AI Native On-Chain Communication

For AI-driven automation to work in DeFi, execution must happen entirely on-chain, ensuring security, transparency, and reliability. However, most AI systems today lack direct integration with blockchain infrastructure, forcing off-chain computation with delayed execution.

This results in:

• High latency – AI must rely on external transaction relayers, slowing execution.

• Limited security – Off-chain bots are vulnerable to MEV attacks, frontrunning, and oracle exploits.

• Execution risks – AI systems must manually sign transactions, exposing private key vulnerabilities.

Faktora’s Solution: AI as a Native On-Chain Executor

Faktora integrates AI execution logic directly into blockchain infrastructure, ensuring that:

• AI agents execute transactions natively on Ethereum and Layer 2s.

• Smart contracts verify execution correctness before transactions settle.

• On-chain security mechanisms prevent unauthorized AI actions.

By embedding AI-driven execution within the blockchain itself, Faktora ensures trustless, real-time DeFi interactions.

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How Faktora Executes AI-Powered On-Chain Transactions

Faktora’s execution model consists of three key components:

1. AI Agents Generate Execution Strategies

   • AI detects optimal trading opportunities, arbitrage gaps, or liquidity shifts.

   • AI selects the most efficient route for execution across DEXs, lending platforms, and staking pools.

2. On-Chain Transaction Signing & Execution

   • AI constructs raw transactions, signs them with a pre-approved execution wallet, and submits them on-chain.

   • Transactions settle instantly, reducing latency compared to off-chain execution models.

3. Smart Contracts Ensure Security & Compliance

   • Faktora’s execution contracts validate transactions before committing them.

   • AI agents must follow predefined execution policies, preventing unauthorized trades.

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Mathematical Model for AI-Based Transaction Execution

The AI execution model follows a reinforcement learning framework, ensuring that agents continuously improve their on-chain transaction logic:

Where:

• ​ is the execution decision vector at time
• represents the reward function (evaluating slippage, gas efficiency, execution success).
• is the learning rate, ensuring that AI adapts over time.

This ensures that Faktora’s AI constantly improves execution logic, minimizing slippage and optimizing transaction speed.

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AI-Optimized Gas Efficiency: Reducing Ethereum Transaction Costs

Ethereum’s gas fees are a major bottleneck for DeFi execution. Faktora solves this by dynamically optimizing transaction batching.

Gas Optimization Techniques in Faktora

Smart Execution Engine & Transaction Efficiency	How It Works	Impact
Transaction Batching	AI combines multiple trades into a single on-chain transaction.	Reduces gas fees by 30-50%.
MEV Protection	AI detects MEV threats and adjusts execution routes.	Prevents frontrunning and sandwich attacks.
Layer 2 Execution	AI prioritizes Layer 2 rollups for gas-efficient transactions.	Cuts execution costs by 90% vs. mainnet.

By optimizing gas usage, Faktora ensures that AI-driven DeFi strategies remain cost-effective.

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Faktora transforms DeFi execution by embedding AI directly into blockchain infrastructure, ensuring:

• Autonomous on-chain trade execution without user input.

• Real-time gas optimization, reducing transaction costs.

• Security-first execution logic, preventing malicious AI actions.

With Faktora, AI is no longer just an assistant—it’s a full DeFi market participant, capable of executing trades, moving liquidity, and optimizing strategies entirely on-chain.