The rise of artificial intelligence (AI) agents in the decentralized financial world heralds a transition to an era of autopilot. Jacob C. of Coinfello argues that these agents fundamentally improve the way users interact with complex smart contracts.
Key Takeaways:
- AI agents like Coinfello are automating DeFi tasks once reserved for hedge funds to manage market risk 24/7.
- Jacob C. warns that the ‘translation layer’ must resolve oracle and agency risks so that DeFi can scale safely.
- Jacob C. predicts that by 2030, the number of dapps will decline as AI agents become the primary way to use smart contracts.
The shift to autonomous finance
The shift from manual interaction to artificial intelligence (AI) agents in decentralized finance (DeFi) represents the autopilot era of crypto. In the past, DeFi required users to be glued to screens and monitor gas costs, slippages, and liquidation risks. Today, autonomous agents are taking over the heavy lifting and providing continuous monitoring that was previously only available to institutional hedge funds.
In some cases, agents can automatically withdraw liquidity from a pool if they detect a carpet pulling pattern or if a stablecoin begins to decouple. According to Jacob C., co-founder and CEO of Coinfello, AI agents are also improving the way DeFi users interact with smart contracts.
“Before AI agents, users had to rely on a centralized intermediary website (the dapp) that pointed to the smart contract,” said Jacob C.. “They had to trust that the website would honestly convey what a smart contract does, legitimately point to the correct smart contract, and not be hacked by a malicious third party.”
AI agents like Coinfello, Jacob C. argues, eliminate this risk by connecting directly to smart contracts, reading them and explaining their risks to users. In other words, AI agents act as a translation layer that could be critical if DeFi is to scale to levels that now seem impossible.
While AI agents undeniably improve efficiency and streamline complex workflows, they also expose systems to new vulnerabilities – most notably oracle dependence, where external data sources can skew outcomes, and a subtle erosion of human agency as decision-making power shifts from individuals to algorithms. Coinfello’s CEO agrees, warning that users should still be able to verify or audit an agent before completely surrendering control or access to their funds.
“Most AI agents we see on the market today require users to transfer funds to a wallet fully controlled by the AI agent, and trust that the agent will not make mistakes or be malicious,” the CEO said.
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To get around this problem, Jacob C. said his platform uses what he called “liquidity sandboxing,” a concept that he said allows users to approve individual permissions to the AI agent, which limits which tokens the agent can access. The Coinfello team believes that this approach “creates guardrails that fundamentally solve the dangers of using AI agents safely.”
As for the prospects of DeFi in the age of AI agents, Jacob C. foresees that these agents will automate actions that a user would otherwise not have time to monitor, such as dollar cost averaging or executing personally defined trading strategies. He predicts that by 2030, the number of decentralized applications (dApps) will decline to the point where they are no longer the primary way people use smart contracts.