Abstract

In traditional finance (TradFi), investment funds simplify access for investors by leveraging the expertise of fund managers in exchange for fees, while symbiotically getting access to investors’ liquidity to run their strategies at scale. In decentralized finance (DeFi), however, trustlessness and active oversight are crucial for liquidity providers (LPs) to participate. The non-custodial nature of on-chain yield generation enhances security while providing stakeholders with full control over their assets, and while DeFi yield strategies have generated great returns not only on base tokens’ upside but also on yield farming techniques relevant to the specific asset. Yet, a key challenge is the lack of reliable data to predict returns. This paper introduces Sharpe Consensus, run by verifiers that use statistical and AI-driven benchmarking to create predictable outcomes for all investment strategies (or “Farms”) while ensuring competitive performance based incentives. The protocol aims to replace unpredictable and inefficient mechanisms with a more rewarding and secure framework, fostering consistent and optimized returns for all stakeholders. This is achieved through a sustainable network of interdependent participants and a unified incentivisation system built around the protocol’s native token, $DXP.