Volume AMA: Palomabots Built For Your Every Strategy
Background
It’s bot season in Paloma as new bots are released to suit every trader’s strategy, even in a sideways market. This week’s AMA episode talks more about palomabot.ai, how the different bots work, and what’s next for Paloma. The episode also acknowledges the great value of validators in keeping the network alive and secure and how Paloma is taking every step to drive revenue so that validators can charge fees for relaying messages.
The host Taariq Lewis @Lewis Taariq, CEO of VolumeFi (volume.finance) is joined by two members of the VolumeFi team, Vera Behr @v_behr, Head of Product, and Zhibai Zhang @FieldTheory, DeFi Strategist.
Definitions
AMA – Ask Me Anything
Momentum - the rate of change in price movement over time to help investors determine the strength of a trend. Momentum is used by investors to trade in an uptrend by buying or selling in a downtrend.
Vyper - a contract-oriented programming language created specifically for writing smart contracts on the Ethereum blockchain platform.
Cosmos SDK - an open-source framework for building multi-asset public Proof-of-Stake (PoS) blockchains as well as permissioned Proof-of-Authority (PoA) blockchains.
CosmWasm - a smart contract platform focusing on security, performance, and interoperability It is the only smart contracting platform for public blockchains with heavy adoption outside of the EVM world.
CoinGecko - a cryptocurrency ranking website that provides a 360-degree overview of the standing of digital currencies
Sniping - a trading strategy that involves buying a new cryptocurrency token as soon as it is launched, usually on a decentralized exchange (DEX) like PancakeSwap or Uniswap, and then selling it for a profit after the price pumps.
Mempool - (a contraction of memory and pool) is a cryptocurrency node's mechanism for storing information on unconfirmed transactions. It acts as a sort of waiting room for transactions that have not yet been included in a block.
Sideways market - when asset prices fluctuate within a tight range for an extended time without trending one way or the other.
DEX – short for decentralized exchange is a peer-to-peer marketplace where users can trade cryptocurrencies in a non-custodial manner without the need for an intermediary to facilitate the transfer and custody of funds.
Limit Order - allows you to set your price to buy or sell. If the market reaches your limit price, your order will be executed. However, if the market does not reach your limit price, your order will not be executed.
Stop-loss - an advance order that traders use to prevent additional losses and protect crypto investments from market volatility. When a specific price point is met, the order is triggered. As the market experiences a pull-back, a stop-loss can trigger to trade funds out of the current position.
TWAP - stands for time-weighted average price. It's a pricing algorithm used to calculate the average price of an asset over a set period.
Slippage - describes the difference between the expected price of an asset and its actual execution price. Though small differences in pricing can frequently occur while investing in cryptocurrencies, they can also have significant impacts if not appropriately monitored.
Intro
The host extends a warm welcome to everyone to Volume’s weekly update. He gives a special shout-out to the Volume and Paloma communities. Taariq shares a brief about Volume:
“Volume is a private key and private security management company. We provide blockchain services for managing private keys and decentralized private key signing. Our goal is to find out how you can get the most out of your private key across multiple public blockchains and enable more control and more features to your private key.”
He invites all the listeners to check out Paloma Bot’s website palomabot.ai, and its new Twitter account @palombotai.
Why Does the Paloma Chain Exist?
From the beginning, there was a lot of excitement around Paloma, especially the community of validators who help secure cross-chain messaging. Taariq recalls the earlier success of 3Commas, a decentralized trading bot company for crypto, where fast crypto day traders were looking to manage their losses and capture opportunities. Taariq shares:
“And so what we thought was Paloma bot would be a great way to demonstrate the power and impact and value of the Paloma blockchain by delivering fast execution to decentralized exchange traders, automated market makers, and liquidity providers.”
The Paloma Bot aims to be a great tool for capturing momentum and automated execution, especially in a market where things change quickly and the oscillations tend to narrow. With thousands of coins or tokens in the crypto market, it would be very difficult and exhausting to keep track of changes. Taariq explains how the Paloma bot is here to help:
“We think Paloma Bot is the most qualified tool to help crypto day traders get a handle on it. In a sideways market, Paloma Bot is your perfect tool. When pumps are short and returns are not as high, you need to move in fast and out fast, and you need to move them across multiple chains. You want to trade multiple different things and capture those gains.”
What are Paloma Bots?
Taariq asks Vera to talk about Paloma bots and how they work. Vera gives an overview of Paloma bots:
“Paloma bot is decentralized and running on the Paloma blockchain which is a Cosmos SDK blockchain. We have about 30 active validators who are securing the network. The Paloma bots use two sets of contracts: Vyper contracts with bots running on Ethereum, Binance Smart Chain and Polygon, and CosmWasm contracts.”
Each bot has a CosmWasm contract that handles the execution of messages. This contract sends the message to the Vyper contract on the target chain via the Compass EVM, which is like a router contract, that is secured by the validator set.
On the matter of security, Vera emphasizes:
“Paloma or Volume can never run away with your funds because it is secured through the validator set. It is written in a way that only that specific CosmWasm contract can send a message that is honored by the bot contracts.”
Currently, there are seven bots online with different functionalities, and more are in the making, Vera shares. Three of the bots use CoinGecko APIs for price information, useful for those who are interested in trending new tokens. Momentum bots funnel data from CoinGecko and uses that information to derive more strategies.
Telegram alerts are available for users to receive notifications when new tokens come out, for example, or when a position has been traded or closed out.
A 0.5% fee on the bot plus gas fees will be collected, Vera shares.
One-Second Block Time
The host announces that Paloma validators have agreed to decrease block time from 5 seconds to one second. The speed for Pigeons to relay messages has also been adjusted to make them faster. He asks Vera to explain what it means for the Paloma bot. Vera replies:
“What that means is that for every second, we're executing a block. This means that bots can execute trades or close out a position in one second making Paloma bots the fastest chain infrastructure in Cosmos.”
Taariq adds that with a one-second block time, developing sniping bots would be fantastic for users who are interested in mempool transactions.
Paloma Bots for Every Trading Strategy
Taariq asks FieldTheory to discuss the different types of trades that can be done with Paloma bots. FieldTheory starts with Momentum Bots:
“Momentum bots provide a great number of tokens for users to discover. With the broad landscape of tokens in the crypto space, one of the greatest challenges is choosing from thousands of tokens and all the possibilities without automation tools. We scan some of the most liquid, largest DEXs and pools, and we identify tokens using momentum. For example, these tokens are already catching some lightning and if you want to ride the trend, this is the bot for you to use. So once you identify these momentum tokens the second part of the bot helps you get into a long position.”
FieldTheory explains further that users can specify well-defined risk parameters, both upside, and downside, to make sure that profit-taking and stop-loss are controlled.
He also talks about limit-order bots. He cites an example:
“You have a USDC token and you’re looking to buy Eth but at a slightly lower price. You don’t have the energy to monitor the Eth market constantly. The limit order bot will be watching the price of Eth and when it goes down to the price that you desire, the contracts automatically swap your USDC for Eth. That goes for any tokens that you would like to buy.”
FieldTheory explains stop-loss bots where users can set a pre-defined stop-loss parameter.
“If you’re holding a volatile token and their price just wiggles, and if you’re concerned about the downside and you don’t want to lose more than 10% in value, for example, the bot can immediately get out of that position when it reaches the predefined 10%.”
The stop-loss bot will keep track of the price and when the price limit hits, the contract automatically swaps the volatile token for any token that the user chooses.
The TWAP (short for time-weighted average price) bot, is another useful tool, FieldTheory shares. Based on a popular order execution algorithm in traditional finance, TWAP is for users who are looking to do a large trade and want to avoid slippage.
“When you trade everything at once, slippage can eat up a lot of your profit. The TWAP bot allows users to de-compose one [large] trade and put it into multiple trades and then execute it at predefined timestamps. Users can set up a TWAP bot and specify how long they want the bot to run, and how many sub-trades they want to do.”
The TWAP bot enables the scheduler to execute the trade on a piecemeal basis at the user’s pre-defined timestamps. This smooths out the price impact giving the user a much better execution price.
FieldTheory invites everyone to check out more bots like the CoinGecko bot Top Gainers and CoinGecko New Listing bots at the palomabot.ai website.
The Importance of Validators
Taariq acknowledges the profound value of Paloma validators who keep the network alive while waiting for value creation to start increasing so that the grain tokens can be priced.
“We really want to say thank you. We wouldn't be here without Paloma validators. We know that it takes effort both in skill and time as well as in data centers to resources. Paloma bot is delivering secure execution for trades, even though the security model is not fully complete because the price of the grain token is not yet listed.”
Paloma is working on Pigeon feed where validators get to set their price for gas for relaying messages. The Volume team is finishing the work on the Paloma bridge as well. The bridge is a way for people to get their grains from the Cosmos side onto the EVM side, any EVM where they can be traded out in any decentralized pool.
While Taariq admits that there’s a lot of work still to be done, by making the pool and bot live, validators will know that their work is valued.
“Once the grain or Pigeon feed is launched, validators will be able to capture and charge their own, make their own profits, make their own revenues, whatever they want to collect. It's really a validator-driven network and we are pushing forward so that validators can get rewarded for it.”
What’s next for Paloma?
More bots will be launched, Taariq announces.
“We're going to promote the bots. So you're going to see us on Twitter talking about Paloma bots. We're gonna be talking about sniping and collecting and, and trading in sideways markets.”
Paloma bots contracts have not been audited and talks with contract auditing firms are underway.
Paloma will be deploying to new chains. Proposals to deploy to Optimism and Base are ongoing. He sends a reminder to validators:
“If you’re a validator on the network, make sure to post your Base Ethereum address on the mainnet channel to get the airdrop of Base. I think we're airdropping like $20 worth of base e base so that validators can support the network without having to put up more capital and to ease that burden because validators have been very faithful to this network.”
Closing
Taariq thanks all the validators, Vera and FieldTheory. He wraps up the episode with a reminder for validators:
“Paloma bot is live, the bots are running, the bots are cranking, and we're going to let the world know that the safest bots to use on Telegram are going to be run and handled by the Paloma validator set.”
Stay tuned for the next AMA!
To find out more about Volume, check out Volume Finance (https://volume.finance/), join the Discord (https://discord.com/invite/Ebh6YjMShu), and follow us on Twitter (@Volumefi). Check out Paloma Chain on palomachain.com (https://www.palomachain.com/), follow them on Twitter (@palomachain), and join the flock on Discord (https://discord.com/invite/tNqkNHvVNc). Coo!
