> For the complete documentation index, see [llms.txt](https://zap-pilot.gitbook.io/zap-pilot/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://zap-pilot.gitbook.io/zap-pilot/product/protocol-mechanics.md).

# Protocol Mechanics

### 🧠 Protocol Mechanism

Zap Pilot operates as a non-custodial, algorithmic asset allocation system. Users maintain full control of their funds via smart AA wallets. The protocol provides allocation suggestions and execution tools, but cannot move user assets without explicit approval.

#### 1. User Deposit

Users interact with the protocol through an Account Abstraction (AA) wallet. Upon deposit, funds are routed into a thematic vault containing a curated set of DeFi protocols.

#### 2. Vault Strategy

Each vault represents a strategy (e.g. stablecoin yield, liquid staking tokens, or cross-chain opportunities), and contains multiple pools. These are dynamically weighted based on expected performance and risk.

#### 3. Kelly Allocation

Vault weights are determined using the Kelly Criterion. This strategy calculates the optimal allocation to each pool based on its expected return and variance, maximizing long-term geometric growth:

  **weight = expected\_return / variance**

This provides a systematic balance between growth and risk management.

#### 4. Rebalancing (User-Driven)

Since funds remain in the user’s AA wallet, the protocol cannot perform rebalancing directly. Instead:

* **Quarterly**: Users receive an email with updated Kelly-based allocation suggestions
* **Frontend**: Users can trigger a one-click rebalance via the interface, which is executed from their own wallet

#### 5. Asset Flow Overview

{% @mermaid/diagram content="graph TD
A\[User deposits via AA wallet] --> B\[Vault applies Kelly Allocation]
B --> C\[Funds distributed to DeFi pools across chains]
C --> D\[Quarterly email: rebalance suggestion sent to user]
D --> E\[User triggers rebalance via frontend interface]
" %}

<figure><img src="/files/AceyyjlLU1VhTVrQP0ty" alt=""><figcaption></figcaption></figure>

***→*** [***Try it NOW***](https://app.awp-capital.com/) ***←***


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