The current mainstream narrative in the crypto market is focused on "AI+", especially the AI Agent track, whose market capitalization and growth rate have surpassed the early stage of DeFi, sparking market discussions about its potential. Although AI Agent has shown advantages in technological innovation, user coverage, and capital efficiency, its development cycle and sustainability are still controversial. Compared to DeFi, crypto AI has a broader application scope, technological driving force, and user base, but also faces higher uncertainty and risk.
Author: Nancy
Source: PANews
Each crypto cycle will give rise to a dominant narrative, and AI+ is undoubtedly one of the biggest themes in this bull market, especially the AI Agent craze, which is occupying the vast majority of on-chain liquidity. The market discussion about crypto AI being in a similar DeFi Summer cycle is increasing. This article will compare the market development scale of crypto AI and DeFi, and explore the similarities and differences in the development of these two fields.
$48 Billion Market Cap Exceeds DeFi Summer, Controversy Over Whether It Can Replicate DeFi's Success
According to CoinGecko data, as of January 2, the market capitalization of the crypto AI field has reached $48.8 billion, far exceeding the market capitalization of DeFi during the "DeFi Summer" period. According to data from The Block, after the explosive growth of DeFi in 2020, its market capitalization reached a high of $6.04 billion, and it was not until mid-April 2021 that it broke through the $50 billion mark, by which time the market had gradually matured and diversified. This comparison shows that the explosive power of crypto AI has surpassed the early development stage of DeFi, and it has shown stronger advantages in market appeal and growth potential.
Specifically, the AI Agent sub-sector has been continuously exploding during this period. CoinGecko data shows that as of January 2, the market capitalization of AI Agent has reached $16.93 billion, accounting for 34.7% of the entire crypto AI track, which is equivalent to the total market capitalization of DeFi protocols in January 2021. Taking the leading projects Virtuals Protocol ($5.02 billion) and ai16z ($2.7 billion) as examples, the sum of their market capitalizations has exceeded the total market capitalization of all DeFi protocols at the end of 2020, further highlighting the rapid development of the AI track. The market capitalization of the leading DeFi projects Uniswap and Aave reached a peak of $22.05 billion and $6.58 billion respectively in the previous bull market.
In terms of capital investment, DeFi has attracted a large amount of venture capital after its rapid development, and crypto AI is also in a similar stage, with more and more funds flowing into the AI field, and investment around crypto AI has surged. According to the 2024 financing report compiled by PANews, the DeFi field received $1.69 billion in 269 investment and financing events in 2024, while AI-related projects, as an emerging category, have seen rapid growth this year, with nearly 100 disclosed financing events, 15.2% of which received funding in the tens of millions of dollars range, with a total funding scale of around $600 million.
Although the data performance of the crypto AI track is impressive, the market has different views on whether its development cycle can be similar to DeFi. For example, Messari's latest report points out that AI Agent will reach its peak in the first quarter of 2025 and will not recover. The reasons are as follows: (1) AI Agent agents have not yet proven their product adaptability to support market speculation; (2) The success of Alt-L1 is based on the clear demand for block space during the DeFi boom, but AI Agent lacks both demand and a clear user base; (3) The launch of AI Agent depends on market speculation, but when the market realizes that they will only be toys in the foreseeable future, this speculative cycle will collapse.
There are also views that AI has similar development potential as DeFi. For example, crypto KOL @0xWizard said that 2020 can be called the "Cambrian explosion of DeFi", and 2025 is likely to be the "Cambrian explosion of AI Agent". Various Ai+Crypto applications will emerge next year. Researcher Haotian believes that the arrival of AI Agent is like the DeFi Summer in 2020, which will create a new "bubble" narrative cycle of Build+Speculation. Although the AI Agent ecosystem does not even have its own dedicated infra conditions yet, in terms of ecosystem plasticity, the industry narrative opportunities brought by AI Agent are much grander than DeFi.
Former Spartan Group member @0xJeff predicted that 2025 will be called the Agentic (agency) era, and Agentic-type L1 will reach a market capitalization of $100 billion, similar to the 2020-21 L1 valuation cycle; DeFi will reach a TVL high of over $200 billion with the help of AI Agent.
Regarding the valuation of AI-related MEME coin projects, crypto KOL @Rui said that in the early MEME market, the valuation of projects was closely related to whether they could be listed on exchanges, especially top exchanges. But with the rise of AI Agent and changes in the market, the valuation system based on exchange logic for large-cap MEME is no longer valid, and people's valuation expectations for projects are not which exchanges they will be listed on, but what kind of ecosystem they will create. For projects with existing ecosystems, valuation can be determined based on their ecosystem share; for single-project or "wild ecosystem" projects, the key to valuation is whether they can break through a $100 million market cap, below which they rely more on dissemination, community, and early capital support.
Four Commonalities from Cultural Impact to Capital Efficiency
The combination of technology and capital is the core driving force for the development of the crypto industry. In the previous bull market, DeFi reshaped the crypto financial world through decentralized platforms and smart contracts. Now, crypto AI is changing the way the crypto market operates in a more intelligent and automated way. From the current perspective, the two have similarities in terms of cultural influence, technological foundation, access threshold, and capital efficiency.
Meme Culture
As one of the core narratives of the previous crypto bull market, DeFi itself has a spirit of rebelling against traditional finance. Many DeFi projects, while providing real financial functions, have attracted attention through humorous and parodic naming (such as various food series). Initially, the market even attributed DeFi more to a liquidity game than a pure financial tool, but this culture of breaking the "seriousness" of traditional finance unexpectedly sparked reflection and discussion on the traditional financial system, and quickly accumulated a large number of developers and users to participate.
Similar to the meme culture in the early DeFi narrative, the popularization of crypto AI also relies on the power of MEME. The rise of AI Agent not only depends on technological innovation and application value, but also quickly gathers emotions through humorous and playful MEME methods, thereby stimulating the interest and participation of on-chain users, including bringing new groups such as off-chain developers and researchers to join in a more relaxed and interactive way.
Technological Foundation
Relying on its support in smart contracts, token standards, and developer ecosystems, the flexibility of Ethereum has provided a strong technological foundation for the rise of DeFi, allowing developers to innovate financial products based on demand, and its decentralization and open-source mechanism also provide users with a fair and transparent financial platform.
The emergence of the crypto AI narrative in this cycle is also rooted in the explosive progress of AI technology, especially the advent of large language models (such as ChatGPT), which has allowed people to see the huge potential of the combination of artificial intelligence technology and blockchain. At the same time, the rapid improvement of AI large model capabilities has also empowered more intelligent on-chain applications, such as trading strategies, market forecasting, smart contract automation, and data analysis, thereby providing new perspectives and momentum for crypto technology innovation.
Barriers to Entry
Compared to the complex procedures, bank accounts, and credit checks required by the traditional financial system, DeFi can provide a financial service model that is open, transparent, and without intermediaries through blockchain and smart contracts. All that is needed is a crypto wallet and a small amount of crypto assets to freely engage in activities such as lending, trading, and liquidity provision, without being restricted by region or economic background.
Compared to traditional crypto tools and platforms, the AI Agent provides a more intelligent and automated way of operation, allowing users to easily get started without needing to deeply understand complex technical details or possess professional trading knowledge and experience. At the same time, high-quality AI Agent projects, with their low participation thresholds and convenient operation paths, have broken down the high barriers of platforms such as VCs and centralized exchanges (CEXs), providing not only more opportunities for individual investors to participate, but also a lower-cost and more decentralized innovation channel for developers and project parties.
The combination of AI Agent and MEME culture has also lowered the cognitive threshold for people to understand crypto AI technology, especially for non-technical users, and has broken the image of high-threshold 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 can greatly improve capital utilization efficiency through decentralized platforms, smart contracts, and automated mechanisms. These platforms attract a large amount of institutional capital and retail users into the market by offering high APYs and capital returns. Due to the lack of intermediaries and traditional banking processing, capital can flow and generate higher returns in a shorter period of time, greatly improving the capital efficiency of the market.
The AI Agent, through the automation and intelligence of artificial intelligence technology, can help users achieve more efficient capital operations in the crypto market. Unlike traditional manual intervention, the 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, avoid emotional decision-making and human errors, and significantly improve the efficiency of capital operations. Furthermore, AI Agent projects, through on-chain execution mechanisms, provide more users with opportunities for benefit redistribution, allowing participants to enjoy the growth dividends of the project at a low threshold.
Four Key Differences from Technology-Driven to User Participation
Although DeFi and Crypto AI have shown similar momentum and potential in driving innovation in the crypto market, they differ significantly in several key aspects. These differences are reflected not only in the complexity of technology and the breadth of application scenarios, but also in the different ways of driving the market and user participation.
Scope of Application
The main focus of DeFi is on-chain finance, with most innovations concentrated on the construction of decentralized exchanges (DEXs), automated market makers (AMMs), lending protocols, and other financial instruments. Although these innovations have disrupted the traditional financial system, their application scenarios are relatively concentrated and clear. In comparison, the application scope of Crypto AI is much broader, involving areas such as on-chain finance, AI-generated content (AIGC), Non-Fungible Tokens (NFTs), smart contract automation, and data analysis. While the complexity of technology integration is higher for Crypto AI, it also allows it to reach more market and user demands. In the future, with the technological development of large-scale AI models, more cross-domain innovations and applications will be driven.
Technology Driving Force
The technological innovation of DeFi is primarily based on blockchain and smart contracts, driving the innovation of the decentralized finance ecosystem, with the core driving force coming from decentralized trading, permissionless financial innovation, and smart contract auto-execution. In contrast, the Crypto AI narrative has complex and diverse technological driving forces, ranging from trading strategies and risk management in the financial field to content generation, personalized recommendations, and data analysis in a wider range of applications.
User Groups
The main user group of DeFi is on-chain native users, who typically have strong financial operation experience. Crypto AI, on the other hand, can attract not only crypto natives but also a large number of non-technical users, including content creators, developers, and technical researchers, giving it a significant advantage in terms of adoption and market coverage.
Market Value Drivers
The market value of DeFi projects is mainly determined by factors such as the amount of locked-in capital, the listing on exchanges, and liquidity, which are more directly and transparently related to the frequency of use of the financial instruments and the degree of user participation. In contrast, the market value logic of Crypto AI projects is more complex and has a higher degree of uncertainty. It not only depends on the depth and breadth of technological innovation, but also needs to consider the project's ecosystem influence and the development potential of actual application scenarios. This means that the sustainability of the Crypto AI narrative depends on the combination of technological progress and user demand, and there are higher risks and potentials.
