In just over a week, DeFAI has rapidly established itself as an important sector in the crypto world. Combining the best of decentralised finance (DeFi) and artificial intelligence (AI), this emerging field is positioned to change user interaction and how they may benefit from financial ecosystems.
But what exactly is DeFAI, and why does it matter? DWF Ventures explored.
In just over a week, DeFAI has quickly emerged and established itself as a leading sector of projects, primed to perform in the coming months.
— DWF Ventures (@DWFVentures) January 21, 2025
But what exactly makes DeFAI important and what problems does it solve? Lets break it down! 🧵 pic.twitter.com/5TQ8g3SJhi
The Evolution of DeFi
Over the years, DeFi has grown from its pioneering protocols, such as MakerDAO (now Sky), Uniswap, and Compound, into a sprawling ecosystem of over 3,000 projects and protocols.
While these advancements have unlocked great value and potential, they have also introduced new challenges:
- Complexity: The growing sophistication and intricacies of DeFi products has made them increasingly inaccessible to everyday users. Multi-step processes, intricate interfaces, and technical jargon are some of the reasons that may deter wider adoption.
- Manual Inefficiency: Users often need to actively manage their portfolios, which can lead to emotional decision-making, suboptimal outcomes, and missed opportunities.
These barriers highlight the need for solutions that simplify processes and make DeFi accessible to everyone.
This is where DeFAI steps in.
Introducing DeFAI
DeFAI represents a merger of DeFi and AI, designed to fill the gaps in utility and efficiency. By automating complex operations and providing intuitive interfaces, DeFAI creates a seamless and user-friendly experience.
As Founder of Hey Anon, Daniele Sesta, aptly puts it in his article on onboarding billions with DeFAI as a superapp, “DeFAI is no longer just an idea; it’s a new category in crypto. By merging DeFi with AI, we’re opening doors to mass adoption.”
The DeFAI Ecosystem
DeFAI projects can be grouped into four key categories, each tackling specific challenges in the DeFi landscape:
1. Abstraction
Abstraction projects focus on simplifying DeFi processes, removing technical barriers for users. They achieve this in many ways, including text-to-action support, and automatic execution of multi-step and multi-chain processes.
They achieve this in many ways, including text-to-action support, and automatic execution of multi-step and multi-chain processes. These essentially break down DeFi participation into just two simple steps: identification of the best opportunities based on a user’s needs and interests, and then having the agent execute all required steps via a single prompt.
Some projects take this offering even further. Besides tools for research and automatic execution, Hey Anon also provides a framework for developers to directly integrate their DeFi protocols into the agent’s ecosystem, actively expanding the agents' services. The startup received funding from DWF Labs’s AI Agent Fund.
Another project called Griffain introduces a wide range of specialised agents that users can take advantage of, to even simplify specific processes like token sniping.
2. Analysis
The DeFAI space incorporates analysis tools that aggregate and analyse on-chain data, identifying trends and opportunities for users.
Sharing some similarities with crypto projects from the Abstraction category, Analysis-focused DeFAI protocols focus on aggregating and analysing data on-chain and across multiple sources, then identifying trends and opportunities across DeFi activities and tokens.
Through an interface of an analytical DeFAI app, users are able to query AI agents for information related to project’s technicals, fundamentals, and even sentiment, and most of these agents also run their own profiles on X (Twitter), where they actively share their findings and interact with the community.
One of the leaders in this category is Aixbt, featuring its own custom LLM framework, data indexer, and algorithm to identify trends. It has quickly become integrated into crypto twitter culture, with its calls being relatively accurate, and creating a KOL-esque reputation for itself.
Another notable app is Acolyt, with an oracle that allows for dynamic interaction with an agent swarm, allowing users to receive aggregated data-driven responses, with support for even private datasets in the future.
3. Optimisation
DeFAI projects in the Optimisation category leverage AI to enhance portfolio yields and automate decision-making. Projects of this type range from agents to protocols which utilise AI in optimising yields and portfolio allocation.
Optimisation protocols usually have an implemented AI model which directly deploys users’ deposits based on their prior backtested strategies. On the other hand, agents usually provide elements of customisation, allowing users to define their own strategies and methodology.
An AI-powered yield optimisation engine, Sturdy Finance’s SN10 (Opentensor subnet), can autonomously decide how to allocate user deposits into various lending silos, providing the best yield for lenders, while allowing them to go completely ‘hands-off’.
The Axal’s flagship product, Autopilot, enables users to set up parameters to automate portfolio rebalancing, and yield harvesting. This helps users maintain risk exposure at all times, remove emotional decision-making, and even autocompound their earnings.
4. Infrastructure
Infrastructure projects provide the foundational tools needed for DeFAI agents to operate effectively.
Instead of individual agents, projects in this category provide essential infrastructure required by DeFAI agents. This spans across model training and inference, to data and security, and even a means for coordination and cooperation.
Brahma’s ConsoleKit helps ensure safe and efficient asset management and operations for agents, by introducing measures like pre-execution simulations, customisable smart accounts, a modular policy engine, and more.
Omo Protocol is a comprehensive multi-agent orchestration layer that enables users and developers to create networks of coordinated specialised agents, allowing for more sophisticated interactions and strategies. This is besides providing an aggregated toolkit for agent creation.
Why DeFAI Matters
DeFAI isn’t just a technology or a use case, it promises to unlock the next phase of DeFi adoption. By addressing complexity and inefficiency, DeFAI has the potential to onboard millions of new users, empowering them with tools that:
- Simplify DeFi workflows.
- Provide actionable insights through data analysis.
- Automate portfolio management for optimal returns.
Here the changes brought to the realm of decentralised finance by DeFAI to resolve complexities and repetitive tasks:
The Road Ahead
While still in its early stages, the DeFAI sector is brimming with potential. As the ecosystem evolves, it can reduce barriers for new users, enhance efficiency, and drive broader adoption.
At DWF Ventures, we are excited to support the visionaries building this future. If you’re working on a DeFAI project, we’d love to hear from you. Contact our crypto venture capital firm via the form on our page.
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