Why the Cryptocurrency Market Has High Barriers to Entry
The cryptocurrency market is filled with decentralization and innovative technologies, but for beginners, it presents high barriers to entry. Unlike traditional financial systems, the market is characterized by a structure without intermediaries and complex processes. Most new investors encounter cryptocurrencies for the first time on centralized exchanges (CEX), but with the rapid growth of decentralized exchanges (DEX) and decentralized finance (DeFi), the landscape of the market is changing.
As reported by Cointelegraph on January 7, 2024, over 20% of cryptocurrency spot trading volume occurred on DEX platforms. This indicates accelerated growth for decentralized finance (DeFi), which is differentiated from the traditional financial system. However, DeFi remains a challenging area for beginners due to its complex interfaces and the need for a high level of technical understanding.
The Growth of DeFi and Interest from Traditional Finance
DeFi is an innovative field that provides financial services without intermediaries by utilizing smart contracts and oracle networks. With these technological advancements, traditional financial institutions are gradually showing interest in DeFi.
- BlackRock: Curve has partnered with the Elixir blockchain network to expand BlackRock's tokenized money market fund BUIDL and increase DeFi accessibility.
- Goldman Sachs: Since 2021, they have been offering Bitcoin-related financial services and have applied to launch a DeFi ETF.
As traditional finance and DeFi merge, the market is growing more rapidly. Throughout 2023, DeFi projects attracted a total of $1.49 billion in investments, and in April 2024, 41 DeFi projects raised new funds, setting an all-time high.
Solving DeFi's Complexity with DeFAI
While the potential of DeFi is significant, its technical difficulties contribute to high entry barriers. So, how can beginners participate more easily? DeFAI (Decentralized Finance + AI) could provide an answer.
DeFAI is a concept proposed by cryptocurrency developer Daniele Sestagalli, combining AI and DeFi to simplify financial transactions. This approach aims to lower complex technical barriers, making it easier for beginners to access DeFi.
He presents the following key use cases for DeFAI:
- AI Interface: Simplifying transactions across various protocols.
- Autonomous DeFi Agents: Independently executing trades.
- Research and Communication Agents: Supporting information collection and decision-making.
Rapid Growth of DeFAI and Key Projects
As of January 16, 2024, the total market capitalization of DeFAI tokens has surpassed $2 billion, indicating potential for DeFAI to make DeFi more mainstream.
Consider the case of 2024, when AI technology hit the cryptocurrency market. The meme coin $GOAT, created by the AI model Terminal of Truths, autonomously garnered massive attention on social media.
Subsequently, AI projects have expanded beyond mere entertainment into practical financial applications. Finally, DeFAI has evolved to utilize AI agents to perform on-chain activities, allowing users to manage complex interfaces with simple commands.
Classification of Major DeFAI Projects
DeFi analyst 0xJeff (@Defi0xJeff) has categorized DeFAI projects into three main groups:
- Abstraction Layers
- Representative Examples: Griffain, Heyanon.ai
- Supports users in intuitively using DeFi through natural language commands.
- Autonomous Trading Agents
- Representative Examples: Almanak, Cod3x
- Executes trades based on dynamic strategies, learning and adapting to market conditions instead of relying on pre-set rules.
- AI-Powered dApps
- Representative Example: Mode Network
- Optimizes various DeFi operations and enhances user experiences using AI.
DeFAI and the Mainstreaming of Web3
The DeFAI market is rapidly growing, with Daniele recently revealing plans to introduce on-chain AI agents from Web2 for real-world applications.
Could this change be a breakthrough for the mainstreaming of Web3? Only time will tell.
Conclusion
Cryptocurrency and DeFi continue to hold many opportunities and potentials. However, high technical barriers can pose challenges for beginners. DeFAI is working to make DeFi more accessible with the help of AI, attracting increasing attention from investors and projects alike.
Looking ahead to 2025, we anticipate how the evolution of DeFAI and DeFi will transform the cryptocurrency market.
