An AI DeFi Robo-advisor for Everyone: Building the Smart DeFi Ecosystem
DeFi is on Fire
Since Compound’s issuance of COMP tokens and distribution to users via yield farming, the DeFi craze has become unstoppable. DeFi products like Oracles, DEX, DeFi aggregators and yield farming soon started to emerge and attract capitals.
There is no doubt that DeFi is on fire right now.
In this article, we will share with the Cortex community some of our thoughts on the current state and future development of DeFi. We will also talk about the release of our very first open-source DeFi project, CyFi, an AI DeFi intelligent robo-advisor, laying the foundation for a smart DeFi ecosystem. In the near future, we hope to iteratively introduce more open-source projects into the smart DeFi ecosystem.
The “New Token” Movement
DeFi infrastructure projects, such as MakerDAO, Compound, Uniswap, etc., have been in the market for several years through its highs and lows. Although they have suffered heavy losses, they continue to push forward DeFi’s state of art. These projects have now become the core building blocks for various layer-2 projects vying for shares in the DeFi market.
These layer-2 DeFi projects lower the barriers to entry for users, allowing them to learn and understand DeFi products such as Maker and Compound more easily. They also introduce features such as multi-platform aggregation, which uses mathematical methods to calculate higher returns. The ROIs of the underlying DeFi products, such as Compound Lending and Uniswap, are not much different from one another. As a result, in order to increase the ROI, rivaling aggregators are issuing their own tokens, hoping to attract funds and increase profitability for their investors.
The term “DeFi” has become the hottest topic in all blockchain communities. Projects like Maker, Compound, Uniswap, dYdX, Fulcrum, Aave, Synthetic, etc. are finally becoming mainstream, attracting attention from traditional investors. This is good news for the crypto community.
Cortex’s Foundation to the Smart DeFi Ecosystem: AI DeFi Robo-advisory
Investment advisory is already a very mature practice in traditional finance. Professional investment institutions provide customized investment advisory and asset management services to investors. However, professional asset management services have extremely high capital thresholds and management fees, which are difficult for average Joes to afford. As a result, many people are excluded from traditional financial advisory. Recently, the robo-advisory industry has emerged and grown rapidly. Robo-advisors provide a one-stop investment and financial advisory platform that lowers the market barrier. What differentiates the robo-advisors from their traditional counterparts is that they rely on algorithms and AI models to optimize the ROIs. AI models integrate a variety of factors (including income evaluation, risk evaluation, investor risk appetite evaluation, etc.) to provide investors with investing advice as well as formulate investment strategies and portfolios.
In the field of crypto assets, with the rapid rise of decentralized financial platforms and centralized financial platforms, more and more financial advisors and investors are taking cryptocurrencies more seriously. How to fit cryptocurrencies into one’s existing investment strategies has become a difficult problem faced by investors.
CyFi, the first AI DeFi robo-advisor, released by Cortex, is an open-source one-stop robo-advisor that aggregates popular DeFi products into one platform for ROI maximization.
CyFi can be thought of as a one-stop investment platform, advisory, and operation services for users. Unlike traditional DeFi aggregators, CyFi evaluates not only the rate of return for each DeFi protocol but also the hidden risks behind the DeFi financial platforms that users tend to ignore; it takes a more holistic view when making decisions on investment strategies and portfolios. Starting from the original data of DeFi, CyFi calculates a series of high-level features (including centralization, liquidity, collateral, etc.) to compute a score for each DeFi protocol, outputting the optimal portfolio. The resulting portfolio is then automatically pushed from Cortex to Etheruem’s smart contract to invest in the corresponding DeFi products.
It should be noted that everything is open-source and transparent, including the AI models that calculate the optimal investment portfolio, the inference results, and the Ethereum smart contracts. While the user enjoys the benefits of the one-stop service of DeFi intelligent robo-advisory, the user’s assets are entirely in his own hands from beginning to end.
Core Feature #1: Decentralized AI Product Rating
As the number of DeFi platforms and various decentralized investment and wealth management products increases, there is a growing need for an independent and impartial third-party institution to review these DeFi platforms products in terms of features such as income, safety, risk, etc. This audit includes not only the statistical calculation of historical yield, but also the source of income, code review, and contract logic analysis etc.
The decentralized AI DeFi platform rating based on the Cortex blockchain can first solve the issue of running complex algorithms and calculations on limited-resource environments. Cortex can make the rating rules truly open and transparent. With the continuous enrichment of evaluation dimensions, the acquisition of on-chain data, the calculation of more features, and the continuous training and iteration of AI models, CyFi will gradually become a fully decentralized on-chain AI DeFi platform rating tool.
Core Feature #2: Personalize Investment Portfolio
In the first version of CyFi, the AI model only bases its portfolio allocation decisions on the ratings of DeFi platforms. However, future updates will evaluate the investor’s asset status and risk appetite to provide a highly personalized investment portfolio strategy.
Investors only need to fill out an investment questionnaire on the platform, and the AI algorithm on the Cortex blockchain can assess the investor’s risk appetite level. Then the outcome is combined with the AI DeFi platform rating results to automatically generate the final personalized investment portfolio. The entire process takes only a few minutes, which achieves not only true openness and transparency but also efficient and accurate matching of the user’s asset management goals.
Core Feature #3: Decentralized AI Credit Rating based on User Data on-chain
As on-chain data grow, ratings based users’ assets, risks, and credits become feasible. These data and ratings make more possible certain financial services, such as loans and lending.
Utilizing AI models on the Cortex blockchain, a reference credit rating can be computed based on the user’s data. Lending platforms can use this rating as a basis, along with other effective risk control methods, to carry out credit lending. It will be a huge breakthrough to the current crypto lending market, which is heavily based on mortgage lending.
Core Feature #4: Cortex on-chain Governance based on DeFi Products
DeFi governance is essential, as more protocols and services are introduced to the DeFi ecosystem. Questions arise such as: Which DeFi platforms need to be included in the evaluation scope of the CyFi platform? Which dimensions need to be evaluated by the AI model? All these issues require a sufficiently open, fair, and effective governance structure for management. This is where Cortex AI DAO comes in. The Cortex community will have decision-making power, and CTXC holders will be incentivized to participate in the governance of the entire AI ecosystem. Various decentralized governance methods — AI governs AI, user governs AI, AI governs user — will be discussed, tried, and implemented in AI DAO.
The Path to a Smart DeFi World
DeFi has gained the central spotlight in not only the crypto space but also traditional finance. The attention has injected much-needed hope and excitement to the blockchain field.
The application of blockchain in the financial field has proven to be feasible and beneficial. To continue breaking into the mainstream of financial field, Cortex and its capability to transparently execute AI models on the blockchain will play an essential role in the AI DeFi ecosystem. As a new DeFi infrastructure project, CyFi’s unique offerings will continue to evolve and contribute to the DeFi field.
