Hey Edge readers,
The future of DeFi is here, and it’s automated. AI agents—autonomous programs that analyze, decide, and act—are revolutionizing how we interact with decentralized protocols, and their potential is just starting to unfold. This week, we’re breaking down the basics of this exciting trend, we’ll spotlight the rising momentum of AI agent tokens like VIRTUAL, and show how you can position yourself to capitalize on this shift.
Stay sharp. 🫡
- The Exponential team
Understanding AI agents
You may have heard some buzz around AI agents recently—and for good reason. These aren’t just advanced software programs; they’re highly efficient assistants designed to autonomously perform tasks and solve problems.
What sets AI agents apart is their ability to combine reasoning, real-time information, and powerful tools to interact with the world dynamically. Unlike static, pre-trained models, AI agents don’t just follow instructions, they plan and execute strategies to achieve your goals. Imagine an assistant that not only responds to your needs but proactively works to optimize outcomes—that’s the power of AI agents.
How do AI agents work?
AI agents operate by combining three core components:
1. The Model: This is the brain of the agent—often a large language model (LLM)—that processes user inputs and generates reasoning or decisions.
2. The Tools: Tools allow agents to bridge the gap between static knowledge and real-world action. Think of an agent interacting with APIs, querying databases, or even performing on-chain tasks like managing liquidity pools.
3. The Orchestration Layer: This is where it all comes together. It’s the logic that allows the agent to intake data, plan actions, and execute tasks in a loop until it meets its objective.
- The Model: This is the brain of the agent—often a large language model (LLM)—that processes user inputs and generates reasoning or decisions.
- The Tools: Tools allow agents to bridge the gap between static knowledge and real-world action. Think of an agent interacting with APIs, querying databases, or even performing on-chain tasks like managing liquidity pools.
- The Orchestration Layer: This is where it all comes together. It’s the logic that allows the agent to intake data, plan actions, and execute tasks in a loop until it meets its objective.
For example, in DeFi, an AI agent might use price feeds, liquidity data, and on-chain interactions to automatically rebalance your portfolio or find the best staking opportunities.
Why the hype?
- Smarter automation: Agents go beyond traditional bots by combining reasoning with action. They can analyze a situation, decide on the next step, and take action all without human intervention.
- Improved efficiency: Imagine a world where your yield farming strategies are autonomously optimized, social content is continuously managed, or assets are traded in real time—all powered by AI agents.
- Deeper integrations: AI agents can interact with APIs, databases, and external systems, allowing them to handle far more complex tasks than standalone models.
- Versatility: Beyond just DeFi, agents are already being used in areas like customer support, travel planning, and even social media engagement.
What’s next for AI agents?
2025 is shaping up to be the breakout year for AI agents in DeFi. Here’s a few things to watch out for:
- AI agent marketplaces: Platforms like Virtuals Protocol are democratizing access to AI agents, enabling creators to monetize their work while users benefit from tailored on-chain automation.
- DeFi-specific agents: Expect agents designed specifically for yield optimization, liquidation management, or even governance participation to gain traction.
- Multi-agent ecosystems: The next wave of innovation could involve “agent chaining,” where multiple AI agents, each specializing in a specific DeFi task, collaborate to tackle complex challenges. For example, one agent could optimize liquidity across various protocols, while another manages cross-chain asset transfers, and yet another handles risk mitigation.
Virtuals Protocol: A launchpad for AI agents
Virtuals is an AI agent marketplace built on Base, allowing anyone to create and deploy agents for on-chain tasks. It’s like pump.fun for AI agents—but instead of memecoins, it’s powering the next generation of digital workers.
The VIRTUAL token is central to the Virtuals ecosystem. It facilitates interactions by enabling users to:
- Buy agent tokens to access their services.
- Pay for agent-created actions (e.g., executing on-chain tasks).
- Launch new agents, which requires locking VIRTUAL tokens.
By incentivizing agent creators to use VIRTUAL and pairing it with agent tokens in liquidity pools, the protocol ensures sustainable growth and utility for the token. This ecosystem design fosters long-term demand for VIRTUAL.
Looking to capitalize on the AI agent wave AND earn yield?
Check out ExtraFi’s VIRTUAL pool, earning ~20% APY by lending it to leveraged yield farmers. This pool is a great play for investors who have a long-term view of AI agents as you would be betting on the price appreciation of VIRTUAL while earning a competitive yield.
In the news 🗞️
- New “DeFAI” project goes parabolic. Daniele Sesta’s AI-driven DeFi project on Sonic saw a 600% surge, with its token ANON reaching a $118M market cap. The "DeFAI" concept simplifies DeFi by using AI to execute actions via natural language prompts. Sesta also launched Gemma, an AI research companion providing data and risk assessments.
- Stablecoin protocol Resolv’s TVL soars above $400M. Resolv’s TVL surged to $448M, with its USR stablecoin’s market cap rising from $13.7M to $387M in just one month. The protocol uses a delta-neutral strategy like Ethena, offering conservative and high-risk staking options, with USR yielding 12% APY and RLP offering 40% yield.
- Nation-state Bitcoin adoption to drive crypto growth in 2025. Fidelity forecasts that more nations will add Bitcoin to their reserves in 2025, following the lead of countries like Bhutan and El Salvador. This shift, along with the rise of Bitcoin ETFs and tokenization, is expected to accelerate crypto adoption and growth.