X402 Documentation

Introduction

X402 represents a paradigm shift in automated cryptocurrency trading. Built on the revolutionary X402 AI module developed by ai16z, this is the first AI agent capable of executing complete trading strategies autonomously without human intervention.

What Makes X402 Different?

Traditional trading bots follow pre-programmed rules and require constant human oversight. X402 is fundamentally different:

• Adaptive Intelligence: X402 doesn't just execute predefined strategies—it develops its own based on market conditions
• Contextual Understanding: Analyzes social sentiment, on-chain metrics, liquidity depth, and holder distribution simultaneously
• Complete Autonomy: From market scanning to trade execution and position management—all automated
• Transparency: Every decision is logged and can be audited in real-time

System Architecture

X402 is built on a sophisticated multi-layer architecture designed for speed, reliability, and security.

Core Components

The X402 AI Module

Developed by ai16z, the X402 AI module represents the cutting edge of autonomous trading technology.

Neural Architecture

The X402 module employs a hybrid architecture combining:

Decision Making Process

1. Signal Generation: Multiple models generate independent trading signals
2. Confidence Scoring: Each signal is assigned a confidence level (0-100%)
3. Risk Assessment: Potential downside is calculated for each opportunity
4. Portfolio Analysis: Current holdings and exposure are considered
5. Consensus Building: Signals are weighted and aggregated
6. Execution Decision: Final go/no-go determination with position sizing

Trading Engine

X402's trading engine is optimized for the unique characteristics of memecoin markets on BNB Chain and other networks.

Market Analysis

The system analyzes multiple dimensions simultaneously:

Trade Execution Strategy

X402 employs sophisticated execution algorithms to minimize slippage and maximize profitability:

// Simplified execution logic
if (signal.confidence > THRESHOLD && risk.acceptable) {
    position_size = calculate_optimal_size(
        portfolio_balance,
        risk_score,
        confidence_level
    );
    
    entry_price = get_optimal_entry(
        liquidity_pools,
        slippage_tolerance
    );
    
    execute_trade({
        token: signal.token,
        amount: position_size,
        max_price: entry_price,
        stop_loss: calculate_stop_loss(),
        take_profit: calculate_take_profit()
    });
}

Risk Management

X402 implements institutional-grade risk management protocols adapted for the cryptocurrency market.

Position Sizing

Dynamic position sizing based on:

• Kelly Criterion: Optimal bet sizing based on edge and odds
• Volatility Adjustment: Smaller positions in high-volatility tokens
• Portfolio Percentage: Maximum 5-10% per position
• Correlation Analysis: Reduced exposure to correlated assets

Stop Loss Mechanisms

• Fixed Percentage: Standard stop-loss at predetermined levels
• Trailing Stops: Lock in profits as price moves favorably
• Volatility-Based: ATR-adjusted stops for different market conditions
• Time-Based: Exit positions that don't perform within expected timeframe

Circuit Breakers

Automatic trading halts trigger under these conditions:

• Daily loss exceeds 5% of portfolio value
• Consecutive losing trades exceed threshold (default: 5)
• Extreme market volatility detected (VIX-equivalent spike)
• Unusual on-chain activity patterns
• Smart contract vulnerability detected in holdings

Integration Guide

Getting started with X402 is straightforward. The system is designed for easy deployment and configuration.

Prerequisites

• BNB Chain wallet with BNB for gas fees
• Initial trading capital (minimum recommended: 0.5 BNB)
• API key from supported exchanges (optional for CEX trading)

Setup Process

1. Wallet Connection: Connect your Web3 wallet (MetaMask, Trust Wallet, etc.)
2. Risk Profile: Select your risk tolerance (Conservative, Moderate, Aggressive)
3. Trading Parameters: Set maximum position sizes and stop-loss preferences
4. Approval: Approve the X402 smart contract to trade on your behalf
5. Activation: Enable the bot and start autonomous trading

Configuration Options

{
  "risk_level": "moderate",
  "max_position_size": "5%",
  "max_daily_loss": "3%",
  "trading_pairs": ["WBNB/USDT", "BUSD"],
  "strategies": ["momentum", "mean_reversion"],
  "stop_loss": "7%",
  "take_profit": "15%",
  "max_open_positions": 5
}

API Reference

For developers building on top of X402 or integrating with external systems.

REST API Endpoints

Response:
{
  "status": "active",
  "uptime": "24h 35m",
  "total_trades": 142,
  "win_rate": 67.6,
  "pnl_24h": "+12.4%",
  "open_positions": 3
}

Response:
{
  "positions": [
    {
      "token": "PEPE",
      "entry_price": "0.00000123",
      "current_price": "0.00000145",
      "pnl": "+17.9%",
      "size": "0.3 BNB"
    }
  ]
}

Request:
{
  "max_position_size": "8%",
  "stop_loss": "5%"
}

Response:
{
  "success": true,
  "message": "Configuration updated"
}

WebSocket Streams

Real-time updates via WebSocket connection:

ws://api.x402.ai/stream

Events:
- trade.opened
- trade.closed
- position.updated
- alert.triggered
- signal.generated

Security

X402 employs multiple layers of security to protect user funds and data.

Smart Contract Security

• Audited Contracts: All smart contracts audited by CertiK and PeckShield
• Non-Custodial: You maintain control of your funds at all times
• Timelock: Critical functions have 24-hour timelock for transparency
• Multi-Sig: Contract upgrades require 3-of-5 multi-signature approval

Operational Security

• Encrypted Communication: All API calls use TLS 1.3 encryption
• Rate Limiting: Protection against DDoS and brute force attacks
• Private Keys: Never transmitted or stored on servers
• Monitoring: 24/7 system monitoring and anomaly detection

Rug Pull Protection

X402 automatically analyzes tokens for common rug pull indicators:

• Unlocked liquidity
• Excessive token concentration in few wallets
• Minting capabilities still active
• Hidden transfer taxes or blacklist functions
• Anonymous or new developer wallets

Frequently Asked Questions