Summary and Conclusion
Palomabot.ai is a new suite of crypto bots powered by a Cosmos-SDK L1 blockchain and appchain known as Paloma. Palomabot uses the Paloma blockchain validator-set to custody liquidity and automatically execute user transactions on time and with MEV-secured endpoints for target chains including Ethereum, BNB Chain, Polygon, Optimism, and KAVA. Palomabot protects users from centrally controlled crypto bot liquidity tools that may rug pull users at any time. Reduced risk of liquidity loss is the core foundation of Palomabot.ai and we’ll outline below why Palomabot is the best in class for cryptobot security.
Palomabot.ai Reduces Private Key Custody and Security Risk
In just 2023 so far, over $300MM in liquidity was lost due to private key hacks. This number does not include the over $130MM loss of funds on Multichain’s bridge that was secured by MPC cryptography and over 11 professional audits. Palomabot is the answer to this ongoing risk of loss with its Paloma blockchain of validators that are incentivized to maintain performance or lose all their stake and revenue opportunity that the chain generates. The security model of Palomabot depends on the security guarantees of the Paloma blockchain validator set. The Paloma validator set is built on the Cosmos-SDK and ComeBFT consensus layer where over 40 validators have invested substantial fixed and variable costs to maintain network uptime as well as their acquired stake. This means, that Palomabot’s control of private keys and liquidity on an EVM chain is the most advanced security model possible in decentralized systems today. Paloma validators, easily identified and verified here: https://paloma.explorers.guru/validators. All Palomabot.ai transactions are signed by the entire Paloma validator set, regardless of staking power. Palomoa validators receive key control commands to execute trades on behalf of users liquidity in custody on various target chains. Paloma currently supports liquidity custody and transaction execution on Ethereum, Polygon, Binance Smart Chain, Optimism and Kava. As a result, Palomabot users scheduling AMM trades on these chains depend on the Paloma validator set to receive instructions, come to consensus on the authenticity of those instructions, and then execute those instructions. Volume, the team that designed the Palomabot does not have any access to control the liquidity of the bot users.
When transferring liquidity from a wallet to a crypto bot, the minimum security assurance that users require is that the crypto bot’s security model includes multiple parties that provide a proven, transparent, and decentralized approach to security that does not depend on a single centralized entity controlling the users’ private keys or liquidity. Crypto bots that do not provide decentralized private key controls or that do not clearly explain their security model in a publicly verifiable manner risk contributing to increased losses of private key value. We think this is the number one reason that Palomabot is safer and reduces private key custody and security risks for its users.
Palomabot.ai Reduces Front-running Risk for Users
When using a web or telegram crypto-trading bot, users’ orders are usually scheduled or executed when some logical state change requires the execute of an order. The more popular the crypto trading bot, the more popular will be the temptation to trade against the bot’s users’ orders by observing their requested positions. In centralized crypto trading bots, there’s no way for users to verify that they are not being front-run by their bot owners. They must either trust that they are not being frontrun or assume that they are and that their fills will be worse than if they were in the market.
Palomabot.ai orders are stored on-chain in Cosmwasm contracts that are readable only by the authorized bot contracts that collect users’ trade positions. Paloma pigeons execute these orders using MEV dedicated endpoints that allow users orders to be included in bundles and submitted into the blockchain via bundlers. Paloma’s validators also receive orders based on their performance for message routing in the validator set. As such, messages for palomabot trades are delivered to the validators that perform the best message and deliver via their dedicated MEV endpoints. Paloma validators are able to claim fee revenue for this messaging and use that as their incentive to not front-run user orders. Paloma continues to improve this model and differentiate itself from other, centralized trading bot solutions. Thus, Palomabot.ai is a beneficiary of this economic alignment that ensures that front-running users orders is difficult and not attractive to Paloma validators who would prefer increased order volume and message relay fees.
Palomabot.ai Avoids Order Execution Risk
When markets are crashing, it’s critical to execute stop losses quickly. A stop loss order executes when market price has fallen below a certain level. A user will sell a token they own for another token, for example a stablecoin such as USDT or USDC when a stop loss is hit. The goal of the stop loss is to prevent loss of portfolio value. Centralized order bots provide no assurance or guarantees that stop-loss orders will be submitted when users demand or schedule. Again, the centralized nature of most cryptobots means that some bots may not respect execution order performance minimums. If orders are filled, users are lucky to have them filled and will still pay fees.
Palomabot order execution is performed by the Paloma validator set. Because validators are disinterested message relayers, their objective is to send the most MEV messages successfully. Paloma validators, known as pigeons, are able to receive messages for relay based on their prior performance on message delivery. As such, validators that fail to deliver messages successfully are not able to compete for messages as effectively as validators that have a high record of successful message delivery. As such, Paloma avoids order execution risk and decentralizes that to over 40 data centers in the network. In a centralized crypto bot, there’s just one order execution service provider. This means that if that provider fails, users have no recourse. Palomabot avoids order execution risk by distributing and incentivizing order delivery via the Paloma validator set.
Source: Robot Pigeon by Marcos https://sketchfab.com/mar.cos.
NO Rug Pulls
Palomabot avoids rug pulls because the validators that custody funds cannot take those funds and abscond with the money without massive coordination of all fifty validators in the network. Paloma validators are made of up of a globally diverse group of business operators that have invested substantial time and money to secure the Paloma network. The more transactions the Paloma network receives, the more valuable the network and the more demand for the Paloma GRAIN token which is used to pay for message relay. This security model and economic incentive means that Paloma will most likely not suffer a rug pull of funds for Palomabot. We are confident that if there was any suspicious activities on the Paloma network, all users and validators would be fully aware in real time, avoiding the surprise rug pulls that are common in many early, token-chasing projects.
No Risk of a Token Pump-n-dump
Paloma’s GRAIN token that is used for message delivery. As such, the token needs to respond to organic demand for message relay. Any pumping of the GRAIN token will result in less demand for message relay. It’s in validators interests to see that the GRAIN token price is not volatile and that prices continue to be low enough to support continued buy activity for message relay. As such, validators prefer that GRAIN tokens prices stay low and relay execution volume remains high. The GRAIN token that secures the Paloma network has little pump and dump interests due to its revenue-generating tokenomics from bot message execution.
The Paloma blockchain and its newest dapp, Palomabot.ai, is the future of decentralized custody and automated execution. The Paloma’s validator set delivers the assurance that trading bot users’ private keys are transparently not in control of bot creators. Palomabots economic interests reduce rug-pull risk as well as token pump-and-dump risk because validators want to be paid for order execution performance and privacy.
To try the new world of blockchain trading bots, please visit https://palomabot.ai
To learn more about Paloma, please visit https://palomachain.com
To follow the project on Github, please star the project https://github.com/palomachain/paloma
To participate in the community, please join the Paloma Discord: https://discord.gg/HtUvgxvh5N
Paloma Protocol is a Cosmos-SDK blockchain protocol custom-built for omnichain communication that allows permissionless controls of any contract on any chain. Built by Volume, Paloma delivers the world’s first intelligently scheduled and automated smart contract transaction execution for the Cosmos ecosystem. The protocol enables developers to remotely control the transmission of value without the need to wrap, bridge tokens, or trust validators with their digital assets. Led by founding members of Sommelier, Paloma is building the primary communication layer of Web3.