The convergence of decentralized finance (DeFi) and AI has become one of the main narratives of Web3, a subsector now known – perhaps inevitably – as DeFAI. A rapidly growing offshoot of the crypto-economy, DeFAI involves the use of smart technologies.agents‘ to simplify and automate on-chain activities such as trading, staking and lending. The objective? Profit, of course. Is this never the case?
The fundamental principle is rather simple: AI systems can process vast amounts 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, create 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-managed Web3 wallets and wallets is not a pipe dream either, with agent ecosystems now very much a reality.
Democratizing DeFi
The greatest promise of DeFAI, aside from the potential profits it can bring, is its ability to simplify the complexity inherent in cryptography, thereby making the industry more accessible to mainstream or “standard” users. Just as search engines served as gateways 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 application front-ends, where intelligent interfaces help users understand and interact with various dApps. Proponents of AI Challenge We believe this 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 are not only deployed in web3. Back in the real world (since spending a day in DeFi can feel like a daydream), they are leveraged 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 can 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 means removing chains and giving them operational freedom.
This 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 burdensome compliance constraints, shift schedules, and legacy systems.
There is also the tantalizing prospect of traditional companies joining their bots in the transition to Web3. In the near future, retailers could employ DeFAI agents for automated financial settlement, while businesses could use AI for sophisticated cash management.
DeFAI’s pioneering projects
Many projects are now using AI in one form or another to make progress in DeFi. Take Hi Anon for example, a project that is making waves with its innovative Automate framework. Intended for integration with DeFi protocols, this recently launched TypeScript-based solution allows agents to manage on-chain interactions with unprecedented security and simplicity.
The key lies in implementing a deterministic, schema-based format to describe blockchain actions (swapping ETH for USDC if ETH > X, for example). A format that allows Automate to eliminate the risk of AI “hallucinations” when processing orders. Additionally, as highlighted in a recent article on X, this opens the prospect of seamless integration of Web2 systems with advanced Web3 tools.
Another player on the rise is Financing the singularitywhich considers itself “the financial engine of AI”. EVM-enabled Layer 2 blockchain combining high throughput and low fees, it has features such as optimistic rollups 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 significant liquidity and increased accessibility, including through its built-in compliance features such as data verification. on-chain identity and AML checks. It is hoped that these aspects will inspire confidence in traditional Web2 companies considering blockchain adoption.
Flare Networkmeanwhile, is a layer 1 blockchain aimed at enabling interoperability between disparate chains and dApps. Lately, the network has become linked to DeFAI thanks to its introduction of Consensual learning (CL), a new approach that leverages distributed ledger technology to create decentralized AI models.
CL paves the way for collaborative AI development without compromising data privacy or security. Participants can develop custom local models using their private data and then only share the results of their models via a secure gossip protocol. This approach could prove particularly useful in data-sensitive fields, such as healthcare, where the combination of increased accuracy and strong privacy could lead to better patient outcomes.
The future of financial automation
The pace 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 goes beyond simple automation. Singularity Finance’s Real World Asset (RWA) tokenization framework, for example, demonstrates how DeFAI can enable tokenization of 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.
