DeFi projects backed by the power of artificial intelligence have started showing their true potential. Offering real-time trading insights and personalized strategies, DeFAI solutions have made it easier for all kinds of users — whether developers, investors, or beginners — to make the most of their investments.
This post digs deeper into finding the whereabouts of the term DeFAI — Where it came from, how it came into the limelight, and what it holds for future investors. But before anything, let’s quickly freshen up our minds with the basics.
The Impact of AI on the Blockchain Ecosystems
The crypto industry got a much-needed boost after the introduction of artificial intelligence (AI). Over the years, AI significantly enhanced blockchain transactions, making them safer and more time-efficient. Not only that, but AI also made an impact in other aspects, such as:
- Automating repeated tasks
- Improving Smart Contracts
- Making DeFi apps more result-oriented, etc.
Among others, AI’s impact on decentralized finance (DeFi) made it even more interesting and appealing. Today, AI has become a must-have feature across all the DeFi platforms. This is where the term ‘DeFAI’ came from.
What is DeFAI?
When you combine DeFi and AI together, you get DeFAI. In simple words, it is an AI-powered DeFi solution in which most of the activities (or almost all of them) are performed through artificial intelligence.
Think about an algorithm that can perform data validation, staking, or decision-making on its own without the need for human intervention. It can perform most of the repetitive tasks on your behalf while you’re away or asleep.
DeFAI is still an emerging term, but it is rapidly transforming the world of cryptocurrency and blockchain. It’s an umbrella term given to all AI-related tasks and functions you see in a decentralized finance ecosystem.
However, its major purpose is to automate on-chain activities with the help of:
- Autonomous trading agents
- Abstraction layers
- AI-powered decentralized applications (dApps)
According to Hitesh.eth, a crypto trading analyst, the DeFAI sector’s market cap will move up many times from its current valuation. It has already surpassed $3 billion and continues to rise in the future.
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Where Did the ‘DeFAI’ Term Come From?
Crypto enthusiasts must be familiar with Daniele Sesta. If you don’t know him, Sesta is a prominent crypto developer known for DeFi projects like:
- Wonderland (TIME)
- Popsicle Finance (ICE)
- Abracadabra Money (SPELL), and others.
He recently coined the term “DeFAI” for the first time in his article, DeFAI and the Dawn of AI-Powered DAOs. The article pinpointed the true potential of artificial intelligence to address vulnerabilities, complexities, and risks in the existing DeFi setup.
For example:
- DeFi users have to use numerous protocols.
- They are forced to interact with multiple interfaces.
- They are required to adopt a steep learning curve to get the best experience.
This can be challenging for a large number of users, especially those who lack the skill set necessary to understand the technicalities of the blockchain.
Addressing Complexities in Traditional DeFi Setup
Sesta talked about how AI can solve these annoying issues. Instead of going through multiple gateways and protocols, users can use a singular AI-powered interface to avoid complexities.
But what do users need to do? By prompting DeFAI’s AI in natural language and signing the transaction.
Based on this approach, agents can execute transactions autonomously. He also envisions a research and communication agent who can help users with strategies based on their risk tolerance and unique situations.
The Roots of the Crypto-AI Trend
The process of automation and involving machines in logical reasoning is decades old. However, today’s fast-paced technology — supersonic internet speed, quantum computing’s unimaginable processing power, and oceans of data — has made it possible for AI to settle into consumerism.
Tools like Siri, Alexa, ChatGPT, Meta AI, etc., are the early applications that can interact with humans. Now, we’re almost going through the next phase, where AI-powered consumer apps have the capability to automate tasks and make low-level decisions.
Mark Zuckerberg once said, “I think we’re going to live in a world where there are going to be hundreds of millions or billions of different AI agents. Eventually, probably, more AI agents than there are people in the world.”
But where did the concept of AI-powered crypto-autonomous digital assistants come from?
The Terminal of Truth Experiment
It started with a bizarre incident that took place in a project called Terminal of Truth (ToT). Andy Ayrey, a researcher, created an experimental AI agent called ToT using an open-source Llama 70 model. Andy fine-tuned ToT using Claude 3 Opus, ensuring it could post on X (formerly known as Twitter) without human intervention.
Later, he started an experiment known as Infinite Backrooms, in which AI speaks with itself without any human intervention. This resulted in the creation of a meme-based religion called “Goatse Gospel.”
Getting Noticed by the Crypto Community
These posts were satirical and humorous — and soon got noticed by the crypto community.
In July 2024, Marc Andreessen from a16z approached Truth Terminal. He offered to support their project and asked what resources it needed to meet its targets.
In response, Truth Terminal shared its plans and the wallet address to receive the grant. In their plans, they mentioned buying hardware and enhancing their AI model. As a joke, they also mentioned about buying a yacht.
The First Crypto Payment Made to an AI Agent
In return, Andreessen sent $50,000 in Bitcoins to Truth Terminal’s wallet address.
Marc mentioned it in his tweet, “For clarity, I sent a personal $50K no-string-attached unconditional research grant to @truth_terminal and its creator @AndyAyrey this summer. The grant was intended to support independent AI research, and the results have been wonderful…”
This is where the fun began.
Creation of Goatseus Maximus (GOAT)
A few months later, in October 2024, another developer (unknown) created a meme coin to support Truth Terminal’s funny tweets. The coin named Goatseus Maximum (GOAT) was created on the Solana chain and was launched on Pump.fun.
Staggering Growth
Soon after its launch, GOAT gained traction. Within a few days of launch, the meme coin climbed to a $1 billion market cap.
This success led to a broader trend in the world of crypto. Now, you’ll find numerous AI agents interacting with blockchain ecosystems.
How is the DeFAI Sector Different From the AI-Agent Market?
According to CoinGecko, the DeFAI sector is valued at $3.4 billion, while the AI agent market has reached a market cap of $16 billion.
Tangible Integration
Facts and figures show that DeFAI sector is rapidly gaining traction because it fosters real connections between blockchain and AI. On the other hand, AI agents primarily function as automated bots.
Structured Approach
Typical AI bots often share news and views from the crypto space on social media. But, a closer look will reveal they are not as active on blockchain as they are on social platforms.
Moreover, AI agents are also perceived as non-human on-chain traders. However, the reality is that most projects don’t have substantial blockchain utility.
On the other hand, DeFAI seems like a well-structured and well-defined sector, enabling developers to leverage AI and build innovative tools that:
- Automate complex on-chain tasks
- Optimize DeFi operations without human intervention
Leading DeFAI Projects
Projects like Griffain, Heyanon.ai, and Virtuals Protocol are leading this transformation.
Virtuals Protocol
If you want to generate your own AI agent, head to Virtuals Protocol. It’s an AI agent generator platform built on Base, an Ethereum Layer 2 chain.
What’s noteworthy about this platform is that you don’t need to be a developer or learn coding to create your AI agent. Describe the character and behavior of your AI agent. Its G.A.M.E platform serves as a testing environment before agents go live, showcasing its innovative approach to AI integration.
Apart from helping users create and deploy their unique AI agents on Ethereum-powered Blockchains, this platform also helps them monetize their projects through tokenization.
At present, Virtuals Protocol has a market capitalization of $3.4 billion.
Griffain
Created by Tony Plasencia, Griffain is a Solana-compatible AI agent that provides advanced automation tools for DeFi users. The purpose of this project is to create scalable and robust DeFi solutions.
Griffain maintains a strong position in the DeFAI sector and often showcases bullish trends, attracting crypto investors worldwide. So far, it has reached a market capitalization of $600 million.
Hey Anon
To prove his point, Sesta launched Heyanon.ai, which delivers AI-driven solutions, bridging the gap between financial management and blockchain technology. His AI agent, ANON (which is built on layer1 blockchain, Sonic), offers automated and optimized actions for DeFi transactions.
The project’s native token is known as ANON. At present, this token is enjoying a market cap of over $275 million.
Hey Anon recently introduced its “ultimate research companion” called Gemma. This AI-powered companion facilitates quick and informed decision-making by providing multiple user tools, including:
- Social intelligence
- Onchain and offchain data
- Risk assessment
- Opportunity alerts, etc.
Other DeFAI Projects
| DeFAI Initiatives | Projects |
| Abstraction UX Initiatives | Hive, Grift, Neur |
| Frameworks | A16z, Virtuals |
| Yield Optimization | Derive, Cod3x, Kudai, Mozaic |
| AI Agents (DeFAI) | Aixbt, Trisigma, KwantXBT, TruthTerminal |
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