The landscape of DeFi is marked by remarkable growth, but volatility remains a defining characteristic as the year 2025 is coming to an end. The ecosystem recorded a peak of USD 237 billion in total value locked in Q3 2025, but that excitement was short-lived. By the end of November, the total value locked (TVL) shrank by USD 55 billion to just USD 123 billion.
Although there has been significant volatility, participation in DeFi is not only stable but has also increased more than before. This trend is evident from the over 14.2 million wallets participating in the ecosystem this year, with Ethereum still dominating approximately 63% of DeFi activity.
This high level of participation can be seen as proof of DeFi's potential. However, some experts indicate that volatility has opened up fundamental issues: the need to constantly respond to market conditions, making success distant from most users.
Users are expected to continuously check liquidity ranges, adjust positions, and navigate various necessary adjustments. This creates a contradiction that, although it is said that money grows on its own, DeFi participants are still burdened with the manual work needed to enhance their returns.
One example of this perspective is Ron Bodkin, a former Google executive who is now the head of the AI Agent protocol team called Theoriq. Bodkin noted that he has observed the increasing burden on users daily as DeFi grows.
Most people come to DeFi hoping their money will work for them, Bodkin said.
But in some ways, it turns out they are working for their money: checking charts at midnight, adjusting positions during meetings. It is a reverse action that exhausts users.
According to Bodkin, the real inactivity will not come from asking users to do more but from rethinking how to manage all returns. It sounds less like a chase for past yields and more like a search for tools that do not rely on users being glued to their wallets.
Bringing AI into DeFi without black box issues.
Theoriq's new protocol, AlphaVault, aligns with the broader shift towards a more autonomous DeFi management model. Over the past year, there has been a surge in projects starting to experiment with overlaps between DeFi and AI (sometimes called DeFAI), using agents to automate routine tasks and keep up with fast-moving markets.
It's an experiment that gradually shifts from interest in problem-solving tournaments to what the protocol team now describes as part of a long-term plan, Bodkin further stated.
We see increased interest in AI across DeFi, but the real challenge is ensuring that people can understand and trust what those agents are doing. Transparency must grow alongside automation; otherwise, this will not expand in the way people hope.
AlphaVault is one of the DeFi rooms experimenting with specialized AI agents to directly manage users' funds instead of relying solely on tools that operate under specific conditions. It uses a multi-agent system designed to adapt to changing market conditions. This setup has been tested under real pressure during Theoriq's testnet, which processed over 65 million requests from agents in more than 2.1 million wallets.
According to the team, one of the significant differences between it and other AI Agent protocols is how it manages transparency and security, which has previously been criticized for obscuring decision-making processes.
AlphaVault approaches this with policy cages, which are clearly defined smart contract rules about what agents are allowed to do, specifying everything from asset types to position sizes. These boundaries are meant to help users better understand how the system works and to reduce the risks seen in previous AI experiments.
At the launch of AlphaVault, it is integrating with trusted partners in the Ethereum yield space, including Lido's stRATEGY vault managed by Mellow Protocol and Chorus One's MEV Max powered by StakeWise.
These partners allow AlphaVault to allocate funds into Ethereum income-generating strategies utilized globally. The idea is to provide users with a way to earn money without having to constantly check or adjust positions, but the effectiveness of this will depend on the system's performance in the long run.
Liquidity fundraising like many DeFi projects currently do.
In DeFi projects, programming initial startup phases has become a common method to increase liquidity and build total value locked (TVL), giving new systems room to operate under real-world conditions. AlphaVault is choosing the same path.
To begin using the vault, Theoriq has launched a boost phase encouraging the community to lock ETH and earn points convertible to $THQ rewards. As this phase progresses, TVL will gradually shift from locked capital to capital residing within AlphaVault managed by autonomous agents.
This is a familiar model in DeFi, but in this case, capital does not just sit idle but becomes fuel for a system designed to operate with minimal manual control, the team stated.
What is interesting is how $THQ will function in the future. Rather than just being an incentive, Theoriq plans for it to become a reputation token that allows users to stake to support AI agents they believe are performing well.
If the agent performs poorly or does not meet expectations, those stakes may be partially reduced. This mechanism aims to maintain high quality and does not support reckless behavior.
This approach reflects the industry's effort to bring accountability to more automated systems, rather than relying on market references or obscure outcome reports. The idea is to have reputation arise directly from the behaviors of these agents over the long term.
According to this theory, it often creates systems where trust is not based on personalities or promises but on clear on-chain performance, with the community playing a direct role in determining which AI agents are held more accountable.
The future of DeFi post-yield chasing.
Theoriq aims to shift the conversation in the industry from chasing higher APYs to reducing the workload users are expected to handle instead. It is designed based on the idea that developers are seeking ways to lessen the burden of monitoring, balancing, and decision-making that most people still perform manually.
The goal is not to remove users from the process but to create tools that manage on-chain aspects that require significant time and sensitivity, so people do not have to treat DeFi as a side job.
The team has seen increased interest from users in systems that can operate consistently in the background, responding to market conditions without requiring them to intervene every few hours. This type of automation is seen as the next natural step for a sector that wants to grow, expand, and attract a broader audience.
In this broader effort toward more automated, accountable, and transparent on-chain operations, Theoriq and the AlphaVault system may have implications. Whether funds managed by AI will become standard or remain early-stage experiments is still an open question, but the direction of the industry makes their arrival no coincidence.
