The DeFi landscape has been marked by impressive growth, but persistent volatility remains a defining feature as 2025 draws to a close. The ecosystem hit a record $237 billion in total value locked (TLV) in Q3 2025, but the exuberance was short-lived. By the end of November, total TVL had contracted by $55 billion, falling to $123 billion.
Despite these sharp fluctuations, participation in DeFi has not only remained stable, but has increased significantly. More than 14.2 million wallets have been used in the ecosystem this year, and Ethereum continues to capture approximately 63% of all DeFi activity.
This high level of participation can be seen as a testament to the potential of DeFi. However, some experts say volatility has exposed a fundamental challenge: the constant need to react to market conditions, making success out of reach for most users.
Users are expected to constantly monitor liquidity ranges, adjust their positions, and navigate changing arbitrage opportunities. This has created a paradox: despite the claim that money grows on its own, DeFi participants are actually burdened with tedious manual tasks to maximize their returns.
An example of this view is Ron Bodkin, a former Google executive who now leads the AI Agent Protocol Theoriq team. Bodkin claims to have seen the burden on daily users increase as DeFi has grown.
“Most people came to DeFi hoping their money would work for them,” says Bodkin.
“But somehow they worked for their money: checking the charts at midnight, adjusting the ranges between meetings. It’s a bit backwards and it wears users out.”
According to Bodkin, real passivity won’t come from asking users to do even more, but from completely rethinking how output is managed. This feels less like the yield-chasing days of cycles past and more like a search for tools that don’t rely on users being glued to their wallets.
Introducing AI into DeFi without the black box problem
Theoriq’s new protocol, AlphaVault, is part of a broader shift toward more autonomous forms of DeFi management. Over the past year, more projects have begun to experiment with the overlap between DeFi and AI (sometimes called DeFAI), using agents to help automate routine decisions and keep up with rapidly changing markets.
This is the kind of experimentation that has slowly evolved from hackathon curiosity to something that protocol teams now discuss as part of long-term roadmaps. Bodkin adds:
“We’re seeing more interest in AI in DeFi, but the real challenge is making sure people can understand and trust what these agents are doing. Transparency needs to grow alongside automation, otherwise none of this scales the way people hope.”
AlphaVault is among DeFi vaults experimenting with the use of specialized AI agents to directly manage user capital. Instead of relying on simple rule-based composition tools, it uses a multi-agent system designed to adapt to changing market conditions. This configuration was tested under real pressure during Theoriq’s testnet, which processed over 65 million agent requests across 2.1 million wallets.
According to the team, one of the main differences between it and other AI Agent protocols is how it handles transparency and security. Previous attempts have often been criticized for hiding how decisions were made.
AlphaVault addresses this problem with “policy cages,” which are smart contract rules that define exactly what an agent is allowed to do, from asset types to position sizes. These limits are intended to give users a clearer idea of how the system works and to reduce risks observed in previous AI experiments.
Upon launch, AlphaVault integrates with established and trusted partners in the Ethereum yield space. These include Lido’s stRATEGY Vault, curated by Mellow Protocol, and Chorus One’s MEV Max, powered by StakeWise.
These partnerships allow AlphaVault to allocate capital to established Ethereum yield strategies that have been used across the ecosystem. The idea is to give users a way to earn returns without constantly checking or adjusting their positions, although the effectiveness of this in practice will depend on the long-term performance of the system.
Seed liquidity as many DeFi projects now do
Across DeFi, early participation programs have become a common way for projects to generate liquidity and establish an initial base of total value locked (TVL), giving new systems the ability to operate in real-world conditions. AlphaVault is taking a similar path.
To launch the vault, Theoriq launched an incentivized seed phase where the community can lock up ETH and earn points that convert into $THQ rewards. As this phase progresses, TVL gradually transitions from locked capital to real capital managed within AlphaVault by its autonomous agents.
It’s a familiar pattern in DeFi, but in this case the capital doesn’t just sit around but becomes the fuel for a system designed to operate with minimal manual oversight, the team claims.
Where things get more interesting is in how $THQ is supposed to work in the future. Instead of serving solely as an incentive, Theoriq plans to make it a reputational token that will allow users to rely on AI agents they believe perform well.
If an agent behaves poorly or fails to meet expectations, these stakes can be partially reduced. This mechanism aims to maintain high quality and discourage reckless behavior.
This approach reflects a broader industry effort to increase accountability in automated systems. Rather than relying on marketing claims or opaque performance reports, the idea is to let reputation form directly based on the behavior of these agents over time.
In theory, this creates a system where trust is not based on personalities or promises, but on visible on-chain performance, and where the community has a direct role in determining which AI agents get more responsibility.
Where is DeFi going after the yield-seeking era
Theoriq hopes to shift the industry discussion away from larger APYs and focus on reducing the amount of work users are expected to do. It’s designed based on the idea that developers are looking for ways to offload the constant monitoring, rebalancing, and decision-making that most people still do manually.
The goal is not to remove users from the process, but to create tools that support the routine and time-sensitive parts of on-chain management so that people don’t have to treat DeFi as a side hustle.
According to the team, users are increasingly interested in systems that can operate more consistently in the background, reacting to market conditions without requiring them to intervene every few hours. This type of automation is increasingly seen as the natural next step for an industry that wants to mature, evolve and appeal to a wider audience.
It is within this broader push for more reliable and transparent on-chain automation that Theoriq and its AlphaVault system may make sense. Whether AI-managed safes will become the norm or remain early experiments remains an open question, but the direction of the industry makes their arrival seem far from accidental.
