Reef Finance Yield Engine: Cross-Chain Solution to Maximize DeFi Yield

One of the major components of Reef protocol is the machine learning and AI powered DeFi yield engine. For most DeFi users, they do not have the capacity to learn and benefit from all the DeFi projects that provide high yield. Often the yield fluctuates as well, causing assets to move from one platform to another on a regular basis.

There are many forms of yield engines which have been developed and running in the ecosystem at the moment — with major players currently being Compound, Curve.fi, yEarn.fi, Balancer, and a number of new protocols in the pipelines. Reef engine maximizes its potential by being a cross-chain yield engine, tapping into DeFi protocols across multiple blockchains. This is possible because of the cross-chain functionalities and tooling Polkadot ecosystem provides.

Reef Yield Engine Features

Multi asset support — the yield engine will be able to support various types of tokens including stablecoins, synthetic tokens, hybrid tokens, etc.

Staking Support Automatic staking on behalf of the user will be supported for Proof of Stake tokens such as ETH 2.0, Dot, Tezos, etc.

Liquidity Farming Reef will automatically scrape the DeFi landscape for the highest yield in liquidity farming and provide easy access to the user.

Insurance coverage Reef integrates with Etherisc, Nexus Mutual, Opyn, and other DeFi insurance protocols to provide financial insurance service to the user.

Integration compatibility Reef will be a fully distributed and autonomous protocol, and compatible with the widest range of DeFi protocols, including parallel implementations on Ethereum, Polkadot, etc., to maximize the ease of integration and compatibility with other major apps in the DeFi space.

AI Personalized Smart Engine

The defining feature of the Reef yield engine is the use of an AI and Machine Learning powered backend to optimize user asset distribution.

The Reef Intelligence Engine is an off-chain oracle which is sourcing intel- ligence into the on-chain DeFi proxy smart contract. The Reef product team has a long history building such engines which either monitor different landscapes for fundamental metrics, and collecting and aggregating blockchain data as well as turning this data into usable metrics.

This engine is composed of complex architecture and data pipelines as well as optimized databases containing very large datasets. It uses algorithms to combine hundreds of factors to allocate pools and various forms of exposures into different baskets sorted by risk.

The baskets are backed by different methodologies based on the duration of the exposure and risk level. The users will then be able to choose which baskets they want to allocate their assets to, and how much.

The system monitors and scrapes the landscape in real time, from measuring the activity of liquidity pools, to on-chain data, etc — thus these baskets will be dynamic and require constant rebalancing and adjustments to maintain. The users which participate in the basket can keep certain assets locked, which will be seamlessly transferred between these two allocations when the adjustment occurs in the backend.

Augmented Decision Making

The distribution of assets to various yield-providing pools can be modeled as a linear programming maximization problem, with constraints defined in the user’s risk tolerance. Linear programming is a popular technique for decision modeling used by financial institutions to efficiently allocate capital.

Let’s examine a conceptual model as an example.

Let χi denote the distribution of assets into N baskets. And let σρ denote the expected yield, and µρ the standard deviation, Rρ the variance of a pool of possible yield giving products, and ρij be the matrix of weighting coefficients.

Then we optimize the following system:

This model seeks to simultaneously maximize expected yield or returns, while minimizing risk exposure. The ReefIntelligence Engine will constantly train over a large aggregate dataset consisting of market data to update the parameters used in these models representing levels of risks and returns.

By efficiently solving linear programming models, and other mathematical models depending on assets and situation, the Reef Intelligence Engine will look for the best allocation coefficients given the user’s risk tolerance profile and automatically make micro-adjustments to the baskets of financial products main- tained on the platform.

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About Reef

Reef is the first cross-chain DeFi operating system built on Polkadot. With a seamless user interface, Reef offers its users a smart liquidity aggregator and yield engine that enables trading with access to liquidity from both CEXes and DEXes while offering smart lending, borrowing, staking, mining through AI driven personalized Reef Yield Engine.

For more information about Reef, or to join our team, Please contact us at: info@reef.finance

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