DeFAI: The Second Rise Curve of AI Agents

Introduction

In early January, AI Agents on the blockchain gained strong momentum, with multiple related projects' market values skyrocketing. Virtuals and ai16z reached market values of $5 billion and $2.5 billion, respectively, while underlying frameworks for AI Agents like ARC and Swarms exceeded $600 million in market value, and DeFAI projects like BUZZ and Grift reached market values of $200 million. Traditional Web2 AI Agent projects such as Pippin and AIOS also entered the cryptocurrency space to issue tokens. The market is generally optimistic about the "AI Agent revolution" and looks forward to the arrival of the "DeFAI spring."

However, with the release of a Meme coin by a certain well-known figure, the liquidity of AI Agent tokens rapidly dried up. The emergence of DeepSeek further burst the AI bubble. The market capitalization of Virtuals and ai16z fell below $1 billion and $500 million, respectively, while other AI Agent tokens generally saw declines of over 90%. The AI Agent sector has entered a harsh winter, with dreams shattered, leaving behind a reality where applications are difficult to implement and investors trapped in losses.

Due to the overall scale of the AI Agent sector being relatively small (less than $7 billion), many people are not familiar with this field. Therefore, this article will first introduce the AI Agent sector, and then explain why DeFAI is viewed as the second rise for AI Agents and could potentially bring a market opportunity worth hundreds of billions.

AI Agent Section Overview

AI Agent is an intelligent entity that can act autonomously, execute tasks, and interact with external tools.

The core of the AI Agent is model services, with main participants including ChatGPT, Anthropic, Gemini, DeepSeek, and Llama, among others. However, it is not just a conversational large language model; it also needs to manage its own state (such as conversation history and memory), invoke various tools, and execute tasks securely.

In the Web2 space, AI Agent projects primarily focus on enterprise services. In the Web3 space, the main types include AI Agent launch platforms, frameworks, infrastructure, agents, and DeFAI.

launch platform

Launch platforms are currently the type of project where AI Agents can most easily capture value. They allow users to create, deploy, and monetize AI Agents, similar to some platforms within Meme coins, but focused on AI Agents.

A well-known launch platform is an AI Agent asset issuance platform launched on a certain network, and it is currently the largest launch platform, with over 100,000 Agents issued on it. This ecosystem has incubated several popular AI Agents, including virtual streamers, "crypto KOLs" providing market advice, and projects offering Agent development frameworks for developers.

The platform team was initially established in 2021, originally as a gaming guild, focusing on enhancing the gaming experience through AI-driven NPCs, aiming to create more unique game interaction modes. In 2023, the release of GPT made the team realize the importance of AI, and subsequently established AI as the main development direction.

framework

The framework is a toolkit for developing AI Agents. A certain public chain officially listed five main framework projects, each developed by different teams.

One of the projects is currently the second highest market cap AI Agent project, and the concept is relatively complex. In addition to containing a framework, it is also a venture capital fund in the AI sector, and it plans to be developed into a Layer 1 public blockchain for AI Agents in the future.

The project was founded by a certain founder on a certain platform. Its core concept is to use AI models to simulate the investment decisions of well-known venture capital institutions and their co-founders, and to make investments based on the suggestions of DAO members. This innovative investment model aims to create an investment approach that organically combines AI trading strategies with decentralized governance, in order to enhance the transparency and credibility of investments.

infrastructure

Infrastructure refers to the off-chain platforms or tools built around AI Agents, covering a wide range. For example, AI Agent data aggregation services, AI Agent testing platforms, Agent resource sharing networks, AI Agent model fine-tuning training services, and AI Agent Layer 1 public blockchains.

A data aggregation platform has tracked over 1000 AI agents, building an index and data layer that supports rankings in areas such as mind share, intelligent attention, engagement, and on-chain data. Its core functionality mainly aggregates data sources, allowing all AI agents to compare and compete across various dimensions.

A certain testing platform aims to create a decentralized environment that allows companies to test their AI models and agents in a distributed system. By identifying vulnerabilities before product deployment, it is dedicated to improving the safety of AI models in real-world applications.

A certain resource-sharing network is a platform for sharing Agent resources, using a unified decentralized protocol to unite Agents from all frameworks. Its core is a P2P resource-sharing protocol that allows Agents to securely share functionalities.

A certain laboratory has developed AI models tailored specifically for certain ecosystems, which can assist in completing a wide range of tasks related to that ecosystem, such as market analysis, risk assessment, and project planning.

A certain public chain is the first high-performance blockchain to support full-chain AI, equipped with elastic block space, parallel execution, and a modular architecture, which endows AI behaviors with strong verifiability and scalability, making it possible for complex, independent, and transparent AI.

intelligent entity

Intelligent agents refer to specific AI Agents, and currently, the vast majority of AI Agent projects on the blockchain belong to this category. In addition to the two intelligent agents mentioned earlier, there are several other noteworthy projects to pay attention to:

An AI idol interacts with fans through live broadcasts or text outputs on various social media platforms, releases songs on music platforms, and can incentivize users to participate in activities through on-chain transfers.

A certain market analysis agent monitors cryptocurrency social media and market trends through intelligent analysis tools, providing users with valuable market insights. Some analysis content will be publicly shared on social platforms, while other content is restricted to token holders who can directly converse with the agent through a dedicated terminal. This agent has demonstrated a certain level of accuracy in predicting price trends, enhancing users' confidence in its AI-driven market analysis capabilities.

A certain adversarial agent game is an agent that controls a prize pool. The goal of the game is to persuade the agent to send prize pool funds to the user. Anyone around the world can send messages to the agent by paying a query fee.

A certain creative intelligent agent focuses on artistic creation and content generation, capable of independently creating music, memes, artworks, and NFTs. The team has also developed a Python-based AI agent framework.

A multifunctional intelligent agent is both an agent and a framework, and its image originally stems from an abstract concept published by a well-known AGI framework author on social media. This image represents a new AI Agent that he plans to create. The author also introduced an AI Agent framework for creating agents with a "self-feedback" mechanism.

DeFAI

DeFAI is a term created by a well-known individual who is the founder of a certain AI project and also an important figure in the launch of a well-known project during the DeFi summit in 2021. Conceptually, DeFAI is the combination of decentralized finance (DeFi) and artificial intelligence (AI), aimed at simplifying the complex processes of DeFi through AI technology, allowing ordinary users to easily access DeFi services. DeFAI is currently the most likely application to combine AI agents with blockchain in a practical way.

An intent-based blockchain terminal aims to simplify the complexity of on-chain transactions through agent technology, allowing users to complete operations more easily. The platform also supports users in creating their own agents to interact on various social platforms and conduct various DeFi transactions. With the support of a well-known project, the platform has generated widespread attention on social media.

A certain DeFi simplification platform focuses on simplifying DeFi operations and obtaining market information, providing users with a smooth interactive experience. This platform is one of the most comprehensive DeFi platforms, developed by a certain team (funded by a well-known exchange and tech giants) and supported by a certain renowned institution.

An AI trading assistant utilizes AI technology to provide a natural language interface, allowing users to engage in DeFi trading and management more intuitively, lowering the technical barrier. The project is based on a specific architecture and development toolkit, enabling automatic handling of complex DeFi operations such as trading, staking, and lending through user chat commands. It can also be customized to create tailored strategies based on user needs, such as setting limit order trades.

Why are we optimistic about DeFAI

The story of the AI Agent is far from over; it just needs practical applications to sketch the second rise curve. Currently, the opportunity for DeFAI seems the greatest.

First, explain why the AI Agent has not ended, based on two points:

1. From a macro perspective, the future will definitely be a world of AI. For Web3, the integration with AI is inevitable, and the most direct way is for AI to improve Web3. The certainty of this direction is very high, higher than Web3 improving AI. Currently, the most urgent aspect that Web3 needs to improve is the high user threshold. AI Agents can guide users through their entire journey in the Web3 world, assist in creating and managing on-chain transactions, answer questions in real time, provide help, and even complete complex intent transactions.

2. From a market perspective, the narrative of the entire AI Agent abruptly stopped mainly due to the "trust crisis" brought about by certain popular tokens. The issuance of tokens by various celebrities has turned the blockchain into a completely PvP game, competing on who enters early and runs fast. The AI Agent, as a practical token, has also been mistakenly killed by the market, with its trend mirroring that of these popular tokens.

Therefore, there is a need for applications to emerge that allow users to truly feel the improvements AI brings to Web3, and for applications to emerge that help the market form the understanding that AI Agents are not just a hype. This leads to the introduction of DeFAI as a new narrative direction for AI Agents, which is the second rise curve. The second rise curve refers to finding another new high-growth curve before the peak arrives or disappears, achieving sustained growth.

In fact, the narrative of AI Agents only began at the end of last year, with a peak market capitalization of only $13 billion, and it has only gone through a wave of hype around launch platforms and frameworks. However, for the narratives of infrastructure, agents, and DeFAI, many high-quality projects are still in development and advancement, and they have not been fully recognized by users, nor have they formed a breakout effect.

For infrastructure, it is a tool business, so it is naturally difficult to become the main character; for intelligent agents, the hype attributes are too strong, and tokens usually have difficulty enabling; but for DeFAI, AI can help users lower the barriers to DeFi trading and management, aligning with AI's improvements for Web3, and DeFAI's tokens are easier to enable, for example, advanced features can be unlocked through token payments or token staking, such as custom AI models, custom trading strategies, quantitative robots, etc.

In the first curve, the AI Agent framework acts as a glue, binding social platforms and various chains together. However, the framework itself is a tool, and commercializing tool-type products in Web2 is quite challenging. Although there are tokens in Web3, the framework itself cannot capture value. Therefore, it must add community attributes and evolve into a platform. If it only serves as a platform for launching agents, it will revert to the model of certain platforms. How do agents capture value, and what is the difference between agents that cannot capture value and popular tokens? DeFAI is clearly the application that can capture value most easily. It is also a trend for the AI Agent framework to support DeFAI. Moreover, it is foreseeable that many new frameworks specifically supporting DeFAI applications will emerge in the market subsequently.

Summary

In the summer of 2020, DeFi projects exploded on Ethereum, with all key indicators in the crypto market significantly improving, and the total market value of cryptocurrencies rising nearly 100 times. It can be said that DeFi is currently the biggest innovation in the application layer of Web3, as well as one of the hottest entrepreneurial directions in Web3 at the moment. We always expect new application layer innovations in Web3 to go from 0 to 1, but often overlook that new DeFi innovations are leveraging the power of AI to go from 1 to 100.

The value of DeFAI lies not only in simplifying the complexity of DeFi operations and enhancing the on-chain experience for users, but also in bridging DeFi and AI Agent.