The Swarm Is Here

It was a glass tank full of crickets.

Just like the one you see in the pet store.

An enclosure packed wall to wall with yellow-bodied animals, body parts waving through the air…

Complete with a cacophony of chirping filling the room.

But this wasn’t the pet store or the zoo.

It was what the trading floor looked like in the late 1990s.

Source: CNBC.com | Visions of America UIG Getty Images

This was the open outcry trading pit. It’s where traders would relay buy and sell orders using verbal shouting and hand signals.

It’s since become history — replaced by walls of servers humming with cooling fans.

The transition to this electronic exchange of stocks was marked in 2006 when the New York Stock Exchange eliminated its pit.

It was an understandable move.

U.S. algorithmic trading was surging. In 2003, about 15% of trade volume was done by algorithms… By 2010, that figure was 70%.

Computers making trades automatically became the norm. It was no longer clicking buttons on a screen or flinging one’s hands in the air.

It was a technology shift.

The result was more trades, faster execution, and an explosion in trade volumes. Here’s a chart showing the growth in trade volumes.

Source: streetfins.com

And here’s a slide from the CME Group’s quarterly presentation showcasing its massive surge in average daily volume during this period of transition.

Source: CME Group

The landscape of trading had changed forever.

We’re witnessing a similar transition.

One that isn’t happening on traditional markets or exchanges. But on public blockchain networks.

A trend poised to push volumes beyond anything we’ve seen to date.

The Finding

A study came out recently called “Unraveling the Probabilistic Forest: Arbitrage in Prediction Markets”.

It dived into Polymarket’s prediction markets.

Now Polymarket is an event-based marketplace. Events range from what your favorite actor or actress might wear at some awards event to when the current Iran conflict might end.

There is quite the range of markets to track and it offers a real-time glimpse into sentiment on certain events happening or not.

We use it at Brownstone Research to track economic indicators for investment insights.

The exchange is becoming a reliable source of information… It’s done over $20 billion in volume over the last three years. And has garnered massive attention with the Intercontinental Exchange announcing last week it invested another $600 million into the exchange, which comes on the heels of a $1 billion investment last October.

It’s redefining what markets and information mean.

But getting back to the study…

Findings revealed a quiet shift in markets — one exposing the growing use of autonomous agents exploiting inefficiencies on Polymarket.

And it wasn’t a few dollars or a couple of participants.

The study revealed roughly $40 million was extracted from these inefficiencies.

It’s an amount that turns heads.

But the findings didn’t stop there.

The study pulled back the curtain on an emerging industry. One that reveals that bots are scanning hundreds of markets per second to find these edges.

And it’s not just algorithms.

These bots feed AI agents that digest real-time news, scan markets, and take profitable action.

It moves faster than any human can click a button.

And reminiscent of the rise of algorithmic trading in the early 2000s.

Only this time it’s taking place on markets open 24/7/365.

The 100x Change

The study gives us a glimpse of how finance is changing.

We’re seeing a move toward 24/7/365 markets.  And as readers of Chain of Thought know, the future of finance is coming onchain.

It’s not some far-off dream — we’re tracking it each day.

The future of finance won’t be humans clicking buttons on a screen or individuals managing their assets in personal wallets.

It’ll be dominated by AI agents that process information in real time and adjust your portfolio based on your goals.

It’s a trend already emerging.

We can look no further than a project known as Giza. It’s a protocol that’s enabling autonomous transactions to take place in your wallet.

What was once a single transaction now generates hundreds a week.

Below is an image that shows these agents transacting across various protocols in real-time.

Each large bubble is a decentralized finance protocol such as Aave, Morpho, Euler, and Fluid, to name a few.

The small dots are agents. Each time one of those small bubbles moves from one large bubble to the next, it represents a transaction.

Source: world.gizatech.xyz

It’s a visual that exemplifies an agentic swarm emerging onchain.

And this is just one example.

Projects pop up daily, making it easier to find better yields, trade opportunities, and more.

It’s bleeding-edge technology. One gaining momentum as every stock, commodity, and asset gets tokenized onchain.

And the result…

The number of transactions happening on networks like Ethereum is beginning to climb.

Source: Etherscan.io

That’s because each deposit into a wallet is no longer just a single transaction.

The swarm of agents is turning a single transaction into hundreds.

And we’re early. These solutions are just making their way to the marketplace. Each improvement and iteration makes these autonomous solutions faster, more efficient, and easier to use.

What we’re seeing now is akin to what happened at the floor of the New York Stock Exchange.

We currently manage accounts in a narrow window Monday through Friday.

We might make a few transactions each year to buy an ETF or a new share of stock.

We’re moving toward a world where accounts make dozens of transactions daily, 24/7/365.

The shift represents a 100x uptick in blockchain usage.

It’s a monumental shift — one that will trigger a major repricing when investors realize how crucial public blockchains will be for the future of finance.

But more on that later…

Your Pulse on Crypto,

Ben Lilly
Editor, Chain of Thought