Original author: Nancy, PANews
Reprinted: Lawrence, Mars Finance
Every crypto cycle brings forth dominant narratives, and AI+ is undoubtedly one of the major themes of this bull market, especially as the AI Agent craze is capturing a substantial amount of liquidity on-chain. Discussions about crypto AI being in a similar phase to the DeFi Summer are increasingly prevalent. This article will compare the market development scale of crypto AI with DeFi and explore the similarities and differences in the development of these two fields.
With a market value of $48 billion surpassing the DeFi Summer period, whether it can replicate DeFi's success remains controversial.
According to CoinGecko data, as of January 2, the market value of the crypto AI sector has reached $48.8 billion, far exceeding the market value during DeFi's 'DeFi Summer'. According to The Block data, after the explosive growth phase of DeFi in 2020, the highest market value reached $6.04 billion, and it wasn't until mid-April 2021 that it surpassed $50 billion. By that 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, showing stronger advantages in market attractiveness and growth potential.
In particular, the AI Agent sub-sector has continued to explode during this period. CoinGecko data shows that as of January 2, the market value of AI Agents has reached $16.93 billion, accounting for 34.7% of the entire crypto AI sector, a figure equivalent to the total market value of DeFi protocols in January 2021. Taking leading projects like Virtuals Protocol ($5.02 billion) and ai16z ($2.7 billion) as examples, the combined market value of these two has already surpassed the market value of all DeFi protocols at the end of 2020, further highlighting the rapid development of the AI sector. Leading DeFi projects Uniswap and Aave had peak circulating market values of $22.05 billion and $6.58 billion, respectively, during the last bull market.
In terms of capital investment, DeFi has rapidly attracted a large influx of venture capital, and crypto AI is currently in a similar stage, with increasing funds flowing into the AI sector, leading to a surge in investments around crypto AI. According to PANews' 2024 financing report, the DeFi sector secured $1.69 billion in 296 financing events in 2024. AI projects, as an emerging category, have rapidly grown this year, with nearly a hundred disclosed financing events, of which 15.2% received funding in the tens of millions, with a funding scale of around $600 million.
Although the data performance of the crypto AI sector is impressive, opinions differ on whether its development cycle can be similar to that of DeFi. For example, Messari's latest report points out that AI Agents will peak in the first quarter of 2025 and will not recover. The reasons are as follows: (1) AI Agent proxies have yet to prove their product adaptability to support market speculation; (2) The success of Alt-L1 is based on clear demand for blockchain space during the DeFi boom, but AI Agents lack both demand and a clear user base; (3) The launch of AI Agents relies on market speculation, but when the market realizes they will remain mere toys in the foreseeable future, this speculation cycle will collapse.
There are also viewpoints suggesting that AI has similar development potential as DeFi. For instance, crypto KOL @0xWizard stated that 2020 could be termed the 'Cambrian Explosion of DeFi,' and 2025 is likely to be the 'Cambrian Explosion of AI Agents.' Various Ai+Crypto applications are expected to emerge in the coming year. Researcher Haotian believes that the arrival of AI Agents is akin to the DeFi Summer experienced by blockchain in 2020, generating a massive new narrative cycle of Build+Speculation. Although the AI Agent ecosystem does not yet have exclusive infrastructure conditions, from the perspective of ecosystem plasticity, the narrative opportunities brought by AI Agents are much grander than those of DeFi.
Former Spartan Group member @0xJeff predicts that 2025 will be known as the Age of Agency, where Agentic L1 will reach a market value of $100 billion, similar to the L1 valuation cycle of 2020-21; DeFi will, with the help of AI Agents, reach a TVL high point of over $200 billion from the previous cycle.
Regarding the valuation of AI MEME coin projects, crypto KOL @Rui stated that in the early MEME market, a project's valuation was closely related to whether it could be listed on exchanges, especially top-tier exchanges. However, with the rise of AI Agents and market changes, the previous valuation system based on exchange logic for large-cap MEME has become ineffective. Expectations for project valuations are now focused on what kind of ecosystem will emerge rather than which exchanges will list them. For projects that already have an ecosystem, valuation can be determined based on the ecosystem's market share; for standalone or 'wild system' projects, the key to valuation is whether it can break the $100 million market value, below which valuation relies more on dissemination, community, and early funding support.
Four Commonalities from Cultural Influence to Capital Efficiency
The combination of technology and capital is the core driving force behind the development of the crypto industry. In the last bull market, DeFi reshaped the crypto financial world through decentralized platforms and smart contracts. Now, crypto AI is changing the operational methods of the crypto market in a more intelligent and automated way. From the current perspective, both share similarities in cultural influence, technical foundation, access thresholds, and capital efficiency.
Meme Culture
As one of the core narratives of the last crypto bull market, DeFi embodies a rebellious spirit against traditional finance. Many DeFi projects attract attention by providing real financial functions while using humorous and playful naming methods (such as various food series). Initially, the market categorized DeFi more as a liquidity game than pure financial tools, but this culture of breaking the 'seriousness' of traditional finance unexpectedly sparked reflection and discussion about the traditional financial system, quickly accumulating a large number of developers and users' participation.
Similar to the meme culture in the early DeFi narrative, the popularization of crypto AI also leverages the cultural power of MEME. The rise of AI Agents relies not only on technological innovation and application value but also rapidly gathers interest through humorous and mocking MEME methods, sparking engagement from on-chain users, including attracting new groups like external developers and researchers to join in a more relaxed and interactive manner.
Technical Foundation
With support in areas such as smart contracts, token standards, and developer ecosystems, Ethereum's flexibility provides a strong technical foundation for the rise of DeFi, allowing developers to innovate financial products based on demand. Its decentralized and open-source mechanism also offers users a fair and transparent financial platform.
The rise and popularity of the crypto AI narrative in this cycle also began with explosive advancements in AI technology, particularly with the emergence of large language models (such as ChatGPT), which revealed the immense potential of combining AI technology with blockchain. At the same time, the rapid enhancement of AI large model capabilities has empowered more intelligent on-chain applications, such as trading strategies, market forecasting, smart contract automation, and data analysis, thereby providing new perspectives and motivations for crypto technological innovation.
Access Threshold
Compared to the complex procedures, bank accounts, and credit checks required by traditional financial systems, DeFi provides a way of financial services that is intermediary-free, open, and transparent through blockchain and smart contracts. Users only need a crypto wallet and a small amount of crypto assets to freely engage in lending, trading, liquidity provision, and other activities without geographical and economic background restrictions.
Compared to traditional crypto tools and platforms, AI Agents offer a more intelligent and automated operation method, allowing users to easily engage without needing to deeply understand complex technical details or possess professional trading knowledge and experience. Additionally, high-quality AI Agent projects break the high barriers of previous platforms like VC and centralized exchanges (CEX) with lower participation thresholds and convenient operational paths, providing more opportunities for individual investors and opening up lower-cost and more decentralized innovation pathways for developers and project parties.
The combination of AI Agents and MEME culture has also lowered the cognitive threshold for people regarding crypto AI technology, especially for users with non-technical backgrounds, and has broken the high-threshold image of technical projects, making participation in this field more diverse, easy, and entertaining.
Capital Efficiency
In the DeFi narrative, capital efficiency has always been one of the core driving forces. DeFi significantly enhances the efficiency of capital use through decentralized platforms, utilizing smart contracts and automated mechanisms. These platforms attract a large amount of institutional funds and retail users into the market by offering high APY and capital returns. As there is no need for intermediaries and traditional banking processes, capital can flow in a shorter time and achieve higher returns, greatly improving market capital efficiency.
AI Agents, through the automation and intelligence of AI technology, can help users achieve more efficient capital operations in the crypto market. Unlike traditional manual intervention methods, AI Agents can automate the execution of tasks such as trading, asset management, and risk control based on real-time market data, helping users seize market opportunities and avoid emotional decisions and human errors, thus significantly improving the efficiency of capital operations. Moreover, AI Agent projects provide more users with opportunities for profit redistribution through on-chain execution mechanisms, allowing participants to enjoy the growth dividends of the project at a low threshold.
Four Major Differences from Technology-Driven to User Participation
Although DeFi and crypto AI show similar motivations 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 technology and the breadth of application scenarios but also in the different ways market driving forces and user participation manifest.
Application Scope
The main focus of DeFi is on on-chain finance, with major innovations concentrated on the construction of financial tools such as decentralized exchanges (DEX), automated market makers (AMM), and lending protocols. Although these innovations disrupt the traditional financial system, their application scenarios are relatively concentrated and clear. In contrast, the application range of crypto AI is much broader, involving various fields such as on-chain finance, AI-generated content (AIGC), NFTs, smart contract automation, and data analysis. While the complexity of technological integration in crypto AI is higher, it also enables reaching more market and user demands. In the future, with the technological development of large AI models, more cross-domain innovations and applications will be promoted.
Technological Driving Force
DeFi's technological innovations are primarily based on blockchain and smart contracts, driving innovations in decentralized financial ecosystems. Its core driving forces come from decentralized trading, permissionless financial innovations, and the automatic execution of smart contracts. In contrast, the crypto AI narrative has complex and diverse technological driving forces, ranging from trading strategies and risk management in finance to content generation, personalized recommendations, data analysis, and a broader range of applications.
User Demographics
The main user demographic of DeFi consists of on-chain native users, who generally have strong financial operation experience. In addition to attracting crypto natives, crypto AI can also engage a large number of users with non-technical backgrounds, including content creators, developers, and technical researchers, giving it a significant advantage in terms of popularity and market coverage.
Market Value Driven
The market value of DeFi projects mainly depends on factors such as the amount of locked assets, listings on exchanges, and liquidity. It relies more on the frequency of use of financial tools on the platform and the level of user participation. The market operates relatively directly and transparently. In contrast, the market value logic of crypto AI projects is more complex and has higher uncertainty. It not only depends on the depth and breadth of technological innovation but also needs to consider the ecological influence of the project and the development potential of practical application scenarios. This also means that whether the crypto AI narrative can continue depends on the combination of technological advancement and user demand, carrying higher risks and potential.