Protector (Guardian)

Description

Guardian is a multi-model AI node responsible for overseeing investment positions and managing performance deviation thresholds. It manages Performance Deviation Threshold for Unrealized PnL (PDTU) and Performance Deviation Threshold for Realized PnL (PDTR) to ensure that investment performance stays within acceptable limits.

sequence diagram

Function

• Monitoring: Guardian continuously monitors on-chain data, investment strategies, and market conditions.

• Risk Management: It evaluates the risk profile of each strategy and takes necessary actions if positions are deemed unsafe or insolvent.

• Performance Management: Guardian ensures that the investment positions align with expected performance metrics and thresholds.

Role in Architecture

Guardian plays a critical role in the QuantWealth architecture by:

• Monitoring and managing the performance of investment positions.

• Ensuring compliance with risk and performance thresholds.

• Protecting user investments by taking preemptive actions when necessary.

Responsibilities

Monitoring and Evaluating Strategies

1. Network Monitoring: Monitors the network to ensure each strategy operates within safe parameters.

2. Performance Evaluation: Regularly checks if strategy performance meets expected benchmarks by reading data from Atlas (Indexer).

3. Risk Assessment: Evaluates whether a pool incurs greater risk than tolerance or if positions are insolvent.

Managing Performance Deviation Thresholds

1. PDTU (Performance Deviation Threshold for Unrealized PnL): Ensures unrealized profits and losses stay within acceptable limits.

   • Example: If the base investment asset class is variable, such as Ethereum, fluctuations in Ethereum's price can create unrealized PnL.

2. PDTR (Performance Deviation Threshold for Realized PnL): Manages realized profits and losses, taking corrective actions when necessary.

   • Example: PDTR is proportional to the position itself. For instance, if a user's investment position realizes significant profits, Guardian might adjust the strategy to lock in gains or reallocate assets. Conversely, if realized losses occur, Guardian may liquidate the position or adjust the strategy to prevent further losses.

Action on Insolvent or Unsafe Positions

1. Insolvent Amount Tolerance (IAT): Uses IAT as a tolerance level for deviations from APR, triggering liquidation when positions fall below this threshold.

2. Inaction vs. Liquidation: Decides whether to keep positions or liquidate them based on predefined conditions.

   • Inaction: Positions are kept according to the strategy.

   • Liquidation: Positions are liquidated if deemed insolvent or unsafe, with funds stored back in QWManager.

Risk Auditor Function

1. Risk Monitoring: Acts as a risk auditor, ensuring strategies are within expected bounds and meeting minimum target APY across different timeframes (seconds, hours, days, weeks).

2. Strategy Compliance Score (SCS): Derives an SCS to measure strategy compliance with expected performance.

User Strategies: Liquidations and Withdrawals

1. Liquidations: Initiates a liquidation process if a user's position carries too much risk.

2. Withdrawals: Handles user requests for withdrawals, ensuring the investment strategy is not disrupted.

Evaluating Market Conditions

1. Continuous Evaluation: Continually evaluates market conditions via Atlas (Indexer).

2. Adjustments: Makes necessary adjustments to strategies based on ongoing market analysis.

Handling Investment and Withdrawals

1. Investment Adjustments: Ensures user investments are managed according to predefined strategies, adjusting for new deposits or market changes.

2. Withdrawal Management: Manages user withdrawal requests, ensuring strategies are not adversely affected.

Detailed Workflow

1. Monitoring:

   • Monitors on-chain statistics of interest.

   • Continuously checks strategy performance against expectations.

2. Action Decision:

   • Checks if positions are insolvent or unsafe.

   • Decides on inaction or liquidation based on predefined conditions.

3. Execution:

   • Executes liquidations if necessary.

   • Updates Indexer with the state of liquidated positions.

   • Stores liquidated funds back in QWManager.

4. Risk Auditing:

   • Watches dapp operations to ensure compliance with expected performance.

   • Derives Strategy Compliance Score (SCS).

5. User Interaction:

   • Processes user requests for withdrawals.

   • Evaluates and manages user strategies for liquidations.

Mitigation of Additional Factors

1. Economic Events:

   • Incorporates macroeconomic indicators and event analysis to adjust strategies in anticipation of economic events.

2. Regulatory Changes:

   • Stays updated with regulatory news and adjusts investment strategies to comply with new regulations, avoiding potential legal and financial risks.

3. Technological Changes:

   • Monitors technological trends and innovations, adapting strategies to leverage new opportunities and mitigate disruption risks.

4. Sentiment Shifts:

   • Performs sentiment analysis and adjusts investment strategies to hedge against adverse sentiment-driven market movements.

5. Market Volatility:

   • Uses volatility indicators and historical data to predict and manage market volatility, adjusting strategies to mitigate risks.

Flowchart

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