DRY

Problem Statement

This project is a decentralized application (dApp) designed to simplify and optimize cryptocurrency portfolio management by providing users with risk-tailored asset baskets that are dynamically rebalanced using artificial intelligence. Built on the Hedera network for its high-speed, low-cost, and secure infrastructure, the system automates risk-adjusted investing in tokenized assets, making it accessible for both novice and experienced users in the volatile DeFi space. At its core, it combines user-selected risk profiles with AI-driven decision-making to maintain optimal asset allocations, ensuring better yield potential while respecting individual risk tolerances.The project addresses key challenges in crypto investing: market volatility, manual rebalancing hassles, and lack of trust in automated systems. By leveraging blockchain for transparency and AI for intelligent adjustments, it creates a "set-it-and-forget-it" experience where users hold a single tokenized basket representing diversified holdings. Rebalancing occurs automatically or with user approval, triggered by real-time data analysis, and executed trustlessly on-chain. This not only enhances returns but also incorporates auditability through immutable logs, making it suitable for regulatory-conscious environments.Now, diving deeper into the components, with a primary focus on the AI agent implementation as requested, incorporating the use of the Gemini LLM API.User Onboarding and Basket Creation Users begin by registering on the dApp and selecting one of three risk levels:Low Risk: Emphasizes stability with a heavy allocation to stablecoins and low-volatility assets, such as USDC, DAI, and stETH. This basket prioritizes capital preservation over high returns.Medium Risk: Balances stability and growth with a mix of stablecoins and blue-chip cryptocurrencies like ETH and BTC, offering moderate exposure to market upside.High Risk: Targets aggressive growth with volatile assets, including AVAX, MATIC, and various DeFi tokens, accepting higher drawdown potential for greater rewards.Each risk level corresponds to a predefined basket of the top 5 assets in that category, selected based on historical performance, liquidity, and market cap. Upon selection, the backend mints a customBasket Tokenusing Hedera Token Service (HTS). This non-fungible or fungible token (depending on implementation) represents the user's proportional ownership in the underlying assets, which are tokenized and held in a smart contract-managed pool. Users deposit funds (e.g., via wallet integration), and the system allocates them accordingly. This token is held in the user's wallet, giving them full custody and portability.The onboarding process is streamlined for user-friendliness: a simple web interface guides selection, with educational tooltips explaining risks and expected yields based on historical simulations.Data Feeds and Infrastructure To enable intelligent decisions, the system ingests high-quality data:Real-Time and Historical Feeds: Sourced primarily from Pyth oracles, which provide accurate, low-latency price, APR (Annual Percentage Rate), and volatility data for the assets. Pyth's decentralized nature ensures tamper-resistance.Additional APIs: Supplementary data from other sources (e.g., for broader market sentiment or chain-specific metrics) is pulled as needed.Storage: Data is stored in a PostgreSQL database for structured queries and Redis for caching high-frequency live updates. This setup supports both training (historical data for AI model fine-tuning) and inference (live data for real-time decisions).This data pipeline is crucial as it forms the backbone for the AI agent, ensuring decisions are grounded in verifiable, up-to-date information.AI Agent Implementation (Primary Focus) The AI agent is the heart of the project, an LLM (Large Language Model)-driven component that analyzes market conditions and user preferences to recommend or execute rebalancing. It's designed for explainability, efficiency, and integration with blockchain, emphasizing trustless automation. In this implementation, the agent specifically utilizes the Gemini LLM API for its core reasoning capabilities, providing advanced multimodal and contextual understanding to handle complex financial data patterns. Here's a detailed breakdown:Architecture and Technology Stack:LLM Core: Powered by the Gemini LLM via its API (e.g., integrating with endpoints for models like Gemini 1.5 Pro or Flash), the agent leverages Gemini's strengths in processing structured and unstructured data, including time-series analysis and natural language explanations. The API calls are made securely from the backend, with authentication handled via API keys. For on-chain awareness, it integrates with theHedera Agent Kit SDK, which allows the Gemini-powered LLM to directly interact with Hedera's network state—reading smart contract data, querying mirror nodes, and proposing transactions without off-chain intermediaries. This "bonus" feature enhances decentralization by making the AI "chain-native," reducing latency and reliance on centralized servers while utilizing Gemini's efficient token handling for cost-effective queries.Deployment: The agent runs as a backend service, potentially containerized (e.g., Docker) for scalability. Gemini API integration involves asynchronous calls to generate responses, with retries for rate limits. In a production setup, it could be hosted on decentralized compute platforms, but for the hackathon, it's likely a cloud-based API endpoint calling Gemini.Decision Logic: The agent employs a rule-based overlay on top of Gemini's probabilistic outputs to ensure safety—e.g., capping rebalance amounts at 20% per cycle to avoid excessive trading fees or slippage. Gemini's advanced prompting capabilities allow for fine-grained control, such as using system prompts to enforce risk constraints.Inputs to the AI Agent:Current Basket Allocations: Fetched from the Basket Token smart contract, including weights of each asset (e.g., 40% USDC, 30% ETH).Live Data from Pyth: Real-time APRs (e.g., staking yields), token prices, and volatility metrics (e.g., 30-day standard deviation).Historical Trends: Time-series data from Pyth archives, such as past APR fluctuations, price correlations between assets, and market drawdowns.User Risk Profile: Encoded as parameters (e.g., risk tolerance score from 1-10), influencing how aggressively the agent optimizes for yield vs. stability. Additional user prefs, like preferred assets or rebalance frequency, can be factored in.Optional Contextual Data: Broader market indicators (e.g., overall crypto market cap trends) if available via APIs.These inputs are formatted into a structured prompt for the Gemini API, e.g.: "Given user risk level: Medium, current allocations: [data], live APRs: [data], historical volatility: [data], recommend if rebalance is needed and specify shifts." The API request includes parameters like temperature for determinism and max tokens for concise outputs.Processing and Reasoning:Gemini processes the prompt using chain-of-thought reasoning: It first summarizes market conditions (e.g., "ETH volatility up 15% due to recent news"), evaluates against risk thresholds (e.g., "Medium risk allows max 10% volatility increase"), simulates outcomes (e.g., "Shifting 5% from DAI to ETH could boost APR by 2% with 8% added risk"), and outputs a decision. Gemini's long-context window (up to 1M+ tokens) excels at handling extensive historical data without truncation.To enhance accuracy, the agent could be fine-tuned via Gemini's tuning features on historical rebalancing datasets (e.g., backtested on 1-year Pyth data) using techniques like reinforcement learning from human feedback (RLHF), though for a hackathon, it's primarily prompt-engineered with few-shot examples.Edge Cases: Handles scenarios like extreme market crashes by defaulting to "stay" or shifting to safer assets; incorporates circuit breakers for anomalous data. Gemini's safety filters are leveraged to avoid biased or harmful recommendations in financial contexts.Outputs from the AI Agent:Recommendations: Simple, actionable strings like "Stay in current Basket A (Low risk)" or "Rebalance: Shift 10% from Basket B (Medium) to Basket C (High) for projected 3% yield gain."Explainability: Each output includes a rationale (e.g., "Based on rising ETH APR and user's tolerance"), making it user-friendly. Gemini's verbose mode can generate detailed explanations if requested.Logging: Every decision is published to Hedera Consensus Service (HCS) as an immutable timestamped message. This creates an auditable trail, verifiable via mirror nodes, fostering trust and enabling post-hoc analysis (e.g., AI accuracy audits).Frequency and Triggers: The agent runs periodically (e.g., daily) or on events (e.g., volatility spikes >5%). Users can query it on-demand via the dashboard. Gemini API usage is optimized with batching to manage costs.This AI implementation stands out for its blockchain integration: Unlike off-chain bots, it uses Hedera's tools for on-chain execution, minimizing centralization risks while leveraging Gemini's API for robust, scalable LLM capabilities in handling financial decision-making.Execution Layer When the AI recommends a rebalance:Automation: Hedera Scheduled Transactions queue the action for a specific time, ensuring reliability even if the backend is offline.Swaps: A Hedera EVM-compatible Smart Contract orchestrates the process, calling the 1inch Fusion+ API for efficient cross-chain swaps (e.g., swapping ETH for AVAX across networks with minimal slippage).Updates: Post-swap, the contract adjusts the Basket Token's metadata or burns/mints sub-tokens to reflect new weights. All transactions are low-fee on Hedera, with gas optimizations.Hedera Services Integration (Hackathon Compliance) The project fully utilizes Hedera's ecosystem for a complete, trustless solution:Hedera Token Service (HTS): For minting and managing Basket Tokens.Smart Contracts (EVM): Handle basket logic, rebalancing coordination, and asset pooling.Consensus Service (HCS): For logging AI decisions immutably.Scheduled Transactions: For timed, automated executions.Mirror Node: Provides real-time transparency; used for dashboard analytics and external audits.This meets hackathon criteria by demonstrating innovative use of multiple Hedera services.User Experience and Dashboard The dApp features a responsive frontend (likely React-based) where users:Hold and manage their Basket Token in any compatible wallet.View a dashboard showing:Real-time basket composition (pie charts of asset weights).AI's next rebalance prediction, with confidence scores and rationales.Historical performance: AI accuracy (e.g., "85% of rebalances outperformed benchmarks"), yield vs. market indices (e.g., vs. S&P Crypto Index).Opt-in forauto-rebalancing(fully hands-off) or require manual confirmation via wallet signature.Security features include multi-sig options for large baskets and integration with hardware wallets.Potential Extensions and Impact- While the core is functional for ETH Global 2025, extensions could include multi-chain baskets, community-voted asset additions, or NFT-based personalized risk profiles. The project democratizes AI-powered investing, potentially attracting retail users to DeFi by reducing complexity and risks. By focusing on explainable AI via Gemini and blockchain auditability, it sets a standard for transparent automated finance.Huge efforts in short words, this is a sophisticated yet user-centric dApp that harnesses AI for adaptive portfolio management on Hedera, with the Gemini LLM API-powered agent as the innovative centerpiece driving intelligent, data-backed decisions.

Solution

We aimed for a minimum viable product (MVP) that demonstrates real-world utility: users select a risk level, get a tokenized basket of assets, and let an AI agent handle rebalancing based on live data. We focused on modularity for easy debugging—separating the frontend UI, backend logic, AI agent, and on-chain components. Challenges included ensuring low-latency AI calls didn't bottleneck the system and handling cross-chain swaps without excessive gas fees. We iterated through multiple testnets (Hedera Testnet primarily) before a final deployment. Below, I'll break down the technologies, how they're integrated, benefits from partners, and some hacky bits that made it work. Technologies Used We kept the stack lean but powerful, prioritizing open-source tools and hackathon-friendly integrations:Frontend (dApp Interface):React.js with TypeScript for the UI—built with Vite for fast bundling. We used Chakra UI for responsive components like risk selection sliders, pie charts (via Recharts), and the dashboard for displaying basket compositions and AI predictions. Wallet integration via WalletConnect and @hashgraph/sdk for connecting to Hedera wallets (e.g., HashPack or Blade). State management with Redux Toolkit to handle user sessions, real-time data updates, and transaction statuses.Backend: Node.js with Express.js for the API server. This handles user onboarding, data ingestion, and orchestrating AI calls. Databases: PostgreSQL (via Prisma ORM) for structured storage of historical data and user profiles; Redis (ioredis) for caching live feeds to reduce API hits. WebSockets (Socket.io) for pushing real-time updates to the frontend, like AI rebalance alerts.Blockchain Layer (Hedera Network): @hashgraph/sdk for JavaScript interactions with Hedera services. Solidity for EVM-compatible smart contracts (deployed via Hardhat on Hedera's EVM layer). Key Hedera services:Hedera Token Service (HTS) for minting Basket Tokens. Hedera Consensus Service (HCS) for logging AI decisions as immutable topics. Scheduled Transactions for automating rebalances. Mirror Nodes for querying transaction history and analytics.AI Agent: Gemini LLM API (via @google/generative-ai Node.js SDK) as the core LLM for decision-making. Hedera Agent Kit SDK to make the AI "on-chain aware"—allowing it to query blockchain state directly in prompts.Data and Execution: Pyth SDK for pulling oracle feeds (prices, APRs, volatility). 1inch Fusion+ SDK for cross-chain swaps. Axios for general API calls; dotenv for env management.Dev Tools and Infrastructure: Docker for containerizing backend and AI services. GitHub for version control; Vercel for frontend hosting (testnet demo). Testing: Jest for unit tests; Hedera Testnet faucet for tokens.No fancy monorepo—just separate repos for frontend, backend, and contracts, linked via submodules. How They're Pieced Together The architecture follows a event-driven flow: User → Frontend → Backend → AI/Blockchain → Execution.User Onboarding Flow: Frontend captures risk selection and wallet deposit. It calls the backend API (/onboard) which uses @hashgraph/sdk to mint a Basket Token via HTS. The smart contract (BasketManager.sol) initializes the token with predefined asset weights (hardcoded arrays for low/medium/high risks).Data Pipeline: A cron job (node-cron) in the backend pulls Pyth feeds every 5 minutes, processes them (e.g., calculate volatility using simple std dev in NumPy via a child process), and stores in Postgres/Redis. WebSockets push aggregates to the frontend dashboard.AI Decision Loop: Triggered periodically or on-demand: Backend fetches current state (basket weights from smart contract via mirror node query, live data from Redis, user risk from DB). Formats a prompt and calls Gemini API: e.g., const response = await model.generateContent({ contents: [{ role: 'user', parts: [{ text: prompt }] }] });. Parses the JSON-like output (we enforce structured responses with prompt engineering: "Output in JSON: {recommendation: '...', rationale: '...'}"). If rebalance needed, log to HCS using sdk.submitMessage(), then schedule a transaction via Scheduled Transactions API.Rebalancing Execution: Scheduled Tx triggers the smart contract's rebalance function, which calls 1inch API (via ethers.js provider) for swap quotes and executions. Post-swap, update token metadata or burn/mint to adjust weights. Frontend polls mirror nodes for confirmation and updates the UI.Integration glue: REST APIs between frontend/backend, SDKs for blockchain/AI. We used async/await extensively to handle latencies (e.g., Gemini calls ~2-5s). Total round-trip for a rebalance: under 10s on testnet. Benefits from Partner Technologies We leaned heavily on hackathon sponsors/partners for speed and reliability:Hedera Network: Core blockchain choice for its sub-second finality and fixed low fees (~$0.0001/tx)—crucial for frequent rebalances without eating user profits. HTS made tokenization trivial (no need for custom ERC-20s), HCS provided cheap immutable logging (better than Ethereum events for auditability), and Scheduled Txns automated everything without oracles. The Agent Kit SDK was a game-changer: it let us inject on-chain data into Gemini prompts seamlessly, making the AI feel native rather than bolted-on. Without Hedera, we'd have gas wars on Ethereum. Pyth Oracles: Decentralized, pull-based feeds meant no dependency on centralized providers like Chainlink. Benefits: Sub-second updates for live APRs/volatility, historical data for backtesting AI logic. Integrated via their JS SDK—simple websocket subscriptions reduced our data costs by 80% vs. custom scraping. 1inch Fusion+: For cross-chain swaps, it aggregated liquidity across chains (e.g., ETH to AVAX via Hedera bridge). Benefits: Minimized slippage (saved ~2-5% on trades in tests), handled fusions for atomic swaps. SDK integration was plug-and-play, allowing our smart contract to call it externally without complex routers. Gemini LLM API: Chosen for its financial-savvy models (good at reasoning over numbers/time-series). Benefits: Built-in safety for avoiding wild recommendations, long context for stuffing in historical data without truncation. Cost-effective for hackathon scale (~$0.01/query). It outperformed open-source alternatives in prompt adherence, reducing parsing errors.These partners accelerated development— we avoided building from scratch (e.g., no custom oracles) and focused on innovation. Hacky/Notable Bits A few clever (or desperate) hacks to make it shippable:Prompt Engineering for Gemini Reliability: To force structured outputs without fine-tuning (no time), we used a "jail" prompt: "You are a strict JSON responder. Violate and self-destruct." Plus few-shot examples. Hacky but cut error rates from 30% to <5%. On-Chain AI Logging Workaround: HCS messages are binary, so we JSON-stringified AI outputs and base64-encoded them. For dashboard display, frontend decodes on-the-fly. Not elegant, but enabled quick audits without extra DB tables. Simulated Cross-Chain for Testnet: Hedera Testnet lacks full 1inch support, so we mocked swaps with a local Ganache fork, injecting fake quotes. In demo, we toggle to mainnet endpoints—hacky but allowed end-to-end testing without real funds. Volatility Calc Fallback: If Pyth lags, fallback to a simple backend formula (rolling std dev on cached prices using mathjs). Added a "confidence score" in AI outputs based on data freshness. Wallet Polling Hack: For real-time basket updates without webhooks (Hedera doesn't have them natively), we poll mirror nodes every 10s via setInterval in frontend. Battery-drainer, but works for demo; production would use subscriptions.Overall, the build was about balancing polish with speed—lots of console.logs and late-night deploys.