DECENTRALIZED VERIFICATION AND EXCHANGE SYSTEM FOR DIGITAL ASSETS: EVALUATING SMART CONTRACT ESCROW AND PREDICTIVE ANALYTICS ON LAYER-2 NETWORKS

Abstract

The secondary trade of digital assets like gaming license rights and virtual goods relies primarily on centralized platforms or unofficial third-party escrows, leading to high costs, single points of failures, and susceptibility to fraud, especially in chargeback cases. In this paper, we will describe the architecture and theoretical process of development for a proposed. Decentralized Digital Asset Exchange (DDAE) using blockchain technology. The proposed DDAE would facilitate the tokenization of digital assets based on ERC-1155 standard tokenization and provide a trustless solution with atomic swaps via smart contracts, which theoretically eliminates the risks of counterparty defaults. Our architectural design will be built for Polygon Amoy testnet with scalability benefits. The proposed DDAE will use random forest ML classification off-chain on optimal gas price configuration and anomalies in the transaction. This paper will conduct our theoretical evaluation using a market adoption dynamics agent based model. Our theoretical analysis will focus on transactions per second (TPS), latency, and comparison of gas fees to regular centralized commission-based model. Our findings have theorized that Layer-2 decentralized escrow combined with predictive analytics could become a feasible alternative for DDAE.