Hybrid Stabilization Protocol for Cross-Chain Digital Assets Using Adaptor Signatures and AI-Driven Arbitrage
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arXiv
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| Format: | Preprint |
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2025
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| _version_ | 1866916781835157504 |
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| author | You, Shengwei Kuehlkamp, Andrey Nabrzyski, Jarek |
| author_facet | You, Shengwei Kuehlkamp, Andrey Nabrzyski, Jarek |
| contents | Stablecoins face an unresolved trilemma of balancing decentralization, stability, and regulatory compliance. We present a hybrid stabilization protocol that combines crypto-collateralized reserves, algorithmic futures contracts, and cross-chain liquidity pools to achieve robust price adherence while preserving user privacy. At its core, the protocol introduces stabilization futures contracts (SFCs), non-collateralized derivatives that programmatically incentivize third-party arbitrageurs to counteract price deviations via adaptor signature atomic swaps. Autonomous AI agents optimize delta hedging across decentralized exchanges (DEXs), while zkSNARKs prove compliance with anti-money laundering (AML) regulations without exposing identities or transaction details. Our cryptographic design reduces cross-chain liquidity concentration (Herfindahl-Hirschman Index: 2,400 vs. 4,900 in single-chain systems) and ensures atomicity under standard cryptographic assumptions. The protocol's layered architecture encompassing incentive-compatible SFCs, AI-driven market making, and zero-knowledge regulatory proofs. It provides a blueprint for next-generation decentralized financial infrastructure. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2506_05708 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Hybrid Stabilization Protocol for Cross-Chain Digital Assets Using Adaptor Signatures and AI-Driven Arbitrage You, Shengwei Kuehlkamp, Andrey Nabrzyski, Jarek Cryptography and Security Computational Engineering, Finance, and Science Stablecoins face an unresolved trilemma of balancing decentralization, stability, and regulatory compliance. We present a hybrid stabilization protocol that combines crypto-collateralized reserves, algorithmic futures contracts, and cross-chain liquidity pools to achieve robust price adherence while preserving user privacy. At its core, the protocol introduces stabilization futures contracts (SFCs), non-collateralized derivatives that programmatically incentivize third-party arbitrageurs to counteract price deviations via adaptor signature atomic swaps. Autonomous AI agents optimize delta hedging across decentralized exchanges (DEXs), while zkSNARKs prove compliance with anti-money laundering (AML) regulations without exposing identities or transaction details. Our cryptographic design reduces cross-chain liquidity concentration (Herfindahl-Hirschman Index: 2,400 vs. 4,900 in single-chain systems) and ensures atomicity under standard cryptographic assumptions. The protocol's layered architecture encompassing incentive-compatible SFCs, AI-driven market making, and zero-knowledge regulatory proofs. It provides a blueprint for next-generation decentralized financial infrastructure. |
| title | Hybrid Stabilization Protocol for Cross-Chain Digital Assets Using Adaptor Signatures and AI-Driven Arbitrage |
| topic | Cryptography and Security Computational Engineering, Finance, and Science |
| url | https://arxiv.org/abs/2506.05708 |