Responsibilities and legal¶
Decentralised finance service¶
Trading Strategy protocol operates as a decentralised finance service that consists of smart contracts and oracles. There isn’t a counterparty risk with the investor, as the service is non-custodial. At any moment, an investor can withdraw all their assets in real-time.
The non-custodial nature of the Trading Strategy protocol makes is safer for the investor as traditional fund structures. Misappriration of the investor funds or charging unreasonable fees cannot happen.
Legal and jurisdictional¶
Trading Strategy protocol is not a fund. The protocol governance or the algorithm vendors do not have discretionary control over how the user assets are invested of whether the user can exit.
Trading Strategy protocol development is operated by a Gibraltar based company. Because the development team does not transfer value or store value on the behalf of investors, the development team is unlikely to be a subject for the DLT licensing regime.
Other algorithmic trading signal and copy trading services¶
There exists several copy trading services, with similar business models for centralised exchanges, that are not subject to regulation. Some of the popular names include: 3commas, Cryptohopper, TradeSanta. Trading Strategy is not much different from them.
Because smart contracts offer more fine grained control over the trading decision on the investor assets, Trading Strategy is more secure than centralised services. There cannot be incidents like caused leaked API keys and copy trading service insider stealing the investor assets.
Technical risks with smart contracts¶
As the user can read all the smart contract source code themselves, they can do their own due diligence and be responsible for their own actions when investing in the smart contract.
Trading Strategy protocol developers follow the best practices of smart contract security to ensure that they are technical risk free (i.e. no bugs).
The smart contract operates in the conjuction of other smart contracts: tokens, decentralised exchanges and lending pools. Due to the nascent technology, all of smart contracts, at the blockchain itself, may encounter technical. A most common issue would the blockchain stopping producing new blocks and then the trades would not be executed. This may cause losses (or profits).
Any investor must accept the risk disclaimer on the moment they decide to invest into a strategy. This risk disclaimer is signed with the address of the investing wallet and recorded in the blockchain. Without a proper blockchain record of accepting the risk disclaimer, the investor cannot proceed.
The risk disclaimer states
There is no guaranteed profit
The investor is using high risk technology that is nascent and is likely to encounter issues
Any trading on highly volatile crypto markets may cause the investor to lose 100% of their principal
The investor agrees that neither Trading Strategy protocol developers nor the algorithm vendor is responsible for the investor actions or any losses