Interestingly, the biggest winners often appear "uninteresting" in the early stages until they suddenly become the focus of the market.
Author: 0xJeff
Compiled by: Deep Tide TechFlow
Since the release of the first article "AI Trends in the Trenches" in May this year, many things have changed:
Market sentiment has declined, and the number of fairly issued AI agent tokens has decreased.
The narrative has undergone drastic changes.
New ecosystem players have replaced old roles.
The value proposition of Web3 AI systems has become clearer.
More AI investment opportunities for institutions and whales.
A shift from hype to products and actual impact.
And more changes…
In this article, we will review the major events that have occurred over the past few months, analyze current trends, explore who the market leaders are, the future direction, and how to prepare for the upcoming opportunities.
Let’s dive in.
The trenches of the market are not easy to navigate
First: There are too many tokens in the market, leading to a dispersion of liquidity and attention.
Second: Meaningless discussions on Crypto Twitter (CT) and the proliferation of low-quality AI content have diverted attention from high-quality content.
Third: Market enthusiasm is no longer as high as it used to be, and this trend is likely to continue.
Fourth: The speed of narrative switching is extremely fast—if you are not constantly paying attention or have reliable sources of information, it is hard to keep up.
Looking back at the first and second quarters of this year, meme coins from the Trump family, celebrity tokens, and other eye-catching projects like ICM (Intelligent Creator Token), Creator Tokens, and Pump ICOs occupied most of the active liquidity, leaving only a small amount of residual funds for the AI trenches.
AI Agent Ecosystem: From Hype to Productization
Due to changes in the market environment, opportunities have become scarcer. As one of the largest AI agent ecosystems currently, @virtuals_io has become a highly anticipated ecological platform with the most developers. Its initial issuance (Genesis Launches) performed decently, occasionally bringing 5-20 times hype returns.
However, this enthusiasm only lasted for 1-2 months. Ultimately, this ecosystem is overly reliant on hype driven by new projects. When there are no more exciting new projects launched, market attention and enthusiasm quickly fade, and the "points" within the ecosystem lose their value.
This shift in sentiment has prompted investors and speculators to become more discerning, focusing on the actual value (product) of projects rather than mere hype.
Current Trends in AI Agents
Investors are shifting from focusing on Virtuals' initial issuance to selecting high-quality teams.
Some teams that issued tokens early faced significant sell-off pressure but are now gradually recovering and planning to launch new important products or features.
At the same time, some new teams choose to launch on the Virtuals platform with more mature product stages. Compared to the traditional model of spending 2-3 months developing a minimum viable product (MVP), these teams immediately launch finished products after the token generation event (TGE).
Here are some teams worth paying attention to (but not limited to):
@ArAIstotle: Focused on AI fact-checking.
@PredictBase: Decentralized prediction market.
@Mamo_agent: Personal finance assistant (developed by the Moonwell team).
@AskBillyBets: Sports prediction agent/engine/aggregator.
@useBackroom: AI-driven SocialFi platform.
Looking Ahead: High-Quality Projects Will Remain Scarce
This trend may continue—although the number of high-quality projects is limited, if you closely monitor the dynamics of promising agent teams on the Virtuals platform, you may catch the next 10-50x investment opportunity.
Investors Turning to Other Ecosystems: Seeking More Attractive Opportunities
As the market changes, investors are gradually shifting their attention from Virtuals to other ecosystems that offer more attractive opportunities. For example, @CreatorBid has gained investor attention with its highly curated project issuance strategy. Its core is to launch AI products with clear practical value through Bittensor subnet inference technology. This utility-driven issuance model, combined with the team's focus on product support, partnerships, and marketing for existing projects, makes CreatorBid a standout in the AI agent ecosystem.
Similar players include @HoloworldAI, which has launched a lottery-based issuance mechanism (HoloDraw). Users participate in the lottery by purchasing tickets (each ticket represents a purchasing power of 0.5 SOL). 35% of the token supply is reserved for HoloDraw, and users who do not win still have a chance to receive tokens through a consolation prize pool (accounting for 5% of the supply). $HOLO successfully listed on Upbit with a fully diluted valuation (FDV) of $1.5 billion, attracting widespread attention and enthusiasm from the community.
Additionally, @openservai has adopted a more robust strategy, focusing on incubating teams to help them launch products, attract users, and generate revenue before issuing tokens. At the same time, OpenServ is also developing its own decentralized n8n product for the consumer market.
Looking Ahead: Key Trends and Ecosystem Observations
CreatorBid: Its top agent projects are continuously seeking product-market fit (PMF) in the PredictionAI space, while CreatorBid is working to enhance the value accumulation of $BID, which is currently a major pain point.
Other Ecosystems: Continue to adopt a "product-first" strategy; although tokens may face short-term pressure, once flagship use cases, products, or teams are launched, token valuations are expected to recover.
Ecosystems to Watch: CreatorBid, OpenServ, Holoworld, Arc, Loomlay, ElizaOS.
Moreover, capital is concentrating on a few narratives and verticals, extending beyond the scope of AI agents.
Decentralized AI: From Primitive Intelligence to Intelligent Productization
Decentralized AI (DeAI) remains one of the areas with the highest concentration of whale and institutional capital. Here are the key trends and innovative directions in this field:
- Decentralized Computing: The Highest Revenue Segment
Decentralized computing continues to top the revenue charts. @AethirCloud reports annual revenues reaching eight figures, while @chutes_ai processes over 50-100 billion tokens daily through its openrouter service, showcasing the immense market potential in this field.
- Privacy-Preserving AI: Achieved Through Federated Learning
Privacy-preserving AI has become an important solution for Web2 companies and government agencies. The @flock_io platform has found product-market fit and token-market fit in privacy protection and specific domain AI use cases. Its latest collaborations include the United Nations Development Programme (UNDP), the official AI provider for the Hong Kong government (HKGAI), and CIMG.
- The Rise of Darwinian AI
Bittensor has expanded to 128 subnets, and @SentientAGI has announced the launch of GRID (the world's largest intelligent coordination network) and plans to initiate a Darwinian AI ecosystem through the "artifact" subnet. Other players like @FractionAI_xyz are applying Darwinian AI in gaming, such as Polymarket predictions, AI agent battle predictions, tic-tac-toe, soccer, and more.
- Predictive AI Approaching Productization
Multiple Bittensor subnets have demonstrated the scalable advantages of decentralized intelligent creation and contribution, significantly enhancing intelligence levels. For instance, SN18 Zeus, SN44 Score, and SN50 Synth have outperformed benchmarks and the latest models (SOTA). Among them, SN44 successfully converted signals into revenue through the sports betting strategies of @sire_agent, with top sports hedge funds deploying $300 million using these strategies.
The latest emerging segment in DeAI is data, primarily including data labeling, reinforcement learning feedback (RLHF) data services, and evaluation. These tasks are costly and labor-intensive in Web2, while Web3 enables global participation in labeling, annotating, scoring, and providing feedback through token incentives, effectively reducing costs.
Key Players
In the fields of data labeling and RLHF, some leading teams include: SapienAI, FractionAI, PerleAI, PublicAI, SN52 Dojo, Synesis One.
DeFi x AI (DeFAI): From Proof of Concept to Fully Autonomous Financial Agents
The DeFAI sector has rapidly evolved in just a few quarters, from initial abstract layers and GPT-like interfaces (which performed poorly in the first quarter) to the second quarter's personalized agent proof of concept (POC) that helps users manage funds, and now to fully autonomous financial agents in the third quarter, equipped with highly scalable and verifiable infrastructure.
Key Developments and Representative Players
A notable example of rapid iteration is @gizatechxyz, which has led the development of the entire field, with its agents accumulating nearly $2 billion in trading volume while managing $20 million in agent assets (AuA) around the clock. The newly launched Swarm Finance and Pulse (Pendle agents) mark the beginning of a new era, where these agents can help users optimize the returns on idle capital. Following closely is @Almanak__, which has introduced highly scalable and verifiable infrastructure that utilizes smart contracts (asynchronous tokenized vaults) and multiple agents working in coordination, creating a system where AI does not directly manage user funds. This design completely avoids the risks of AI hallucinations and being hacked or exploited, providing a secure environment for institutions and whales to store large amounts of capital. Additionally, Almanak's quantitative strategy creation platform allows users to design quantitative strategies in minutes, rather than spending weeks.
Evolution of DeFAI Use Cases
The rapid development of DeFAI demonstrates its immense potential in the decentralized finance sector, attracting increasing amounts of capital and attention, from optimizing idle capital to providing fully autonomous asset management solutions.
Progress of AI x DeFi Use Cases
- Lending and automatic compounding
- Pendle PT (from low-risk assets to high-risk assets)
- Liquidity provision
- Trading (spot and perpetual)
- Leverage mining/circulation
- Pendle YT and funding rate trading (Boros)
Key players to watch: Giza, Almanak, Cod3x, Theoriq
Future Trend Predictions
Predictive AI: The Most Promising Asymmetric Investment Field The total addressable market (TAM) for prediction markets far exceeds the Web3 scope, with users from various industries participating in topic predictions through platforms like Polymarket and Kalshi. AI systems and tools built on prediction markets will capture immense value from this sector's growth. Consumer applications with user traffic entry points and alternative prediction markets/agents will stand out. Challenges and Breakthroughs: Liquidity remains the biggest obstacle for prediction markets, but the emergence of AI market makers and vault products may improve market liquidity.
Data: The Next Focus Area in Q4 As "useful" data becomes increasingly scarce, Web3 data players will face higher demand from Web2 and Web3 AI labs. Data will become the largest moat and bottleneck in the future.
AI Agents and Ecosystems: Continuing to Attract Attention AI agents and their ecosystems remain a focus for on-chain players and the crypto community due to their simplicity and fair launch structure. While high-performance opportunities will become scarcer, high-performance projects that can stand out may achieve 10-50x growth. However, it is important to note that the liquidity of these projects may still be low, and investments should be made cautiously.
DeFAI: Driving Growth in TVL and Trading Volume for DeFi Protocols DeFAI will enter a new phase, with top players becoming significant drivers of TVL and trading volume for major DeFi protocols (such as AAVE, Pendle, Fluid, Uniswap, Aerodrome, etc.). In the future, it will cover more DeFi use cases, adopt more complex strategies, provide better execution capabilities, and build safer infrastructure and protective measures.
Core Insights
The competition in the crypto industry will remain exceptionally fierce:
Many tokens will face value loss, market attention will be dispersed, and people may choose to leave.
However, amidst this chaos, the foundation for the next wave of Web3 AI is quietly forming.
The leaders of the next wave will possess the following traits:
Solving Real Problems: Focused on addressing user pain points rather than just chasing trends.
Attracting and Retaining Users: Creating sticky products and communities.
Building Products Resilient to Narrative Rotation: Products that can withstand changes in market sentiment and maintain long-term value.
Interestingly, the biggest winners often appear "uninteresting" in the early stages (such as in infrastructure, privacy, and data fields) until they suddenly become the market focus.
Disclaimer
This article is for informational and entertainment purposes only. The views expressed herein should not be considered investment advice or recommendations. Readers should conduct their own due diligence based on their financial situation, investment goals, and risk tolerance (not covered in this article) before making any investments. This article does not constitute an offer or invitation to buy or sell the assets mentioned.
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