AgentFi - A New AI Powered Narrative is About to Take Over DeFi

Author: Ketzalco

Reviewer: Kyle

A new AI powered narrative is about to take over DeFi and it will radically change how crypto markets operate forever.

Agent Driven Finance will soon be a reality and its impact on the industry will be so deep, it's yet hard to imagine.

But what is meant by AgentFi?

AgentFi, Autonomous Finance, Agentic protocols...

These are a few names we've encountered that attempt to define the same idea.

They all describe a future where AI agents will be able to access defi markets and execute profit strategies without oversight from human actors.

At first, AgentFi is a simple and obvious idea, but let's explore it's attributes and how it comes to materialize.

@aothecomputer recently posted this and it got us to think on the inevitable shift of the current DeFi space into a trustless, autonomous agent driven market.

What is AgentFi?

DeFi has disrupted financial markets by making them permissionless and open.

Primitives such as asset swapping, lending, etc can now be performed in a trustless manner from anywhere with an internet connected device.

All thanks to robust smart contracts.

However, DeFi lacks an intelligence layer where bots can make sophisticated market decisions.

Currently, bots can be programmed to act upon some data events.

AgentFI refers to a world where bots create and adapt complex strategies akin to human agents such as fund managers.

The first question that comes to mind is: what does it mean that AgentFi builds on top of Defi primitives?

To answer this, we need to know how defi currently operates and explore how autonomous agents are different from bots that currently operate across DeFi protocols.


There are two key differences that set AgentFi apart from Defi and open up a new range of possibilities for trading markets.

  1. The type of data upon which bots may act.

  2. The ability of an AI agent to act proactively beyond predetermined configurations.

Currently, the data available across DeFi is quantitive.

It's a stream of raw prices that update according to events such as news or changes in liquidity.

Defi bots monitor these price changes and execute strategies based on preconfigured parameters set by their owners.

These bots require lots of oversight precisely because they lack intelligence.

If market conditions should change, there is greater risk of them becoming unprofitable.

They can only react to preset data triggers. They can't "wake up" and update their strategies proactively.

The difference with autonomous agents is that they will have the ability to access and interpret not only quantitative data, but qualitative as well.

So instead of only reacting to price changes, agents will be able to interpret the information that is hidden behind numbers.

Agents will be able to read into the contents of a speech of an announcement.

They will also interpret facial expressions of the speakers or the tone of news articles.

They'll combine this with real time number data and use everything as input to update their strategies.

But Defi doesn't have reliable access to qualitative data, so where will it come from? That is the magic that is only possible by having @aothecomputer built on top of @arweaveEco . Arweave is a storage layer for all kinds of data, not only raw price feeds from oracles.

There is no limit to the data that can be uploaded onto @arweaveeco . And since processes on @aothecomputer can consume data from Arweave, AI agents built on AO get access to a whole new dimension of data for their Defi operations. This is like adding sound to movies.

Autonomous agents will have the power to read the intricacies of information that is not provided by prices. In other words, they will gain the ability to operate with a new degree of intelligence that goes beyond numbers. Their strategies will be enabled by LLMs on AO.

Even further, the system design in @aothecomputer allows for these agents to "wake up" automatically. Compare this to an MEV bot on Ethereum. It is constantly monitoring transactions until there is an MEV opportunity. The bot tries to react as fast as possible to exploit it.

On @aothecomputer , an autonomous agent can be set to act proactively beyond the limit of some preset parameters. Combine this with a sophisticated financial AI as engine, and you get an unstoppable 24/7 trading agent that learns and adapts to ever changing market conditions.

All that is needed to make this possible is an upstream of live reliable data to @Arweaveeco , and every process in AO can add them to their inputs. AgentFi will create a world of opportunities in Defi. Just thinking about these agents is enough to make one's head explode.

Imagine a world where AI agents can adopt the strategies of the most successful traders. Now imagine you can bet on them by funding their operations on a defi app - Warren Buffet vs Jim Simmons vs Simon Cawkwel.

It's survival of the fittest on a 24/7 live trading arena.

So TLDR on how AgentFi builds on top of DeFi: Current Defi Bots:

  • reactive

  • unintelligent

  • limited to quantitative data

  • need constant oversight Autonomous Financial Agents:

  • proactive

  • intelligent

  • adaptive learning on qualitative data

  • open ownership possible

There are still some questions on how this thesis might unfold. There might be risks and consequences that we don't yet consider due to the excitement around an AgentFi narrative. For now, all we can do is prepare for this shift. It's coming soon on @aothecomputer .

As reference, also check out this awesome article on Agentic Protocols by @goodalexander . It served as inspiration for this post. We'll delve deeper into these ideas soon.

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In AgentFi AI
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