DeFi
How is AI revolutionizing DeFi trading?
The emergence of AI and DeFi technologies has, over the years, transformed the status quo in the financial field. As two of the most disruptive technologies of this century, DeFi and AI are powering the future of the financial landscape, unlocking numerous opportunities while ensuring transparency and decentralization. In this article, readers will learn more about AI and DeFi trading and how the former impacts the latter.
What is DeFi?
Fully known as Decentralized Finance, DeFi leverages the powers of blockchain to eliminate third parties and centralized companies from financial transactions. By removing middlemen, it streamlines the processes of executing financial transactions.
At the heart of DeFi are smart contracts, ensuring open, permissionless access to financial services. While traditional finance relies on intermediaries, such as banks, exchanges, and lending institutions to facilitate transactions, DeFi leverages the decentralized nature of blockchain to ensure a transparent and fiat financial system.
Meanwhile, one of the core aspects of DeFi is Peer-to-Peer (P2P). It involves the agreement of two parties to exchange cryptocurrencies or other assets without the involvement of intermediaries. That said, much like other blockchain-powered industries, DeFi has seen massive investment from users in recent years.
With a market capitalization of over $105 billion at press time, the DeFi crypto market is causing waves across the broader financial landscape. Many users are adopting DeFi projects to engage in various forms of crypto trading and maximize their investments.
What is AI?
Known as artificial intelligence, AI refers to the simulation of human intelligence processes and capabilities by computer systems. AI technology is capable of performing complex tasks or solving problems that only humans can solve. Essentially, AI combines machine learning, the Internet of Things, and neural networks to collect and analyze a large amount of data.
Today, AI has become one of the most talked about innovations in the digital space. Experts believe that this niche has the potential to transform the realities of many sectors. So it’s no surprise that many projects popping up incorporate AI.
That said, AI has started to gain traction following the rise of OpenAI’s ChatGPT, generative AI, and other notable machine learning technologies. There are currently dozens of AI-powered crypto projects on the market. They include eTukTuk, WienerAI, Fetch, SingularityNET and many others. These projects have built particular use cases around AI. WienerAI, for example, harnesses the powers of AI to provide an automated trading bot.
Influence of AI in DeFi trading
AI has become an effective way to improve DeFi trading, thanks to its ability to analyze large amounts of data, spot patterns, and predict market trends. With the emergence of AI-based trading robots like WienerAI, traders can now easily spot high-potential opportunities in the market. These bots merge the capabilities of AI and blockchain to give users an edge over other traders.
From real-time market insights to trading strategies and suggestions, AI-powered bots provide everything traders need to thrive in a volatile market. Essentially, AI-based bots make automated trading possible, allowing everyone to maximize their investments.
It is possible for traders to establish certain trading rules which will be implemented automatically. For example, traders can set both entry and exit points which, once scheduled, will be executed. Beginners who are still finding their feet in the market can even get into copy trading, which involves replicating the strategies of successful traders in the market.
Another major use case for AI in DeFi is fraud detection and security. Over the years, DeFi trading solutions have adopted AI algorithms to detect vulnerabilities and strengthen security measures. This aspect of AI contributes to the security of users and their data on DeFi platforms, improving their overall experience.
Conclusion
AI plays an important role in ensuring an efficient DeFi trading experience. While helping users analyze market trends so they can make informed decisions, it also helps DeFi platforms quickly detect any signs of vulnerability. As such, there is no doubt that the emergence of AI has redefined trading in the DeFi space.