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Crypto Protocols unleash AI Power to push boundaries of DeFi
As the decentralized finance (DeFi) ecosystem continues its rapid growth and regains momentum, forward-thinking protocols are harnessing artificial intelligence (AI) to push the boundaries and redefine how we interact with and leverage digital assets.The integration of AI capabilities is accelerating fast across the DeFi landscape. Numer.ai, a crowdsourced hedge fund, uses AI to carry out trades based on predictions made by quants. Etherscan’s Code Reader leverages AI to let users retrieve and interpret the source code. And Minswap Labs, a DEX on Cardano, has sought SingularityNet’s AI expertise to optimize liquidity provision via smart analysis and prediction.
AI Narrative Evolution
As we move into 2024, the narrative around AI tokens is evolving from infrastructure-focused projects to those that leverage this infrastructure. While early AI developments centered on creating the foundational layers, the next wave will prioritize building innovative products that harness these layers, offering significant advantages to users. This shift highlights the growing importance of platforms which not only facilitate AI development but apply it to existing tech, driving broader DeFi adoption and utility.
Bumper($BUMP) is one project at the forefront of this progression. The DeFi trading solution is establishing itself as a market leader in helping users take advantage of asset price risk by integrating advanced AI systems at its core.
The protocol introduces a new way to trade and generate gains, whichever direction market volatility swings. Users open a position with a set term and price floor, up to 99%, by depositing assets such as wrapped Bitcoin. Over the active period if the asset price rises they realize the asset value gains. If, at the end of the defined term the Bitcoin price is below their floor they withdraw USDT stablecoin to the value of their floor price, and are able to accumulate more of the asset at a lower price. Or they pocket the USDT and they’ve preserved the value of the assets they held.
Bumper’s AI Integration
Bumper’s capabilities are enhanced by a trio of cutting-edge AI tech stacks:
1. Price Prediction
Bumper AI engineers are training a 70 billion parameter Large Language Model (LLM) with financial data. The LLM will be fine-tuned with Reinforcement Learning from Human Feedback techniques (RLHF) to reward the LLM for making predictions that agree with normalized actual price data. Bumper began training datasets of daily price and hourly data but are ultimately aiming to train the LLM on tick data.
Since BTC tick data constitutes hundreds of terabytes of data, datasets are reformatted using Retrieval Augmented Generation (RAG), a relatively new approach to transforming information. RAG technology will not only significantly enhance the performance, but it is also expected to enable the seamless integration of multiple asset price feeds in real-time (a crucial requirement for RLHF) and operate within the constraints of existing LLM context windows.
Bumper uses an 8-billion parameter pre-trained Large Language Model to ingest vast amounts of financial Natural Language Processing (NLP) data. The model broadly categorizes speculator disposition into a detailed sentiment score and distribution, giving a nuanced understanding of market mood. The LLM is fine-tuned utilizing Bi-directional Encoder Representations from Transformers to label opinions, attitudes, and emotions.
Additional NLP training helps to identify distinct financial vocabulary. Equipped with attention mechanisms and transformer-based structures, the LLM discerns market sentiment and investor behavior to signal future market trends.
3. Technical Analysis
Bumper’s AI engineers have pioneered a novel approach to train a 7 billion parameter Large Language and Vision Assistant (LLAVA) directly from market data images. Their innovative method allows the LLAVA to extract price data, technical indicators like RSI and MACD, and label essential technical analysis markers such as support and resistance levels – all from a single image input.This technique represents an end-to-end multimodal model that connects a vision encoder with an LLM. The LLAVA can process both price charts and natural language technical indicators, training the overarching model on technical analysis using advanced Long Short-Term Memory (LSTM) algorithms for highly accurate time series prediction.
For users, Bumper’s AI integration will further enhance their core offerings:
- Smarter Trading to Outperform the Market
Users can leverage Bumper’s hedging tools to capitalize on crypto price swings. Taking out a position by setting a fixed price floor, traders gain the ability to harness the market’s dynamic nature and outperform in volatile conditions.
- More Efficient Capital Value Protection
Bumper empowers users to safeguard their investments against unforeseen downturns. Protection offers peace of mind for Hodlers, DAOs, investment funds and anyone managing crypto capital or reserves. The advancements through AI are making capital value preservation even more cost efficient.
- Higher Consistent Yields to Grow Wealth
It’s not just about volatile assets either. With Bumper, users can put their stablecoins to work generating reliable yields, currently realizing around 150% APR, powered by AI insights. This allows for passive income streams that can consistently grow overall wealth over time.
Proven Performance and Future Innovation
Since launching on Arbitrum in late 2023, Bumper has consistently outperformed leading off-chain Black-Scholes based pricing models like Deribit by up to 30%.
Analysis using Bumper’s proprietary Agent-Based Modelling (ABM) forecasts up to 25% economic efficiency gains by better balancing the trilemma between Lower Premiums, Higher Yields and Solvency Robustness through AI.
Additionally since the protocol will rebalance itself ahead of price movements, it is expected to generate alpha returns, which will be redistributed as lower premiums for hedgers and higher yields for earners.
As DeFi protocols like Bumper continue integrating AI to unlock new capabilities, we’re witnessing the dawn of a more intelligent and sophisticated digital financial ecosystem. Protocols are no longer just leveraging technology – they’re pioneering the frontiers of transformative AI applications in finance.
Disclaimer: This is a paid post and should not be treated as news/advice.
