Adaptive BTC Vault
1. Introduction
Pilot3 introduces the Adaptive BTC Vault, the first fully AI-managed Bitcoin vault leveraging MIDL-compatible Bitcoin-native smart contracts.
Utilizing MIDL-compatible tokenization (e.g., sBTC), this solution uniquely combines adaptive AI-driven risk management with optimized yield strategies, offering seamless Bitcoin custody, asset protection, and dynamic yield generation, all directly on the Bitcoin blockchain.
2. Vault Technical Specification
Smart Contract Standard
Standard: ERC-4626 (OpenZeppelin implementation)
Justification: Widely adopted, secure, pre-audited, efficient interoperability
Core Functions: Deposit, Withdraw, Total Assets Calculation, Yield Computation, Compound Interest Logic
BTC Tokenization
Asset Representation: sBTC (Bitcoin tokenized via MIDL)
Process Workflow:
User deposits native BTC.
BTC is tokenized to sBTC within MIDL environment.
sBTC managed directly by ERC-4626 vault contract.
3. AI-Driven Risk-Adaptive Strategy
Input Data
On-chain Indicators:
Relative Strength Index (RSI)
Funding Rates
Smart Money Concepts (SMC)
Off-chain Data:
Macroeconomic Indicators
Market Sentiment Analysis
Decision-Making Algorithm
Adaptive Logic Flow:
Real-time monitoring of market conditions.
Threshold-based automated switching between yield-maximizing and risk-mitigating asset allocation.
Continuous rebalancing based on predefined thresholds:
High risk: Automatic allocation to protective custody.
Low risk: Aggressive yield generation.
4. Yield Generation Detailed Strategies
Lending
Protocols Used: Sovryn (RSK), ALEX (Stacks)
Interest Computation:
Interest accrued daily.
Automatically compounded weekly.
Liquidity Providing
Pools: sBTC/USDX on ALEX (Stacks-based liquidity pools)
Impermanent Loss Mitigation:
Dynamic monitoring of asset price divergence.
Automated rebalancing to mitigate impermanent loss.
Automated Market Making
Strategies:
AI-driven market making on MIDL-compatible DEXes.
Algorithmic spread adjustments, depth management, and risk controls.
Technical Parameters:
Spread thresholds: dynamically adjusted (0.2%-1%).
Liquidity depth adjustments based on real-time volume analytics.
5. Security & Risk Management
BTC Vault Risk Framework
Automatic transition to OP_VAULT custody triggered by:
Sudden market volatility (e.g., >10% BTC price movement in <1h).
Detection of anomalous withdrawal activities.
Exploit attempts detected by Pilot3.ai security monitoring.
Mitigation Strategies
Automatic custody management via Bitcoin’s native OP_VAULT (BIP-345), ensuring instant and secure isolation of BTC assets under predefined emergency scenarios.
Detailed scenario analysis:
Market crash: Immediate custody activation.
Protocol exploit detection: Immediate asset isolation.
6. Integration & Deployment (Pilot3.ai ↔ MIDL)
ERC-4626 Vault Deployment:
Deploy ERC-4626 vault contract on MIDL environment (testnet, then mainnet).
Ensure ABI compatibility and JSON-RPC integration with Pilot3.ai backend.
Interactions:
Deposits/withdrawals managed directly via vault contract interface.
Yield and rebalancing strategies triggered by Pilot3.ai automated API calls.
7. API & Dashboard Technical Specifications
API Endpoints:
/api/v1/deposit(BTC deposits)/api/v1/withdraw(BTC withdrawals)/api/v1/portfolio(Current asset allocations and yields)/api/v1/strategies(Trigger adaptive rebalancing)
Example API Payload:
{
"user_id": "user_12345",
"action": "rebalance",
"parameters": {
"strategy": "defensive",
"trigger": "market_volatility"
}
}
Dashboard Functionality:
Real-time portfolio monitoring.
User-defined strategy customization.
8. Assumptions, Dependencies & Requirements
Assumptions:
BTC tokenization via MIDL fully operational.
Stable and documented Pilot3.ai backend API available.
Dependencies:
MIDL infrastructure operational on Bitcoin mainnet.
ERC-4626 compatibility with MIDL.
External Integrations:
Sovryn, ALEX liquidity pools and lending markets operational and accessible.
9. Compliance & Security Assurance
ERC-4626 standard adoption negates requirement for additional audits.
Recommended continuous monitoring for abnormal activities post-deployment.
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