The convergence of decentralized finance (DEFI) and AI has become one of the biggest stories in Web3, a subsector now known – perhaps inevitably – as Defai. A rapidly growing offshoot of the crypto-economy, Defai involves the use of ‘smart’agents“To simplify and automate on-chain activities like trading, staking and lending. The objective? Profit, of course. Isn’t it ever?
The fundamental premise is rather simple: AI systems can process vast reams of on-chain and off-chain data more efficiently than humans. This means they can also better identify and exploit market opportunities in the permissionless Defi space. Leaving their human masters free to write poetry or, more likely, make memes.
At its core, DeFAI represents a paradigm shift in how we interact with Defi, bringing a level of technological sophistication and automation to the general degeneracy driven by human traders. The idea of AI-AI-managed Web3 wallets and wallets isn’t pie in the sky either, with agent ecosystems now a reality.
Democratize Challenge
Defai’s biggest promise, aside from the potential profits it can generate, is its potential to simplify the inherent complexity of Crypto, making the industry more accessible to mainstream or “normie” users. Just as search engines have acted as a gateway to the internet for many, AI-powered interfaces could help newcomers navigate the often intimidating world of decentralized finance.
This democratization is already visible in the integration of AI into front-end applications, where intelligent interfaces help users understand and interact with various DAPPs. Supporters of AI-AI Challenge Believe it could lay the foundations for smarter governance systems and personalized financial strategies, with services tailored to users’ individual needs and risk preferences.
Web2 agents deserve web3 technology
Of course, AI agents aren’t just deployed in Web3. Back in the real world (because spending a day in Defi can feel like a waking fever dream), they are tapped to handle mundane tasks like processing invoices and managing spreadsheets. While their use benefits office managers and accountants, the truth is that blockchain technology and AI agents go together like peas and carrots.
The nature of public records means that AI agents benefit from greater autonomy and efficiency by jumping ship. After all, the ability to make frictionless cross-border payments with instant settlement is one of blockchain’s greatest strengths. Deploying Web2 agents in Defi is analogous to removing impediments and giving them operational freedom.
Which is not to say that agents somehow deserve this freedom. Ultimately, it’s simply more efficient to deploy them in an environment where they can generate maximum value, without compliant constraints, business hours and legacy systems.
There’s also the tantalizing prospect of traditional companies joining their bots in the flight to Web3. In the near future, retailers could use Defai agents for automated financial settlement, while corporations could use AI for sophisticated treasury management.
Defai’s pioneering projects
Multi-Tunin projects are now using AI in one form or another to make progress in Defi. Take Hey anon For example, a project making waves with its innovative automation framework. Intended for integration into Defi protocols, this recently launched TypeScript-based solution allows agents to manage on-chain interactions with unprecedented security and simplicity.
The key lies in its implementation of a deterministic schema-based format for describing blockchain actions (exchanging eth for USDC if eth > x, for example). A format that allows automation to eliminate the risk of AI “hallucinations” during processing commands. Additionally, as a recent article on X points out, it raises the prospect of Web2 systems integration integrating seamlessly with advanced Web3 tooling.
Another player on the rise is Singularity financewhich is committed to being “the financial engine of AI”. An EVM-enabled Layer 2 blockchain combining high throughput and low fees, it has features such as optimistic rolls and account abstraction and is designed to extend the functionality of Ethereum.
Singularity Finance enables developers and innovators to build and deploy AI-driven applications and services that benefit from deep liquidity and increased accessibility, particularly due to its built-in compliance features such as Onchain identity verification and LMA verifications. It is hoped that these aspects will instill confidence in traditional Web2 companies considering blockchain adoption.
Rocket Networkmeanwhile, is a Layer 1 blockchain focused on enabling interoperability between disparate chains and DAPPs. Recently, the network became linked to Defai thanks to its introduction Consensual learning (CL), a new approach that leverages distributed ledger technology to create decentralized AI models.
CL sets the stage for collaborative AI development without compromising data privacy or security. Participants can develop custom local models using their private data and then only share their model outputs via a secure gossip protocol. This approach could prove particularly useful in data-sensitive fields like healthcare, where the combination of improved accuracy and strong privacy protection could lead to better patient outcomes.
The future of financial automation
The rate of progress in DeFAI suggests a future in which AI-driven financial automation becomes the norm, not the exception. From everyday business transactions to complex financial strategies, the combination of the enormous processing power of AI and the trustless nature of blockchain could completely transform our daily financial interactions.
This transformation also extends beyond simple automation. Singularity Finance’s Real Asset Tokenization (RWA) framework, for example, shows how Defai can enable tokenization AI computing resources and monetization of AI agents. Such innovations could lead to entirely new financial markets and products.
Whatever happens next in Defai, chances are it won’t be boring.
