Hybrid Stabilization Protocol for Cross-Chain Digital Assets Using Adaptor Signatures and AI-Driven Arbitrage

• URL: http://arxiv.org/abs/2506.05708v1
• Date: Fri, 06 Jun 2025 03:14:05 GMT
• Title: Hybrid Stabilization Protocol for Cross-Chain Digital Assets Using Adaptor Signatures and AI-Driven Arbitrage
• Authors: Shengwei You, Andrey Kuehlkamp, Jarek Nabrzyski,
• Abstract summary: Stablecoins face an unresolved trilemma of balancing decentralization, stability, and regulatory compliance.<n>We present a hybrid cryptographic stabilization protocol that combines crypto-collateralized reserves, algorithmic futures contracts, and cross-chain pools.
• Score: 0.2621730497733947
• License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
• Abstract: 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.

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