Introduction

Since the fall of 2023, with the launch of the Grants program, Covalent has been at the forefront of fostering innovation in the Web3 space, awarding up to $25,000 in grants to each of the 40 groundbreaking projects. These initiatives span a range of categories, from DeFi to data analytics and security enhancements. This blog post delves into the emerging themes among these projects and highlights the integration of artificial intelligence (AI) and other unique features that set some of these initiatives apart.

DeFi Innovations

Projects under this theme are focused on the following key problems in DeFi:

Liquidity for Real-World Assets (RWAs)

Projects like Zoth aim to solve the liquidity issues associated with real-world assets by bridging decentralized finance (DeFi) with these assets. Traditionally, real-world assets such as real estate, art, and certain financial securities suffer from illiquidity due to their high value, complexity in transfer, and regulatory restrictions. By tokenizing these assets and integrating them into the DeFi ecosystem, these projects are attempting to make them more accessible and liquid, thus enabling easier trading, lending, and borrowing against these assets.

Cross-Chain Financial Interactions

Cross-chain technology is essential for the interoperability between different blockchain networks. Projects like Kawa are addressing the challenges of cross-chain lending and borrowing, which include security risks associated with bridging assets, slow transaction speeds, and the complexities of handling different protocols. They aim to provide seamless access to capital across various blockchains without the traditional trade-offs, leveraging cross-chain messaging services to improve security and efficiency in DeFi transactions.

Sustainable and Social Impact Finance

The integration of sustainability into DeFi is a growing area of interest, as seen with projects like ecoToken. These initiatives are addressing the lack of mechanisms within the DeFi space to support environmental and social governance (ESG) principles. By creating platforms for trading and investing in environmental credits, these projects aim to align the incentives of the DeFi ecosystem with sustainable and responsible environmental practices. They seek to offer solutions that not only provide financial returns but also contribute to positive environmental and social outcomes.

Web3 User Experience

Projects under this theme aim to tackle several critical issues that currently hinder the mainstream adoption and functionality of decentralized applications (dApps) and platforms:

Reducing Complexity

One of the main barriers to widespread adoption of Web3 technologies is the complexity and counter-intuitive user interfaces and experiences. Projects like Solace Protocol and 0101 Labs are focused on simplifying interactions between users and decentralized applications, such as easing wallet interactions, enhancing game experiences, and integrating blockchain elements in a user-friendly manner. By making these interactions more intuitive and similar to traditional web and gaming experiences, these projects aim to lower the entry barrier for new users and enhance the overall experience for existing users.

Enhancing Community Engagement with Analytics

Tools for analyzing and understanding Web3 communities are lacking in depth and accessibility. Projects like Bello address this by providing platforms where users can analyze their Web3 community metrics without the need for technical skills or coding knowledge. This simplification and provision of accessible analytics help projects and community managers make informed decisions, foster engagement, and grow their communities more effectively.

Security and Privacy Enhancements

Projects under this theme are primarily tackling the following critical issues:

Wallet Security and User Protection

Projects like inDemniFi are addressing concerns around wallet security, including the protection of funds, secure transaction execution, and providing users with risk assessment tools. Many users face challenges with securing their digital assets against hacks, phishing, and other forms of cyberattacks. By offering enhanced security features, risk dashboards, and insurance options, these projects aim to make managing and transacting with digital assets safer and more accessible for the average user.

Enhancing Privacy and Anonymity

Privacy is a major concern for many users and entities within the blockchain ecosystem. Projects like Alice's Ring are working to enhance user privacy by implementing advanced cryptographic techniques, such as ring signatures, which allow users to sign transactions in a way that hides their identity among a group of users. These initiatives seek to protect users' onchain activities and identities from surveillance, analysis, and tracking, thus ensuring greater personal and financial privacy.

Combatting Fraud

With the rise of scams, sybil attacks, and misinformation in the crypto space, projects like Flaski are focused on improving security through blockchain analysis and machine learning. These projects aim to identify and prevent fraudulent activities by detecting irregular patterns, verifying the authenticity of transactions, and ensuring the integrity of data on the blockchain. By addressing these issues, they aim to build a safer, more trustworthy ecosystem for all participants.

Role of AI

AI continues to plays a transformative role in Web3 projects, enhancing their capabilities, efficiency, and user experiences. In the context of Covalent grant projects, AI is employed to solve complex problems, automate processes, provide insights, and improve security measures. The integration of AI into these projects enables advanced data analysis, predictive modelling, intelligent automation, and enhanced decision-making, contributing significantly to innovation in the decentralized space.

Here are some of the top AI-powered projects from the grant list, highlighting their use of AI as a key feature:

SmartWhales

SmartWhales introduces an onchain copy-trading platform powered by AI, enabling users to follow successful DEX traders and invest alongside top Crypto Funds. The AI component is crucial for identifying profitable trading patterns and wallets across multiple chains, allowing users to "mirror" these strategies in their own trading activities. This democratizes access to high-quality trading moves, maintaining user control over their funds while optimizing investment opportunities.

BotFi

BotFi leverages AI to provide an intelligent crypto trading experience, enabling users to automate strategies, analyze market trends, and receive personalized trading insights. The AI integration helps demystify DeFi operations, making trading accessible and effective for a broader user base.

Laika AI

Laika AI utilizes AI for deep on-chain analytics, offering tools for token contract analysis, DeFi research, and NFT authenticity checks. Its AI models help users navigate the complexities of blockchain data, uncovering actionable insights and enhancing investment strategies.

Entendre Finance:

This platform employs AI to streamline and automate Web3 financial processes, offering solutions like real-time insights, anomaly detection, and predictive analytics. Entendre Finance exemplifies how AI can transform financial management in decentralized environments, ensuring accuracy and efficiency.

What we’re excited about

The diversity and innovation of the projects supported by Covalent's grants highlight the vast potential and dynamic evolution of the Web3 ecosystem. From enhancing DeFi accessibility and security to leveraging AI for deeper insights and efficiency, these projects represent the cutting edge of blockchain technology. As the industry continues to grow, the themes, technologies, and unique features of these projects will undoubtedly shape the future of blockchain and decentralized applications.

Applying for grants

Interesting projects can learn more and apply at: https://www.covalenthq.com/grant/