ETH-BTC Momentum Strategy

Each strategy is essentially a dynamic algorithm prepared by financial and crypto market experts. Algorithms observe market signals (both off and on-chain) 24/7 and are capable of executing portfolio redistribution instructions in real time. Portfolio change instructions are prepared based on strategy objectives that can include maximising yield and mitigating risk.

Sommelier architecture equips strategy creators with a wide variety of possibilities for designing these strategies.

Strategy algorithms can take into account a variety of inputs.

From the base case of simple APY signals about each token from the connected protocols.

To highly sophisticated case using external signals, including both on-chain signals from DeFi protocols and DEXes as well as off-chain signals like equity index changes or even aggregated social media sentiments.

Strategies are proprietary algorithms based on machine learning models developed by strategy providers. Cellars are an internal term that we use to describe smart contracts that execute instructions sent by the strategy.

The only constraint is that the actions recommended by the strategy are within the parameters of what the cellar contract allows. For example, which protocols should strategy trade at, or which particular assets strategy is allowed to hold, buy, trade, stake, lend.

Before submitting the strategy for the validators, each strategy's performance is backtested to prove its potential. Backtesting results tell us how the automated strategy would have performed based on historical data. The automated strategy, on the other hand, is an iterative process. We can use our simulators to refine the strategy to yield the best results on historical data.

Sommelier also deposits our own funds to prove the validity of each strategy and kick-off the initial liquidity so users can see strategy's immediate performance.

Scenario #1:

• Strategy providers - Initial idea how strategy could work
• Sommelier - Helps put the strategy in a mathematical model
• Sommelier - Sommelier data team helps backtest the strategy performance.

Scenario #2:

• Strategy providers - Have already defined strategy model and generated backtested strategy performance.
• The Sommelier cellar team will help strategy get live on the platform where it can allow interested parties to deposit in the cellars attractive to them.

Ideally, a strategist should run a strategy on Sommelier with minimal (if any) programming experience. Even with programming experience, building backtesting infrastructure is non-trivial. To lower this barrier, we are working on developing generic and flexible tools to support backtesting and deploying new strategies on Sommelier.

A Cellar is a smart contract that executes trades among a selected set of tokens (positions) based on instructions dictated by off-chain computation.

The Sommelier development team helps each strategy creator set up the Cellar to which their strategy is connected.

Although strategy providers can change the strategy logic (algorithm which sends position signals to the Cellar), they must submit position additions to Sommelier Governance. This adds a layer of safety for users who have allocated funds to Cellars. They can rest easy knowing that their assets can only be in the prescribed positions that each Cellar manages.

No, for the same strategy provider to add new DeFi protocols new Cellar should be created.

You can deposit only the tokens supported by a particular Cellar strategy.

When changing positions, Sommelier swaps your deposited token to other tokens supported by the strategy.

Before a strategy goes live on the platform, Sommelier governance accepts or declines the strategy based on backtesting data results for ROI, risk management, or other metrics which the strategy provider and governance community deem important.

Sommelier also deposits our own funds to prove the validity of each strategy and kick off the initial liquidity so users can see the strategy's immediate performance.

Strategy performance will be visible in real-time.

You can redeem your funds at any time. No questions asked.

The frequency of each strategy update depends on the strategy parameters the strategist sets.

Sommelier is a non-custodial platform. In case strategy holds a portfolio of selected crypto assets, funds are stored directly on strategy smart contracts. If strategy is lending crypto assets, they are stored directly on DeFi platforms smart contracts, like AAVE Ethereum smart contracts.

All transactions are managed by the Sommelier validator set with decentralized governance. Sommelier cannot steal user funds.

All Cellar Smart Contracts undergo extensive internal reviews by our highly sophisticated solidity engineers, as well as multiple external security audits. This slows down the process of launching a new Cellar, but this way, maximum security is guaranteed.

You hold your Ethereum wallet private keys. You can interact directly with each Cellar smart contract to redeem your funds or sell strategy tokens directly on DEXes

No, the Gravity bridge is used to send only the position change instructions. No actual funds are moved between Sommelier validators and strategy providers and Cellar Smart Contracts on Ethereum.