Decentralized HTLC Token Swapping Enhanced by Predictive Analytics and Generative AI

Abstract

The increasing use of decentralized finance (DeFi) accelerates the demand for trustless, secure mechanisms for crosschain token exchange. This paper outlines a complete model for atomic token swaps based on the Hashed Timelock Contract (HTLC) scheme, allowing for intermediary-free token exchanges across disparate blockchain systems. The system makes use of the local blockchain simulation framework, Ganache, to design and test cross-chain interactions in a sandbox environment. To improve the decision-making capabilities for users, a real-time cryptocurrency price forecasting subsystem is added which utilizes machine learning models to analyze and predict the market and its volatility. Additionally, the system harnesses Generative AI capabilities through prompt engineering to tailor investment advice for individual users by analyzing the market, their preferred risk level, expected returns, and provide investment strategies aligned with users' preferences. Apart from sophisticated trading algorithms, the solution also offers a simple dashboard for market price monitoring and performs rapid token swaps at the user's command. Smart contracts are implemented using Solidity, token and price feeds are ports to Web3.js, predictive analytics is done in Python, while the frontend and backend are structured in Next.js alongside Node.js. System testing validates hypotheses on the provision of secure cross-chain swaps within one transaction without compromising.