AI Agent Market Cap far exceeds the market capitalization of Decentralized Finance during the Summer period, can it replicate the trend of Decentralized Finance in its early days?

Author: Nancy, PANews

Each crypto cycle will bring about a dominant narrative, and 'AI +' is undoubtedly one of the biggest themes of this bull market, especially as the AI Agent frenzy is seizing the majority of on-chain liquidity. Discussions about crypto AI in the market are increasing, similar to the discussions during the DeFi Summer cycle. This article will compare the market development scale of crypto AI and DeFi, and explore the differences between the development of these two areas.

With a market value of 48 billion surpassing the DeFi Summer period, can it replicate the controversial success of DeFi

According to CoinGecko data, as of January 2nd, the market value of the AI field in the crypto space has reached 48.8 billion USD, far exceeding the market value during the 'DeFi Summer' period. According to The Block data, after the explosive growth stage of DeFi in 2020, its market value peaked at 6.04 billion USD, only surpassing the 50 billion USD mark in mid-April 2021, by which time the market had gradually matured and diversified. This comparison indicates that the explosive power of crypto AI has surpassed the early development stage of DeFi, demonstrating stronger attractiveness and growth potential in the market.

The special AI Agent sub-segment has continued to erupt during this time. CoinGecko data shows that as of January 2, the market value of AI Agent has reached $16.93 billion, accounting for 34.7% of the entire encrypted AI track, a figure equivalent to the total market value of DeFi protocols in January 2021. Taking the leading projects Virtuals Protocol ($5.02 billion) and ai16z ($2.7 billion) as examples, the combined market value of these two has surpassed the total market value of all DeFi protocols at the end of 2020, further highlighting the rapid development of the AI track. Meanwhile, the circulating market values of DeFi leaders Uniswap and Aave in the last bull market reached $22.05 billion and $6.58 billion respectively.

From the perspective of capital investment, DeFi has attracted a large amount of risk capital injection after rapid development, and encrypted AI is also in a similar stage. More and more funds are beginning to flow into the AI field, and investments around encrypted AI have surged. According to the 2024 financing report compiled by PANews, the DeFi sector received $1.69 billion in 296 financing cases in 2024. AI projects as an emerging category have grown rapidly this year, with nearly a hundred disclosed financing events, 15.2% of which received funding at the level of tens of millions of dollars, with a total fund size of approximately $600 million.

Despite the impressive performance of the data in the encrypted AI track, the market still has different views on whether its development cycle can be similar to DeFi. For example, Messari pointed out in its latest report that the AI Agent will peak in the first quarter of 2025 and will not recover. The reasons are as follows: (1) AI Agent proxies have not proven that their product adaptability is sufficient to support market speculation; (2) The success of Alt-L1 is based on a clear demand for block space during the DeFi boom, but AI Agent lacks demand and has no clear user base; (3) The launch of AI Agent relies on market speculation, but when the market realizes that they will still be just toys in the foreseeable future, this speculative cycle will collapse.

There is also a view that AI has similar development potential to DeFi. For example, crypto KOL @ 0xWizard stated that 2020 can be called the "Cambrian explosion of DeFi", and 2025 is very likely to be the "Cambrian explosion of AI Agents". Various Ai+Crypto gameplays will emerge next year. Researcher Haotian believes that the advent of AI Agents is like the DeFi Summer of 2020 for blockchain, creating a huge new "bubble" narrative cycle of Build+Speculation. Although the AI Agent ecosystem does not even have exclusive infrastructural conditions, from the perspective of ecosystem plasticity, the industrial narrative opportunities brought by AI Agents are much larger than DeFi.

Former Spartan Group member @0xJeff predicts that 2025 will be known as the Agentic era, with Agentic L1 reaching a market value of 100 billion USD, similar to the L1 valuation cycle of 2020-21. DeFi will reach a TVL high point of over 200 billion USD in the previous cycle with the help of AI Agents.

Regarding the valuation of AI-related MEME coin projects, crypto KOL @Rui stated that in the early MEME market, the valuation of a project was closely related to whether it could be listed on an exchange, especially a top-tier exchange. However, with the rise of AI agents and market changes, the valuation system based on exchange logic for high market cap MEME coins has become ineffective. People now focus on the expected ecosystem generated by the project, rather than which exchanges it will be listed on. For projects that already have an ecosystem, the valuation can be determined based on the proportion of the ecosystem. For standalone projects or 'wild ecosystem' projects, the key to valuation is whether it can surpass a market cap of $100 million, with more reliance on spreading, community, and early funding support below this market cap.

Four commonalities from cultural influence to funding efficiency

The combination of technology and capital is the core driving force for the development of the encryption industry. In the last bull market, DeFi reshaped the crypto financial world through decentralized platforms and smart contracts. Now, encrypted AI is changing the operation of the crypto market in a more intelligent and automated way. Currently, the two have similarities in cultural influence, technological foundation, entry barriers, and capital efficiency.

Meme culture

As one of the core narratives of the last bull market in cryptocurrencies, DeFi itself has a spirit of rebelling against traditional finance. Many DeFi projects attract attention by providing real financial functions and using humorous and spoof naming methods (such as various food series). At first, the market even classified DeFi more as a liquidity game than a pure financial tool, but this culture of breaking the traditional financial 'seriousness' unexpectedly sparked reflection and discussion on the traditional financial system, and quickly accumulated a large number of developers and users' participation.

Similar to the meme culture in the early DeFi narrative, the popularization of encrypted AI is also driven by the cultural power of memes. The rise of AI agents not only relies on technological innovation and application value, but also quickly gathers emotions through humorous and satirical meme methods, thereby stimulating the interest and participation of users on the chain, including attracting new groups such as developers and researchers outside the circle to join in a more relaxed and interactive manner.

Technical Foundation

With support in smart contracts, token standards, and developer ecosystems, Ethereum's flexibility provides a powerful technological foundation for the rise of DeFi. Not only does this enable developers to innovate financial products as needed, but its decentralized and open-source mechanisms also provide users with a fair and transparent financial platform.

The rise and popularity of this cycle's encrypted AI narrative also began with the explosive progress of AI technology, especially the emergence of large language models (such as ChatGPT), which has shown people the huge potential of combining artificial intelligence technology with blockchain. At the same time, the rapid improvement of the capabilities of AI large models has also empowered more intelligent on-chain applications, such as trading strategies, market predictions, smart contract automation, and data analysis, providing new perspectives and momentum for innovation in encryption technology.

Admission requirements

Compared to traditional financial systems that require complex procedures, bank accounts, and credit checks, DeFi provides a decentralized, open, and transparent financial service through blockchain and smart contracts. With just a crypto wallet and a small amount of crypto assets, users can freely engage in activities such as borrowing, trading, and providing liquidity, without being limited by region or economic background.

Compared to traditional encryption tools and platforms, AI Agent provides a more intelligent and automated way of operation, allowing users to easily get started without delving into complex technical details or possessing professional trading knowledge and experience. At the same time, high-quality AI Agent projects also break through the high thresholds of traditional VC and centralized exchanges (CEX) platforms through lower participation thresholds and convenient operational paths, providing more participation opportunities for individual investors and opening up lower-cost and more decentralized innovation channels for developers and project parties.

And AI Agent combines MEME culture also reduces people's cognitive threshold for encrypted AI technology, especially for non-technical users, and breaks the high threshold image of technical projects, making participation in this field more diverse, relaxed and entertaining.

Funding Efficiency

In the DeFi narrative, capital efficiency has always been one of the core driving forces. DeFi greatly improves capital efficiency through decentralized platforms, smart contracts, and automated mechanisms. These platforms attract a large amount of institutional funds and retail users by offering high APY and capital returns. Without intermediaries and traditional banking processes, funds can flow and generate higher returns in a shorter time, greatly improving market capital efficiency.

AI Agent, through the automation and intelligence of artificial intelligence technology, can help users achieve more efficient fund operations in the cryptocurrency market. Unlike traditional manual intervention methods, AI Agent can automatically execute tasks such as trading, asset management, and risk control based on real-time market data, helping users seize market opportunities and avoid emotional decision-making and human errors, thus greatly improving the efficiency of fund operations. Moreover, the AI Agent project provides more users with the opportunity for benefit redistribution through on-chain execution mechanisms, allowing participants to enjoy the project's growth dividends with low barriers to entry.

The 4 major differences from technology-driven to user participation

Although DeFi and crypto AI have demonstrated similar dynamics and potentials in driving innovation in the crypto market, they have significant differences on multiple key levels. These differences are reflected not only in the complexity of the technology and the breadth of application scenarios, but also in the different ways market driving forces and user participation are approached.

Application Scope

The main focus of DeFi is on-chain finance, with the main innovations concentrated in the construction of decentralized exchanges (DEX), automated market makers (AMM), lending protocols, and other financial tools. Although these innovations disrupt traditional financial systems, their application scenarios are relatively concentrated and clear. In contrast, the application scope of encrypted AI is broader, involving multiple fields such as on-chain finance, AI-generated content (AIGC), NFT, smart contract automation, and data analysis. Although encrypted AI has higher complexity in technology integration, it also enables it to reach more markets and user needs. In the future, with the technological development of large-scale AI models, more cross-disciplinary innovations and applications will be promoted.

Technical driving force

The technological innovation of DeFi is mainly based on blockchain and smart contracts, promoting the innovation of decentralized financial ecology. Its core motivation comes from decentralized trading, permissionless financial innovation, and automatic execution of smart contracts. On the other hand, encrypted AI narratives have complex and diverse technological driving forces, ranging from financial fields such as trading strategies and risk management, to more extensive application areas such as content generation, personalized recommendations, and data analysis.

User Base

The main user group of DeFi is native users on the chain, who usually have strong financial operation experience. In addition to attracting crypto natives, encrypted AI can also attract a large number of non-technical background users, including content creators, developers, and technical researchers, etc., which has significant advantages in popularity and market coverage.

Market-driven

The market value of DeFi projects is mainly determined by factors such as the amount of locked positions, the listing and liquidity of exchanges, and relies more on the frequency of use of the platform's financial tools and the level of user participation. The market operation is relatively direct and transparent. On the other hand, the market value logic of encrypted AI projects is more complex and has higher uncertainty. It not only depends on the depth and breadth of technological innovation, but also considers the ecological influence of the project and the development potential of practical application scenarios. It also means that the sustainability of the encrypted AI narrative depends on the combination of technological progress and user demand, and there are higher risks and potentials.

(The above content is authorized excerpt and reprint by partner PANews, original link)

Disclaimer: The article only represents the author's personal opinions and does not represent the views and positions of Gate.io. All content and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and trades, and the author and Gate.io will not be responsible for any direct or indirect losses incurred by investors in their transactions.

The market value of AI Agent far exceeds that of the DeFi Summer period. Can it replicate the market trend of the DeFi market in those years?