The Future is Here with AI in Finance
Imagine your investments tirelessly scouting the global markets for optimal opportunities—without any effort on your part. Although it may sound like science fiction, it’s actually happening right now.
In the realm of traditional finance (TradFi), algorithms account for 70% of U.S. stock trades. Enter AI agents, sophisticated systems capable of learning and making decisions in real-time. According to predictions from VanEck, the number of these agents is anticipated to soar from 10,000 to over 1 million by the end of 2025.
How Does This Impact You?
These AI agents are quietly working behind the scenes, not just analyzing market trends but also balancing portfolios and managing liquidity on decentralized exchanges like SaucerSwap and Uniswap. This innovation blurs the lines between TradFi and decentralized finance (DeFi), with expectations for cross-chain transactions to increase by 20% by 2025.
Can We Rely on AI for Financial Management?
While autonomous finance isn’t a novel concept, today’s AI agents show enhanced capabilities and sophistication. Should we trust them to manage substantial digital assets? What checks are in place for decisions made by algorithms rather than humans? These questions raise legitimate concerns.
Trusting Distributed Ledger Technology (DLT)
As AI agents take on a larger role, issues of transparency and market manipulation are becoming more pressing. Certain blockchains permit front running trades and sandwich attacks, tactics that exploit blockchain consensus and undermine market integrity.
DLT may serve as a key solution, promoting transparency and auditability in decision-making. The Identity Management Institute reports that firms adopting blockchain identity systems have already reduced fraud by 40% and identity theft by 50%. Applying these principles to AI-driven finance could help mitigate risks of manipulation.
Envisioning a New Era: DeFAI
A blockchain-centered, trust-focused framework could usher in DeFAI, where AI agents operate independently, forgoing oversight without compromising accountability. Open-source projects like ElizaOS are paving the way for secure interactions between agents within DeFi networks.
Conclusion
As AI agents assume more complex responsibilities, establishing verifiable trust becomes indispensable. Projects like EQTY Lab, along with tech giants Intel and Nvidia, are already developing solutions to anchor trust within blockchain frameworks. We will only truly trust AI when we can trust its operational inputs and outputs.
The pertinent question is not whether financial institutions will embrace autonomous finance, but whether systems can adapt rapidly enough to facilitate this transformation.
