DeFi
DeFi’s UX Becomes a Disincentive to Adoption – Is AI the Antidote?
DeFi represents low-hanging fruit for AI’s natural language capabilities
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One of the big promises early in the development of decentralized finance was that it would be a great financial leveler. Open financial protocols, accessible to all, would usher in a new era of peer-to-peer financing, lowering barriers to credit for traditionally less wealthy groups who often find themselves excluded from investment avenues open to the already wealthy .
Except four years after the “DeFi summer” that sparked this rhetoric, DeFi remains inaccessible to most people, locked into its own poor user experience. Instead of the initial promise, newcomers are immediately faced with a steep learning curve, high gas fees, user interfaces designed to deter engagement, risky protocols, and shaky interoperability.
User interest in DeFi tends to fluctuate with crypto prices, indicating that people are interested – when the opportunity exists. However, the incentive should be large enough to make the user experience worth it.
Solving the problem at the application level seems, at this stage, futile. The ecosystem has evolved into a Frankenstein-like state, with Ethereum now supporting a plethora of Layer 2 platforms, each with their own dApp segment, connected by a series of bridges and interoperability protocols on which one must navigate.
But what if it could just be abstract? A new wave of innovators believes that DeFi represents low-hanging fruit for AI’s natural language capabilities. A user layer based on ChatGPT could provide a much more accessible interface that simply executes the user’s wishes under the hood. In tandem with emerging technology, like intents, which operate based on user outcomes, it is possible to remove a significant portion of user experience friction. Additionally, it opens up more investment opportunities and potential for users.
Gurps Rai, CEO of droppGroup, which has developed a blockchain-based solution for IP management of AI models and platforms, explains:
“Personalization is another important benefit that AI brings, for example leveraging AI to analyze user data and provide personalized investment recommendations. This not only improves user satisfaction but also increases engagement and retention by offering tailored financial advice that meets individual needs.
He also cites several examples where AI is already integrated into DeFi, such as Numerai, a hedge fund using crowdsourced prediction models to manage its investments, and Harvest Finance, which uses AI to optimize yield farming strategies on multiple platforms.
However, Dominic Williams, founder and chief scientist of the DFinity Foundation which develops the Internet computer protocol, has a vision for even more comprehensive features that make investment management even easier. Internet Computer is building the infrastructure for “decentralized AI” – on-chain smart contracts managed using automated agents. He explains how this could work:
“An AI smart contract could act like a wallet with smart broker functionality. For example, you can log into your wallet on your phone and tell it, “If BTC hits $100,000, trade half of my BTC for USDC.” »
These are future features, rather than capabilities available today, whereby these “wallet smart contracts” can automatically respond to trigger points at any time, provided they have been programmed to do so.
Another future use case could be integrating AI smart contracts with automated market maker smart contracts used on DEXs, automatically changing community incentives in a way that attracts maximum liquidity and minimizes slippage. This would further improve the UX, as issues such as preventing slippage and minimizing gas costs remain a challenge for users.
Converging AI with blockchain technology to produce something greater than the sum of its parts is still relatively uncharted territory, and solving DeFi’s user experience issues is a daunting task. far from being the only use case in the study. However, if there are social or economic benefits to be gained from DeFi beyond a niche financial experience, then leveraging AI’s emerging capabilities could be the best way to transform the DeFi UX of a deterrent into a sales argument.