Updates To Our Alpha Algo
Incorporating Our Newest Proposal
Our Most Recent Proposal
We shared our WhitePaper a couple weeks ago and pushed our community to come up with a way to incorporate Staking into the Alpha Algo. Staking is important because it reduces spam accounts from winning rewards without adding value to our community. It also adds a confidence metric to portfolios which can be a powerful tool to discover new talent. However, that all needs to be balanced with keeping the staking requirement low enough to keep Covey an open meritocracy.
Staking will hit in Q1 2023. We considered three alternatives and landed on using a Pure Alpha Score X Stake Modifier. The modifier amplifies your rewards if you Stake more, and it pays out nothing to spam accounts who Stake nothing.
How Pure Alpha X Stake Modifier Works
First of all, we haven’t yet distributed the token widely enough for Staking to happen so we need a proxy for Staking. For now, that is Days Since First Trade on Covey. Until Q1 2023, you will see Days Since First Trade on Covey as a holder for Staking.
The new math for the Alpha Algo will hit on September 1, 2022. A visual of the effect it will have is below.
In blue, you will see the new method where we payout based on Pure Alpha X Stake Modifier vs. the old method (in purple) where we paid based on a z score of the Stake (Days on Covey). The key difference is that analysts who have been on Covey for a while got paid despite not doing all that well in the Alpha Algo. The new method shifts payments to the top analysts instead. You’ll see how the blue line is up on the left (best analysts) and does not payout anyone on the right (worst analysts).
Check out our discord for even more examples of our current leaderboard: Pure Alpha X Stake Modifier vs. Z Score method.
How We Got Here
Creating this new proposal was a big lift that borrowed work from of our community. We had input from PhDs, students, traders, influencers, and developers. We used Logistic Regressions and Monte Carlo simulations to test out the new methods. We were tempted by complicated math, but for broader inclusion and to prevent hiding behind the veil of “it’s complicated”, we used first principles and sought clarity. The key was that anyone can understand this math, meaning we can calculate it in excel. At the same time, we know this isn’t perfect, and we are looking forward to more proposals and further refinement of the Alpha Algo.
A big thank you to our community for helping us out! We look forward to continuing to build this together!
Join Covey for free today @ covey.io
