How AIxFI Works

AIxFI employs a multi-faceted approach to analyze the stablecoin yield landscape. Its process can be broken down into several key stages:

Data Aggregation & Analysis

AIxFI constantly ingests and processes a wide array of data from numerous sources, including:

Public Blockchain Data: Transaction history, smart contract interactions, token movements, and on-chain metrics for various stablecoins and DeFi protocols.
DeFi Analytics Platforms: APIs and data from leading platforms like DefiLlama for information such as Total Value Locked (TVL), protocol-specific details, historical APYs, and asset flows.
Risk Assessment Platforms: Data from specialized services like Exponential.fi that provide risk scores and detailed assessments for DeFi protocols and pools.
Market Data: Price feeds for stablecoins and other relevant crypto assets.

This data forms the basis for AIxFI's comprehensive market understanding.

Core Analysis Parameters

When evaluating a potential yield opportunity, AIxFI focuses on several critical parameters:

Annual Percentage Yield (APY): AIxFI distinguishes between Base APY (sustainable yield from core protocol mechanics like lending interest or trading fees) and Total APY (which might include temporary token rewards). It prioritizes sustainable base yields. It also analyzes historical APY (e.g., 7-day, 30-day, 90-day averages) to assess stability.
Total Value Locked (TVL): Higher TVL in a protocol or specific pool can indicate greater user trust and liquidity, serving as a proxy for battle-testedness, at the same time increases in TVL reduce future APY projections.
Yield Paid Out (YPO): Track the total amount of yield distributed to Yield bearing stablecoin holders across different time periods, higher APY are not an indication of actual paid rewards.
Liquidity & Lock-up Conditions: AIxFI assesses the ease with which capital can be deployed and withdrawn. It analyzes any lock-up periods associated with a strategy, weighing the yield premium against the illiquidity duration.
Protocol-Specific Metrics: Depending on the type of DeFi protocol (lending, DEX, derivatives, etc.), AIxFI examines relevant metrics like utilization rates, trading volumes, funding rates, collateralization ratios, etc.
Seasonlity and Cycles: analyzing market cycles, seasonal liquidity flows, and historical patterns

Risk Assessment Framework

AIxFI's goal is to identify the "Safest Highest Yields." This involves a sophisticated risk assessment framework that considers:

Third-Party Risk Scores: Leveraging quantitative scores from platforms like Exponential.fi.
Smart Contract Security: While AIxFI doesn't conduct audits, it factors in the number, age, and reputation of a protocol's security audits.
Peg Stability (for underlying stablecoins): Historical performance and mechanisms for maintaining peg.
Protocol Age & Reputation ("Lindy Effect"): Preference for protocols with a longer, proven track record.
Team & Governance: Transparency and perceived reliability of the team or DAO behind a protocol.
Concentration Risk: Both in terms of assets within a protocol and Interstable's potential allocation to a single protocol.
Market Volatility Impact: How broader market volatility might affect the stability or yield of a particular strategy.

AIxFI translates these factors into an internal risk assessment to score and rank opportunities.

Identifying Optimal Yield Strategies

Based on the aggregated data and risk assessment, AIxFI identifies what it determines to be optimal, diversified yield strategies based on past performances and predicts based on analysis future ones. For the MVP showcase on the Interstable website, this is presented as an illustrative optimal portfolio, demonstrating how AIxFI might construct a balanced basket of stablecoin positions across different protocols and chains to achieve strong risk-adjusted returns.

This process is dynamic; as market conditions and data change, AIxFI's assessment of optimal strategies also evolves. This continuous analysis will be the engine that powers the dynamic rebalancing of the upcoming aiUSD stablecoin.

In the future, AIxFI will automatically rebalance the basket of stablecoins collateralizing aiUSD and enable customers to create personalized stablecoin portfolios tailored to their risk appetite.

PreviousIntroduction to AIxFI NextAIxFI's Output: Market Insights

Last updated 20 days ago

How AIxFI Works

AIxFI employs a multi-faceted approach to analyze the stablecoin yield landscape. Its process can be broken down into several key stages:

Data Aggregation & Analysis

AIxFI constantly ingests and processes a wide array of data from numerous sources, including:

Public Blockchain Data: Transaction history, smart contract interactions, token movements, and on-chain metrics for various stablecoins and DeFi protocols.

DeFi Analytics Platforms: APIs and data from leading platforms like DefiLlama for information such as Total Value Locked (TVL), protocol-specific details, historical APYs, and asset flows.

Risk Assessment Platforms: Data from specialized services like Exponential.fi that provide risk scores and detailed assessments for DeFi protocols and pools.

Market Data: Price feeds for stablecoins and other relevant crypto assets.

This data forms the basis for AIxFI's comprehensive market understanding.

Core Analysis Parameters

When evaluating a potential yield opportunity, AIxFI focuses on several critical parameters:

Annual Percentage Yield (APY): AIxFI distinguishes between Base APY (sustainable yield from core protocol mechanics like lending interest or trading fees) and Total APY (which might include temporary token rewards). It prioritizes sustainable base yields. It also analyzes historical APY (e.g., 7-day, 30-day, 90-day averages) to assess stability.

Total Value Locked (TVL): Higher TVL in a protocol or specific pool can indicate greater user trust and liquidity, serving as a proxy for battle-testedness, at the same time increases in TVL reduce future APY projections.

Yield Paid Out (YPO): Track the total amount of yield distributed to Yield bearing stablecoin holders across different time periods, higher APY are not an indication of actual paid rewards.

Liquidity & Lock-up Conditions: AIxFI assesses the ease with which capital can be deployed and withdrawn. It analyzes any lock-up periods associated with a strategy, weighing the yield premium against the illiquidity duration.

Protocol-Specific Metrics: Depending on the type of DeFi protocol (lending, DEX, derivatives, etc.), AIxFI examines relevant metrics like utilization rates, trading volumes, funding rates, collateralization ratios, etc.

Seasonlity and Cycles: analyzing market cycles, seasonal liquidity flows, and historical patterns

Risk Assessment Framework

AIxFI's goal is to identify the "Safest Highest Yields." This involves a sophisticated risk assessment framework that considers:

Third-Party Risk Scores: Leveraging quantitative scores from platforms like Exponential.fi.

Smart Contract Security: While AIxFI doesn't conduct audits, it factors in the number, age, and reputation of a protocol's security audits.

Peg Stability (for underlying stablecoins): Historical performance and mechanisms for maintaining peg.

Protocol Age & Reputation ("Lindy Effect"): Preference for protocols with a longer, proven track record.

Team & Governance: Transparency and perceived reliability of the team or DAO behind a protocol.

Concentration Risk: Both in terms of assets within a protocol and Interstable's potential allocation to a single protocol.

Market Volatility Impact: How broader market volatility might affect the stability or yield of a particular strategy.

AIxFI translates these factors into an internal risk assessment to score and rank opportunities.

Identifying Optimal Yield Strategies

In the future, AIxFI will automatically rebalance the basket of stablecoins collateralizing aiUSD and enable customers to create personalized stablecoin portfolios tailored to their risk appetite.