Polymarket Trading Bot Incident Recovery: How to Reconstruct What Happened

Polymarket experienced an incident with one of its trading bots, which raised questions about how to properly recover from such situations. The immediate reaction is often to simply restart the bot, but this does not address the more critical aspects of the incident, such as understanding what happened beforehand, the bot's belief in its current state, the outcomes of active orders, and the overall position.

A proper incident recovery process involves reconstructing enough state to verify the system's safety to continue trading. This goes beyond just restarting the process, as it requires a comprehensive understanding of the bot's state before and after the incident, as well as the external events that occurred during the downtime.

The recovery process should start by pausing trading and freezing new risk, preventing the bot from creating additional exposure while it investigates the incident. Next, the system should capture the current state, load the last known good state, and then inspect orders, fills, and execution details. This helps identify any discrepancies between the bot's expectations and the actual outcomes.

Reconstructing the execution state is crucial, as it can reveal whether a trade is verified, unknown, inconsistent, or failed. Partial fills can complicate the recovery process, as they may leave the bot uncertain about the final status of an order. Position reconstruction follows, ensuring that the current position aligns with the bot's expectations and accounting for any missed or unexpected events during the downtime.

Overall, incident recovery is not merely about restarting a process. It requires a structured approach to reconstruct the bot's state, reconcile orders and fills, verify the current position, and ensure that the system is safe to trade again. This process helps prevent guesswork and ensures that the trading bot can resume operations with confidence, knowing the exact state it is resuming from.