Welcome to RIALTO.AI Ask Me Anything thread.
This thread has been launched for our supporters to submit questions. RIALTO.AI will answer the questions monthly.
January Session will stay unlocked until January 29. Ten most upvoted questions will be answered on February 5, 2018.
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To avoid retelling, we invite you to read answers of the previous sessions before submitting your questions:
Dear community, thank you for participating in the first RIALTO.AI AMA Session of 2018. We are happy to observe your engagement in these monthly threads that help us deliver the information that interests broader public. Therefore we invite you to participate in the February session already accessible here.
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Q1: Lead developer goodbye note on telegram: "Dear supporters, I would like to inform all of you that I am not part of the RIALTO.AI project anymore. I finished my cooperation with RIALTO.AI on December 18th, 2017. At this point I do not want to leave a space for speculation for the reasons of this happening. Therefore, I would like to inform you that it was a mutual agreement between the partners, the management and me. The main reasons behind were the differences in the views for how and what Rialto.AI should be doing now and in future and the strongly opposite views on the partnership with the Hedge project. I wish the team success with the project as well as success to all of you, our supporters. I sincerely thank you again for supporting this project and giving us a chance to work on this. Valentin" Could you elaborate what Valentin is referring to when saying "... The main reasons behind were the differences in the views for how and what Rialto.AI should be doing now and in future and the strongly opposite views on the partnership with the Hedge project. ". It must be a very important reason for a lead developer of his reputation to leave a fortune on the table and leave the project. There is no place for nuance here.
Vito H. Martin (co-founder): I understand that departure of a co-founder always spurs speculation, rumors, or misunderstandings. I regret to disappoint as I have no mysterious explanation or a blockbuster movie script to share. High fluctuation among co-founding members is a very common event with start-up companies and there are numerous successful companies that changed their key team members even several times before they found the best combination. We are still in a high growth phase of our team structure and business processes and are in that aspect unfortunately no different than other start-ups.
We strongly believe in the strategy we have chosen and are hundred percent devoted to delivering on our roadmap. We have built strong foundations on which we plan to establish sustainable services for the long-term environment as the cryptocurrency and blockchain industry evolve further. We do not want to gamble away our future for today’s returns. Instead, we are rather focusing on developing services that will be needed by real blockchain projects, crypto finance companies, and 2nd generation crypto markets in the future. As the market-making spreads and margins will tend to narrow over the long run, we are already preparing for differentiation and development of complementary solutions which involve the development of data services, prediction trading bots, and negotiating designated market-maker positions for instruments that are yet to come in the 2nd generation of crypto markets (e.g. Tokenized Equity, CTIs, ETNs, Automated Fund Management Systems via Smart Contracts etc.).
Q2: Could you kindly explain why 15 million dollars worth of developer tokens was moving before Valentin resigned on telegram with no Rialto PR present?
Not only the locked tokens but also ETH, BTC, and other cryptocurrencies have been relocated which is evident from the public ledger. We utilize double-layered multiple signatures and physical access restrictions. As new signatories were added to replace previous keys, all cryptocurrencies have been transferred to improved custody locations. Security policy also includes a periodical wallet signature testing, thus the funds can be expected to change custody location repeatedly.
Q3: What would you say is currently the largest challenge to make higher arbitrage profits in 2018 and what structural improvements are planned to overcome this?
The largest challenge is, without doubt, the industry transition from the 1st generation of trading platforms to the 2nd generation (improved software architecture, compliance, account management support). We are investing heavily in our connections to 2nd generation projects and products that are currently in the establishment. Furthermore, we have recently brought in new Head of Trading with experience from one of the largest financial market maker. He will be responsible for leading the analysis and implementation of key expenditure plans (existing system optimization, cross-currency strategies, altcoins).
Q4: What does the current automated trading, machine learning/AI, and arbitrage market activity look like, and how do/will you counteract emerging direct competitors?
For the general activity and overview of each segment please refer to the performance report, while the second part of the question addresses the same answers to questions 1 and 3.
“With market making spreads and margins tending to narrow over the long run, we are already preparing for differentiation and development of complementary solutions. This involves development of data services, prediction trading bots, securing designated market maker position for instruments that are yet to come in the 2nd generation of crypto markets (e.g. Tokenized Equity, CTIs, ETNs, Automated Fund Management Systems via Smart Contracts etc.).“
“We are heavily investing in our connections to 2nd generation projects and products currently in the establishment. Furthermore, we have recently added new Head of Trading with experience from one of a largest financial market maker. He will be responsible for leading the analysis and implementation of key expenditure plans (existing system optimization, cross-currency strategies, altcoins).“
Should this not cover your question completely, please repost it and specify “activity” and we will answer it additionally aside from the regular 10 questions in the February AMA.
Q5: Why is there no mention of E&Y in the performance report? In the whitepaper you clearly stated that there will be a performance report audited by a trusted third party. Then you announced that E&Y will be the trusted third party. Any report that I have seen to date which has been audited by a reputable accounting firm has contained a paragraph stating that it has been audited and what criteria had been used for the audit. Why isn't this the case with the Jan 15th performance report? This has nothing to do with algorithm secrets or anything else. I want to see an audited report clearly stating the current balances of the Rialto funds.
It is still planned that performance reports will be certified by an independent third party. There are some steps that need to be taken before, in the current phase of the industry, it is actually difficult to find a respectable auditor that will certify the trading logs from that many non-regulated crypto exchanges, among which some do not even publish their country of domicile or enable any kind of direct communication. We are aware of that challenge and are pushing for the establishment of respectable practices as soon as possible. However, EY was never meant or announced to audit performance reports.
Furthermore, proof of cryptocurrencies can at any time be verified at the public blockchain addresses.
The non-deployed cryptocurrencies can be tracked at:
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ETH: 0x524F7B4e61a1D22F2b4cEfBA4AdaDC6c5c82c881
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BTC: 3BauSwV58QMMTmS8aXLJbNrbgcRuzi2DNt
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XRP: rDg4H3uSX4smq9nHv3d6e4Yop122CRJcfM
We are also reviewing potential partners for the third party custody of non-deployed assets. This would increase the storage costs but, in turn, additionally ensure integrity and transparency of the platform storage locations.
Q6: Following today's Medium post, could you confirm whether US holders of the XRL token retain ownership of their proportional share of the DAP, the data generated by RIALTO.AI, and the services provided by RIALTO.AI to current and future partners?
XRL token holders will be able to assert their ownership rights on the platform. The usage of the platform is however restricted to countries based on the local legislation and eligibility of users to participate as it was also the case during the crowd sale. We are constantly looking for ways to expand our area of operations and are in the process of consulting with local experts regarding the trading platform, its promotion in the areas outside our operations and specific licensing requirements if required. Our goal since the beginning remains the same to eventually offer our services globally.
Q7: OPPORTUNITY COST - As we only have 5 active exchanges at the moment, has the team considered the opportunity cost of keeping the funds idle and if so, are there any plans to use the funds to generate additional revenue whilst waiting for the exchanges to come online? If not, how has the team considered the opportunity cost of keeping funds idle?
We expect that some platform users will want to withdraw a portion or a total of their assets from the platform which would consequently reduce the amount of non-deployed cryptocurrencies and in turn increase the total utilization rate. Platform users will have complete freedom with the option of depositing and withdrawing cryptocurrencies, therefore the total platform assets will be able to “breathe with the market”.
Q8: UTILISATION OF DAP - Given that we have 5 exchanges that are fully vetted by the team, will the team consider temporarily utilising a higher stake (up to 75%) of the DAP at these exchanges to maximise arbitrage opportunities since the team has done due diligence on these exchanges? If not, please advice how many exchanges will it take for the team to fully utilise the DAP given that there will always be additional exchanges coming online and we cannot wait for additional exchanges indefinitely to implement full utilisation of the DAP?
The performance is not linearly correlated with the total amount of cryptocurrencies deployed but is rather limited by the liquidity and market spreads of certain exchanges. There is an upper limit where the marginal performance disappears, and higher stake solely increases the risk. Therefore, this also represents the optimal level of DAP deployment. Higher DAP utilization will be achieved earlier through additional bot deployments and market making on new products (CTIs) rather than through the increased number of exchanges. We expect to become a designated market maker on two new products until May 2018.
Q9: In your last AMA answers you have stated that there are eight exchanges tested before utilising 90% of the <25% DAP that you use, is it planned to add more after these eight are in full operation?
Yes, and if there were 30 appropriate exchanges on the market today, we would add them all. Exchange plugin system is built modularly which means that this is not a technical issue or significant effort to add new exchanges. We will continue adding new exchanges and currencies to increase the utilization rate.
Q10: You have also mentioned in your previous posts that we, as platform users, will be able to decide which service we will use. It is only a matter of time until people will notice the most profitable service. How will you cope with the demand and supply of these services? Let's say the arbitrage outperforms the market making and all users would like to use the arbitrage service. Let's assume that 100% of token holders would like to use the arbitrage service. But at that time only 50% of the DAP (total assets) are necessary for the realisation of those opportunities. (This situation is obviously too extreme, but it shows the structural problem, which I am still unclear about.) How will you handle such situations? Will you provide the liquidity according to the decision of the token holder or will you utilize the total assets most effectively?
It is indeed the law of competition and survival of each service which is delegated by user demand. If we are not able to offer the bots that users would use then these are probably also not the bots that will survive against the competition on the market and vice versa. The demand and supply dynamics is correctly illustrated in the question and directly influence the performance of each user.
If the market opportunities are fixed at 10 units and there are 10 participants in the market. In the equilibrium of equal competition, every participant will earn 1 unit. If there are 100 participants in the market, every user will earn 0.1 unit, regardless of the other factors (e.g. amount of cryptocurrencies deployed per participant). It is important to add that trading bots are not limited as arbitrage opportunities are but are solely tied to the specific trading pair volume on a given exchange. Given that, scalability of the utilised assets traded by bots is not an issue.