The future of finance is DeFi intelligence

Decentralized funding has become one of the fastest growing areas in the crypto ecosystem over the past year. At the time of writing, the total value locked in DeFi has skyrocketed to over $ 100 billion. Despite the impressive numbers, decentralized finance is still in its infancy, which begs the question: what’s next for this disruptive financial technology?

The next frontier is likely to explore new opportunities through artificial intelligence (AI) and machine learning combined with decentralized funding to create DeFi intelligence.

Smart DeFi in the wild

Today, several companies are leading the way in integrating AI and machine learning with blockchain, with an emphasis on automation and the vision of making intelligent functions core functions. Interoperability is essential for creating fully functional DeFi intelligent solutions. You have developed a network of autonomous economic actors to provide the Web 3.0 ecosystem with efficient, reliable and future-proof tools and infrastructure for building an economy.

Connected: How NFTs, DeFi and Web 3.0 come together

This spring, Shopify Capital announced plans to use machine learning and AI to fund skilled sellers based on their past sales history and business performance. Similarly, SingularityNET’s decentralized AI marketplace has developed a new DeFi project called SingularityDAO that plans to manage dynamic token sets, create predictive markets, and execute hedging strategies.

DeFi Intelligence has the potential to revolutionize DeFi protocols by adding an extra layer of data that brings a new level of efficiency to the market and enables decentralized and intelligent means of asset management.

DeFi wisdom and financial freedom

The need for a transparent and accessible financial system is becoming increasingly apparent as DeFi works to replace legacy systems, highlight the failures of traditional centralized units, and offer a viable option for global financial freedom. Unlike its centralized counterparts, DeFi has been shown to promote global financial freedom so that participants are in full control of their funds at all times and can interact with no middlemen.

Connected: DeFi will bring a global revolution to the traditional finance space

The evolution of DeFi towards automation has the potential to enable powerful intelligence services that make financial services and transactions easier and more widely accessible. These changes will enable a new set of services including:

• AI-regulated derivative products will significantly improve the investment process and liquidity in the peer-to-peer financial markets. An additional benefit would also be improved risk reduction.

• Mitigation Risk Management with AI on decentralized exchanges evaluates trading situations and safeguards risks in the market accordingly.

• User rating. The banking sector is currently being transformed by AI technology which enables faster and more efficient creation of user risk profiles. Without sacrificing user privacy too much, the same technology can be applied to DApps to enable more sophisticated client tiers and more advanced incentive mechanisms. At least users can achieve higher returns through their liquidity or other exclusive product / service features.

DeFi intelligence and interoperability

Interoperability allows funds to flow freely across different blockchain platforms like Bitcoin, Ethereum, Binance Smart Chain and more, creating liquidity and creating a more user-friendly environment for mass adoption of decentralized finance. The use of artificial intelligence makes interoperability a core capability of the next generation of DeFi protocols.

Liquidity repositioning can be further automated by applying more complex intelligence in real time based on the analysis of thousands of data points. This will benefit pricing and can reduce volatility and streamline risk management on blockchains.

Connected: Blockchain Interoperability: The Big Picture

Intelligent AMM

When you think of an automated market maker or AMM as a robot always ready to quote you between two assets, it is clear that apps like Uniswap or Balancer are on the right track. But how do we go one step further? By integrating AI, intelligent AMMs can learn from factors such as historical market performance based on behavior within a particular liquidity pool. This creates an asset allocation function that adequately reflects current market conditions.

Connected: Automated market makers are dead

Smart DeFi Loans

By integrating information, DeFi credit logs can evolve into collateral elements and levels, such as liquidation history and transaction patterns, to develop a smart profile and quantification of borrowers and lenders.

Smart insurance

The traditional insurance market is valued at more than $ 6 trillion today. As institutional capital flows into DeFi and the risk of theft increases, DeFi insurance becomes essential for investors. While insurance is slowly becoming an established part of the DeFi ecosystem, it still uses little intelligence.

The coverage of specific smart contracts can be based on smart models that use quantitative DeFi factors such as the number of liquidations in the loan logs that the smart contract has been exposed to or the types of specific address pools that provide liquidity. Another important service that AI can provide is the ability to assess the risk of exploitation or hacking / failure of a particular smart contract.

Conclusion

As DeFi continues to build a huge network of platforms and protocols that enable users to exchange, trade, deposit, borrow, and lend cryptocurrencies, the transition to AI integration is one of the possibilities. The combination of these two movements seems inevitable and will usher in a new level of innovation at DeFi, driving a whole new generation of intelligent and decentralized financial services.