Stay informed about what matters in crypto. Forget the noise. Get free market-leading crypto research by subscribing to Re7 Capital’s research below:
About Re7 Capital
Re7 Capital is a research-driven digital asset investment firm specialising in DeFi yield and liquid alpha strategies.
Summary
In this edition, we cover:
How AI can help solve key blockchain challenges
What AI agents are and how they can be used in different markets
New monetisation models brought about by AI agents
AI Agents Taking Over the World
Web3 technology has already enabled more efficient, open, and permissionless transactions of value (anywhere from currencies, to assets, and legal documents) over the years.
Yet, we have some way to go to fully realise the ‘Golden Age’ of crypto adoption - a period of coherent growth, driven by institutionalisation and Web2 convergence.
As part of this realisation, there needs to be tools that help crypto easier to use and interact with for the professional as well as the retail user.
The current adoption cycle comes when we have been seeing significant developments in AI which can all be used within Web3 itself.
The Intersection of AI and Blockchain
Projects at the intersection of AI and blockchain can either use one to enhance the other. Applying AI to solve crypto challenges tackles the UX issue mentioned above and is the focus of this article.
Blockchain can leverage AI in key ways, including:
Automation of decision-making and problem-solving (to streamline processes, reduce costs, and improve efficiency)
Using AI to monitor, analyse, and report on risks in relation to the financial products run on blockchains
Code auditing for enhanced analysis
The first is an exciting avenue whereby AI can be represented as an individual smart contract that performs a function autonomously (an AI agent).
AI Agents: Automating Transaction Flow
The elegance comes from the fact smart contracts can speak to other smart contracts. The process of performing an action on-chain can all be automated end-to-end. There is limited user input.
For example, a user can simply instruct an agent (smart contract) to buy a Solana NFT with their ETH on Ethereum.
The New Monetisation Models
But the future of AI agents doesn’t stop there. Just like with other facets of Web3, the creation of AI agents will also be permissionless.
AI agents can apply to virtually any sector too as they are generalised operators.
Anyone will be able to create their own AI agents for a particular service and monetise that opportunity by creating new agent-based markets.
For example, a user creates a Web3 planner agent designed to buy NFTs cross-chain base on a number of trading strategies.
This agent may need to buy their NFTs cross-chain, requiring a router agent. The Web3 planner agent requests the router agent to perform the action by paying that agent to perform a cross-chain transaction.
Taking inspiration from Friend.tech, Agent creators and their co-owners can receive their share of the revenue from each interaction made.
If their AI model services a larger market and performs well, they will take in more revenue.
Therefore, we envisage a world where AI agents proliferate exponentially as it becomes easier for users to create and own AI agents.
It’s not just theory today. We are seeing sharp/consistent growth of AI agent contracts launching in Web3.
These agents are being applied to sectors including prediction markets.
For example, Omen agents take bets on prediction markets autonomously and update their analysis in real time based on outside data.
They have a betting accuracy of 69% today.
Why does this become more interesting? Several elections are coming up this year.
Closing Thoughts
The promise of AI and blockchain is no longer the future. It’s the present.
The rise in AI agents will inevitably bring more on-chain interactions, transactions, and economic activity. Perhaps agents end up driving >90% of all activity.
It’s now reasonable to see how Agents could ultimately become the unique power users of crypto, supporting why this current adoption cycle will be like no other before.
What’s Next for Restaking Yield?
With the two largest restaking projects already past their first airdrops, farmers are looking for new positions in ETH.
Some are turning to other liquid restaking tokens like pufETH, rsETH and rswETH that haven’t yet done an airdrop.
Others are looking forward to AVS partnerships for new returns. Still, others are waiting for launch of new restaking products like Lido and Paradaigm-backed Symbiotic.
AVS delegation is now available to Eigen Layer stakers but slashing has not yet gone live.
As the restaking meta transitions from points farming to real money are on the line, differentiation in approaches and delegation strategies are likely to set apart projects that until now have had minor differences.
Global MCAP
$2.36T; Global market capitalisation+5.92% last week, continuing the trend so far Monday AM. In a bull flag pattern being in the descending channel since March 2024. Now edging to the upper end with a ~$2.4-$2.5T break out to the upside as marking a structural change in the trend.
Altcoin Dominance %
38%; Altcoin market capitalisation dominance (excl. BTC, stablecoins) -3% since March as the broader market consolidates but +3% since October 2023.
Altcoin dominance surged last cycle when BTC convincingly broke above its previous ATH level which BTC has started teasing once again.
Stablecoin Supply
145B; Stablecoin supplies have seen an impulse after staying flat over the past month. Impulse comes as market sees uplift - net new flows making their way into the market once again.
Bitcoin ETF Net Inflows
+$250m 3D Avg; US spot Bitcoin ETFs seeing 5 consecutive days of net inflows ($948m total). Net inflows over the past month offset the entirety of negative flows in April.
Disclaimers
The content is for informational purposes. None of the content is meant to be investment advice. Use your own discretion and independent decision regarding investments. The opinions expressed in all Re7 public research articles are the independent opinions of the authors at the time of publication and not the opinions of the affiliates of Re7.
Please see here for full disclaimers.