest of market prices for a prolonged period of time, a small amount will have a different effect. When that happens, market makers looking for arbitrage opportunities will trade it away (arbitrage is when a trader makes free money by spotting small discrepancies in a market).
This is the first insight. Trade slowly and count on arbitrageurs.
The very fact that large trades are occurring and everyone is aware of it will have some impact on the wider market price but not as much as if it were done suddenly. If traders are open to fahrenheit trading a lot over time, it's a way to communicate to the market that they don't know what the market doesn’t.
This is where the fun part comes in: The idea of laziness. The Fahrenheit System Pro is simply put. saves its users gas by doing trades without doing them.
It is not true. It does them. But it does them less often than you think. Keep in mind the example at top. Although we made six trades, each one had a different price, in the end, it was just one price, the average price.
AMMs are Able to Do the Same
If you have a pool that has two tokens and you announce that your plan to trade 1 million ETH for another token in the pool and spread it evenly over 3,000 blocks, then you can calculate the average price of all 3,000 blocks starting from the first block. On average, a new block is added to Ethereum's chain every 13 seconds.
Paradigm's paper shows that there is a class of plugged in brokers who do this for large equity trades. The proposal does the same thing in a fahrenheit crypto native manner.
The average price for all 3,000 blocks would be predictable if no other trader is in the pool. It is possible to calculate the average price across all 3000 blocks, and then trade one block at that price at each block.
What's the benefit? Gas is the cost to send transactions on Ethereum or perform computations. The trader pays this gas one-time, not 3,000 times.
This is what's called "lazy." It pretends to take a bunch of actions but actually does as little as it can get away with.
Remember my statement that if you trade in one asset to a two-sided pool, the market will lower the price. This will still occur here, but the market can slow it down and bring it back to normal.
The Fahrenheit robot crypto is available. It also informs the public market of the price movements it has made, even though it hasn’t executed any trades yet (because it is lazy).
Arbitrageurs could then step in to adjust the underlying prices even though they have not been recorded on Ethereum. The smart contract will wait if nothing changes. However, a trader in the pool can change the math. The Fahrenheit System Pro Goes ahead, totals the extended trade to that point and registers it on chain. The lazy operation is then restarted based on the new pool state.
This mechanism lowers gas and ensures that long trades are generally in line with the overall market.