hAIrberger

onchain/hAIrberger.md

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+# The hAIrberger Protocol
+
+## Problem / Current Situation:
+
+A static liquidity provider strategy in a dynamic market leads to:
+- impermanent loss
+- reduced earnings
+
+Harbergs baseline-like liquidity setup can reduce impermanent loss only at the cost of liquidity share and fee earnings. Token-printing-priviliges gives unfair advantage, but not forever.
+
+## Succesfull/Dynamic LP strategies use indicators:
+onchain:
+- current and historic price
+- current and historic volume
+- current and historic liquidity distribution
+
+offchain:
+- TA
+- Macro
+- Sentiment
+
+## Making the Harberg LP strategy dynamic
+
+- **Oracle Problem \#1:** The offchain indicators can not be used by decentralized communities at all, having a unsolved oracle trust issue.
+    - use staking, an egoistic marketplace, as data source for sentiment
+        - % staked
+        - average tax rate
+        => egoistic oracle marketplace
+
+- **Using historic data:** The onchain indicators need to be digested, e.g. TA to get signals.
+    - algorithmic trading / backtesting => model => deep learning
+    - fold historic data into AI model training
+
+- **Oracle Problem \#2:** Any algorithm running offchain can not be trusted by community. AI models can not run onchain. Trained models can't react to real-time data (see LMM knowledge cutoff).
+    - use on-chain algorithm that works with real-time data, historic knowledge and limited gas
+    => **follow-up problem:** "write an algorithm that uses limited gas to maximize fees earned, starting with no training data."
+    
+- **Metaheuristic:** is a higher-level procedure  designed to find, generate, and tune partial search algorithm that may provide a sufficiently good solution to a machine learning problem, especially with incomplete or imperfect information or limited computation capacity.
+    - **Genetic algorithms** are used to generate solutions to optimization problems via biologically inspired operators such as selection, crossover, and mutation.
+    - selection can be applied on:
+        - gas usage
+        - fees earned after running scenarios
+            - scenarios can be replaced by historic trading data after launch of project
+    - result of evolution (latest generation) can be deployed onchain and integrated into recenter
+        - recenter() => getDynamicLiqParams() => _scrapePositions() => _setPositions()
+        - function getDynamicLiqParams(inputs) returns (params) is an EA living in upgradeable contract
+    => **follow-up problem:** EVM op-codes can not be used in Evolution, too much grammar
+    => **follow-up problem:** upgradeable contract needs governance
+    
+- **Evolving Stack Machines** instead of reverting, invalid op-codes should be ignored. 
+    - [Push3 by Lee Spector](https://www.youtube.com/watch?v=ryW9w5cAwaI)
+    => implement Push3 runtime in solidity
+    
+- **Governance** tbd
+    
+## Conclusion
+- a dynamic strategy is possible, first using human-generated solutions (sentiment function), and later upgrading into GA.
+- basic governance to be solved before GA.