AI Agents and LLMs - How do they differ?

Flagship is building an army of AI Agents that watches the crypto market 24/7 so you don’t have to. No panic, no FOMO, just smarter investing.

But what are AI Agents, and more importantly, how do they differ from LLMs?

Think of LLMs as the brain that understands and communicates, while AI Agents are the complete package with both brains and ability to act. Brains and limbs.

LLMs: "Here's an answer!"

AI Agents: "I'll solve this entire problem for you, proactively."

Let us understand DeFAI and AI Agents with a simple example -

Imagine you're running a crypto trading bot, and you want an AI Agent to manage trades on a decentralized exchange. Here's how the agent operates:

1 Gathers Information: The agent monitors real-time market data from various DEXs, including token prices, liquidity pools, and trading volumes. It also analyzes on-chain data, social media sentiment, and relevant news articles.

2 Thinks and Decides: Based on the gathered information, the agent uses its trading algorithms, historical data, and connected LLMs to decide on the best trading strategy. For example:

• If it detects a potential arbitrage opportunity between two DEXs, it calculates the profit potential and associated risks.
• If it identifies a trending token with increasing social media buzz, it evaluates the token's fundamentals and market conditions.

3 Takes Action: Once it decides on a trade, the agent executes it:

• Connects to the chosen DEX's smart contract through a Web3 interface.
• Executes the trade, considering factors like slippage tolerance and gas fees.
• Records the transaction details and updates its portfolio balance.

4 Learns and Adapts: The agent continuously improves its trading strategies by:

• Analyzing the performance of past trades and adjusting its algorithms accordingly.
• Staying updated on new DEX protocols and integrating them into its trading options.
• Refining its risk management strategies based on market volatility and liquidity conditions.

In this context, the AI Agent demonstrates:

• Autonomy: It handles the entire trading process without human intervention, from market analysis to trade execution.
• Integration: It connects to various data sources and DEX protocols to make informed decisions and execute trades.
• Goal-Oriented: Its primary objective is to maximize returns while managing risks in the volatile crypto market.

AI Agents showcase how autonomous systems can operate in the complex and fast-paced world of DeFi, leveraging real-time data and advanced algorithms to make trading decisions.