What are AI agents, and how do they work in crypto?

AI agents in crypto explained

As someone who has been closely observing the rapidly evolving world of cryptocurrencies and AI for quite some time now, I find myself both fascinated and cautious about the potential of integrating these two cutting-edge technologies. On one hand, the idea of creating an AI agent that can manage my crypto wallet, make informed trading decisions, and even engage in interesting conversations about the latest trends is incredibly intriguing. I remember when I first stumbled upon Bitcoin back in 2011, never in a million years did I think we’d be where we are today with AI bots promoting memecoins like Goatseus Maximus!

AI agents for cryptocurrencies are computer programs that users can rely on to carry out particular duties automatically.

Self-governing digital entities, powered by artificial intelligence (AI), engage in transactions with blockchain networks. This interaction allows for diverse capabilities like buying/selling assets, exchanging tokens, portfolio management, and participation in Decentralized Finance (DeFi) systems.

Through automated management of intricate tasks, AI agents serve users by refining strategies, minimizing human mistakes, and swiftly and effectively handling transactions.

AI agents in cryptocurrency are following a larger pattern of incorporating artificial intelligence across multiple industries, boosting the performance of smart contracts and Decentralized Applications (DApps). These intelligent entities can sift through enormous datasets, detect patterns, and make well-informed decisions autonomously, reducing the need for continuous human supervision.

How can AI agents drive automation in crypto?

AI-powered agents can simplify, strengthen security, and optimize the performance of cryptocurrencies, revolutionizing the way people handle their digital money transactions.

• Automated financial management: AI agents can take charge of your finances, making trades and managing your portfolio while you sit back and relax. It’s like having a personal financial adviser on autopilot.
• Efficient transaction handling: AI agents can handle millions of transactions simultaneously, allowing for faster trades and more sophisticated strategies, keeping up with the fast-paced crypto market.
• Personalized financial assistants: Think of an AI that not only recommends services but also takes care of payments and bookings — making your financial life easier.
• Natural language transactions: You can interact with your finances using simple text commands. Tell your AI what you want, and it handles the complex operations for you.
• Enhanced security: With advanced technologies like multi-party computation (MPC), your transactions are extra secure, protecting your assets from unauthorized access.

The head of Coinbase, Brian Armstrong, is known for promoting the use of AI-driven agents within cryptocurrency. He believes that as technology advances, more blockchain transactions could be carried out by such autonomous systems, highlighting the emerging fusion between artificial intelligence and blockchain technologies.

What is the Based Agent?

As a researcher, I’ve recently come across an exciting development – Coinbase has unveiled a novel tool named “Based Agent.” This tool empowers users like myself to swiftly and effortlessly develop our very own AI agents within mere minutes.

The Agent is an artificial intelligence-based autonomous entity that links up with Level 2 Base via the Coinbase Developer Platform (CDP) and OpenAI’s Swarm. This enables users to carry out blockchain operations such as launching NFTs, minting tokens, and moving assets.

As a researcher exploring blockchain technology, I’ve come across the Based Agent template, a tool developed by Lincoln Murr, a skilled developer at Coinbase. This template simplifies the process of integrating smart contract functionalities for users, allowing them to execute trades, swaps, and staking activities with ease.

To get started with Based Agent, you need the following:

• An API key from Coinbase’s developer program.
• A key from OpenAI.
• A template provided by Replit.

By simplifying the process, we’re making it possible for more people in the cryptocurrency world to utilize Artificial Intelligence (AI) tools. This enables users to create automated trading strategies and construct AI-driven bots capable of executing transactions directly on the blockchain.

But can AI agents have crypto wallets? 

Absolutely! Artificial Intelligence (AI) entities can indeed possess digital wallets for cryptocurrencies, allowing them to execute multiple transactions on the blockchain. To illustrate, the Based Agent template functions as a simple platform for developing autonomous AI agents that come equipped with crypto wallets and access to the blockchain.

Have you heard? Replit is a user-friendly software development and distribution platform powered by artificial intelligence, enabling programmers to create, distribute, and deploy their software swiftly. You can access the Coinbase-based Replit template right here.

Step-by-step guide to create an AI agent using the OpenAI Swarm Framework and Coinbase’s CDP

To construct your AI agent equipped with a cryptocurrency wallet, you’ll need to accomplish the following:

As a researcher, I’ll guide you through the process of creating your own AI agent equipped with a digital wallet using the OpenAI Swarm Framework in conjunction with Coinbase’s CDP. Here’s an easy-to-follow sequence of steps to get you started:

Step 1: Set up your development environment

• Fork the template: Start by forking the template from the Based Agent Replit.
• Create a Replit account: If you don’t have one, sign up for an account.
• Modify your project: Once you’ve forked it, you’ll have your own version of the project to customize.

Step 2: Obtain required API keys

Coinbase CDP API key:

• Go to the CDP Portal.
• Create a new project and generate an API key. Make sure to save both the key name and private key.

OpenAI API key:

• Visit the OpenAI Platform, sign up or log in.
• Go to the API keys section and create a new key.
• Fund your account with $1 or $2 for testing.

Step 3: Configure your environment

In your Replit project:

• Access “Tools” in the left sidebar.
• Select “Secrets” to store your API keys securely.
• Add your Coinbase and OpenAI keys as secrets, as shown in the image below.

Step 4: Understand the code structure

• Core functionality: Familiarize yourself with the main functions that enable blockchain operations, such as transferring assets and creating tokens.
• Operation modes: Review how to interact with your agent through different modes, including direct command line interaction (chat mode), independent operation (autonomous mode) and conversation between OpenAI and Based Agent (two-agent mode).

As a researcher delving into the intricacies of this AI-based blockchain project, I’ve discovered that it comprises two pivotal files: agents.py, responsible for managing the core functionalities of the intelligent agent in blockchain transactions, and run.py, which outlines various operational modes to facilitate seamless interaction with the agent.

Step 5: Extend agent capabilities

• Think about new functionalities you want to add to your agent to enhance its capabilities.
• You can integrate these new features by updating the agent’s function list (in agents.py file) with your additions.

Risks of AI agents in crypto trading

As a crypto investor, I’m always mindful of the risks associated with AI agents in trading. These risks include algorithmic bias, security loopholes, regulatory uncertainties, and the possibility of market manipulation. Therefore, it’s crucial for me to exercise caution when investing in this space.

One notable example is Truth Terminal, an AI bot that promotes memecoins like Goatseus Maximus (GOAT). While it can create buzz and drive prices up, this hype often lacks any fundamental support, making investments highly speculative.

There’s also the danger of algorithmic bias, which means the AI might disproportionately promote certain stories or investments related to a token, creating an illusion about its worth. This could result in excessive enthusiasm and unjustified price surges that may not be sustainable.

There’s also the risk of market manipulation, where AI tools could be used to execute pump-and-dump schemes, leveraging automated trading to distort true market values. 

Furthermore, since AI-powered marketing isn’t tightly regulated, there’s a risk that dishonest individuals may manipulate these technologies without facing consequences for their actions.

Ultimately, it’s crucial to be aware of potential security risks: if an AI system gets hacked, it might distort trading tactics or mislead market opinions for malicious purposes. With technology advancing rapidly, remaining vigilant and well-informed about these threats has become increasingly important.