A Look at the Rise of Autonomous Agents

AI agents are one of the biggest buzzwords around and they’re propagating into all kinds of businesses and applications, but few use cases are quite as exciting as the opportunity to automate decentralized finance. 

DeFi agents, sometimes known as DeFAI, have captured the imagination of crypto investors with their ability to analyze financial markets, track asset prices, and monitor liquidity protocols  24/7 to execute trades autonomously, based on the user’s investment goals. 

The total market capitalization of the crypto AI industry reportedly hit a staggering $48.8 billion earlier this year, with AI agents making up a significant portion of that figure at $16.93 billion. It’s an awful lot of capital entrusted with a bunch of algorithms, but what makes the idea so attractive? 

DeFI AI Agents Explained

The answer is fairly simple. AI agents can overcome the limitations of humans by acting as a kind of assistant that makes decisions on their behalf. They use technologies such as natural language processing, reinforcement learning, and machine learning to understand their users, analyze data, make decisions, and take actions for their users. It’s kind of like having a digital assistant that never sleeps, but instead just watches intently, learning from its previous actions and their consequences to get better at its job over time.  

While AI agents can exist in many contexts, they’re especially powerful in the data-centered world of blockchain. Their ability to monitor on-chain transactions, engage with smart contracts, and trigger trades at any time is extremely available. Moreover, the transparency of blockchain means they have ample data from which they can learn to improve their decision-making skills, leveling the playing field between the rich and not-so-rich investors. 

AI agents in DeFi offer a powerful combination of constant availability, full autonomy, and verifiable trust. When a user deploys an AI agent on a blockchain like Ethereum or Solana, they gain access to vast amounts of data on a decentralized network that cannot be censored or taken offline. 

Because DeFi AI agents never sleep, they can be set up to monitor crypto markets 24/7, allowing them to execute trades and balance portfolios to manage risk around the clock. This is an advantageous capability in crypto markets that are plagued by extreme volatility. Moreover, the tokenized incentives in blockchain networks can reward AI agents for their participation. 

In addition, the actions performed by AI agents are always transparent, ensuring that they leave behind an immutable trail to enhance user trust and comply with whatever regulatory compliance obligations they’re likely to face. 

DeFi Automation Is Taking Off

Some of the most capable AI agents available today are being built using Giza’s Web3 Agents Stack, a powerful framework of tools that allows anyone to create autonomous algorithms for DeFi applications. 

Giza has pioneered a triple-layer design for DeFI agents, based on a foundational semantic abstraction layer that allows them to apply reasoning to the blockchain data they monitor and craft financial strategies across multiple protocols. For security purposes, there’s an agent authorization layer that leverages smart account infrastructure to authorize and manage permissions, and finally, there’s a decentralized execution layer for automatically executing transactions to capitalize on the strategies they devise. 

Giza’s AI agent network consists of 14,143 active agents with a total of $592,948.85 of assets currently under management. Collectively, those agents have executed 27,565 autonomous transactions, representing the number of decisions requiring critical thinking skills they have made on behalf of human investors. 

Flying the flag for Giza is the protocol’s own autonomous DeFI agent ARMA, which was designed to showcase the potential of its agentic AI framework and has done a stellar job thus far. According to Giza, ARMA can continuously monitor hundreds of DeFi markets across multiple blockchains simultaneously to carry out complex yield farming activities for human users. By dynamically balancing investor’s portfolios based on market conditions, they can enhance risk management while maximizing their returns. DeFi investors who previously slept with one eye open to catch the latest market movements can finally sleep soundly at night. 

Giza says it developed ARMA in response to the growing complexity of the DeFi markets. In a world made up of hundreds of decentralized protocols that operate around the clock, it’s beyond the means of any human user to keep up with all of the latest market movements and trends. With ARMA, they don’t even need to try, as it can monitor thousands of assets and their price movements and take actions based on what it sees. 

One reason for ARMA’s success is its transparency, with its open nature meaning that anyone can dig into it to see how and why it makes its investment decisions, as well as the consequences of those actions. 

What’s Holding DeFI AI Back?

DeFi users should pay attention to some of the concerns around AI agents before they go diving in headfirst. While DeFi agents promise a seamless, stress-free investing experience, they do raise significant security concerns. As with any software program, the risk of vulnerabilities in their underlying code always exists, leaving the door open for malicious actors to create havoc if they find a way through. 

That’s why users should always proceed with caution and do plenty of research before they entrust their funds to any DeFi agent. Bugs can slip through the net in even the most heavily audited codebase, so it makes sense to spread your bets, so to speak, among several different DeFi algorithms. The good news is that developers behind the most popular DeFi agents are working around the clock to improve the safety of their services. 

Another potential obstacle might be the lack of regulatory clarity around DeFi AI. Right now, regulatory agencies are only just beginning to look at the implications of these agents, and it will be some time before they get around to formulating clear rules and regulations governing their use. In the meantime, compliance just isn’t something that exists. 

A final challenge relates to the computational resources required by advanced DeFi agents. These algorithms require significant computing resources to continuously monitor the markets and automate transactions, resulting in increased transaction costs, potentially undermining their cost benefits. 

DeFi’s Era Of Automation

The intersection of blockchain and AI is still nascent, but already it’s setting new standards for what’s possible in the DeFi industry. The arrival of DeFi agents is breaking down barriers to entry, automating complex processes, and enabling every investor to benefit from intelligent, data-driven decisions. 

It brings the promise of unprecedented opportunity to every DeFi investor, and it’s an area of innovation enjoying significant momentum already. Although it faces some challenges, DeFI AI is emerging as a disruptive trend, and its impact will be felt far and wide.