A unified financial protocol is emerging, providing a common, unified standard that fuses various types of financial services and seamlessly connects with AI, promoting the adoption and development of intelligent finance.

Two years ago, we designed and implemented Permaswap Network (PSN), a decentralized asset self-custody trading network. PSN is a network protocol that defines the interactions between LPs and trading users, providing a trustless mechanism for asset exchange. PSN is completely open-source, allowing anyone to review the protocol and freely join or leave the network.

In the PSN network, there are two types of nodes: Routers and LPs. Routers are responsible for aggregating information from LPs and generating many-to-many trading orders for users who need to trade. LP nodes, which include automated market-making programs, allow users to flexibly configure their LP nodes' market-making rules, such as setting up k = x * y curves to become an AMM node.

Unlike Ethereum, funds in PSN are not concentrated in a single smart contract but are self-custodied by each LP node. Nodes exchange information through a unified protocol. When a user requests the network, they can obtain a many-to-many trading order, meaning a single transaction may involve asset exchanges with several or even dozens of LPs simultaneously. Each order must be signed by all trading parties to be settled. If any signature is missing or any party fails to make the payment as per the order, the transaction will fail.

This self-custody LP model can be considered a prototype of what we now refer to as AgentFi on AO. One major difference is that users in the PSN network need to run their own nodes to participate in the network, whereas, in AO's AgentFi, the node programs are abstracted into processes on the AO computer. This means users do not need to run programs locally but can use the trustless AO computer to run their agent programs.

Traditional DeFi, due to the performance limitations of public chain smart contracts, requires liquidity providers to deposit assets into specified contracts to conduct financial activities. AO and the agent model will change this situation. On AO, users can launch their own processes, which are essentially user-managed smart contracts with distributed and trustless operation characteristics. The creation and use costs of these processes are much lower than those of Ethereum and other public chain smart contracts. Users' assets are automatically managed by their own processes, and each process acts as an intelligent agent robot that can be programmed to manage the user's assets automatically.

Traditional blockchain smart contracts are difficult to modify and upgrade, and usually, assets are managed within a single unified smart contract. For example, Uniswap uses the k = x * y curve to manage asset exchanges uniformly, and Compound adopts a unified interest rate model to manage lending. Traditional smart contracts use a single strategy to manage large amounts of assets, which is not very "intelligent." Through AO, users can manage assets using personal processes, modifying the process code and configuring various strategies at any time, providing much higher flexibility.

Transitioning from centralized management to decentralized intelligent management, AO processes will make asset management more efficient and intelligent.

Additionally, agent robots are very easy to integrate with AI. The strategies of agent robots can be updated by AI, and AI can also provide oracle services for the agent robots, adjusting or modifying strategies based on external data. Currently, large language models have been successfully tested and run on AO. In the near future, agent finance may be fully managed by AI, operating 24/7 to continuously generate profits, thus realizing intelligent finance.

Our exploration does not stop here.

In ancient times, bartering was common. Bookkeeping became a more convenient way of trading, allowing the exchange of value without the immediate transfer of physical goods. This significantly boosted the rate of value exchange, leading to more efficient division of labor and increased productivity. Along with this, the demand for flexible and convenient transactions grew. From bookkeeping, notes (promissory notes) gradually emerged. Notes are powerful tools that can record debt transfers, payments, transfers, and financing in various financial scenarios. Checks, a common type of note, offer a convenient and secure method of payment. Today, many payments are made through electronic means, but their essence remains credit, and notes are crucial for recording credit and transferring value. Essentially, all financial activities revolve around notes, either directly using them for value exchange or utilizing their variants.

When designing financial products in traditional finance, designers need to consider the trust issues between different financial entities. These issues are addressed through regulation and legal frameworks, requiring significant effort to ensure compliance and manage trust among various parties. However, in the world of blockchain and other trustless protocols, these concerns simply do not exist. Developers have created diverse DeFi financial ecosystems on trustless platforms like Ethereum. As blockchain technology matures, we can leverage the more powerful AO computer and continue to restructure the financial industry using the concept of AgentFi.

Traditional financial instruments include various types of notes, such as promissory notes, bills of exchange, checks, and discounted notes. The existence of these different types is due to varying trust requirements among different entities, necessitating different legal and compliance measures. However, in a world without trust issues, this proliferation of financial instruments simplifies down to their core abstraction: the financial note. We can use the note as a prototype to implement any financial mechanism. This led to the creation of AgentFi notes, which are incredibly powerful and can express almost any financial business.

AgentFi notes also signify a change in financial sovereignty. The trust issues of traditional notes meant that finance could only be a tool for authoritative institutions and sovereign states. The emergence of DeFi marked a shift from government sovereignty to code sovereignty in finance. AgentFi notes will hand financial rights to individuals, allowing anyone to issue their own notes and assets, defining personal sovereign financial instruments and behaviors.

Using AgentFi notes, we can unify finance by modeling any financial instrument. Let's take a look at example of how AgentFi notes improve outcomes.

Suppose Alice and Bob are the two counterparties in a transaction. Alice requests an exchange rate from Bob, and Bob informs Alice that the rate is P1. If Alice considers P1 reasonable, she will choose to proceed with the transaction; otherwise, she will cancel it.

Even if Alice agrees to P1, Bob may still refuse the transaction since it hasn't been settled. If Alice wants to proceed but Bob refuses, Bob's quote is considered invalid. We view Bob's invalid quote as malicious because Alice loses the opportunity to request other quotes while waiting for Bob's response. In this process, Bob could consistently provide the best quote in the market but never complete the transaction.

To prevent Bob from making malicious quotes, we require the quoting counterparty to provide a note with collateral.

Using Permaswap's token $HALO as an example, Alice requests a quote from Bob for an exchange amount of $100. Bob returns a note collateralized with 10 $HALO (equivalent to $1). The note is valid for a very short period, possibly only 10 seconds. If Alice agrees to the price within 10 seconds, she can initiate the settlement function via a smart contract. At this point, the tokens from both parties are exchanged atomically. Once the settlement is completed, the 10 $HALO collateral is returned to Bob. If Bob refuses to settle, his 10 $HALO collateral will be forfeited and transferred to Alice.

By combining AgentFi notes with the settlement capabilities of smart contracts, we can make the exchange process more resistant to bad actors. Whether using AMM or orderbook decentralized trading models, notes can be used to establish trust between different counterparties.

In the exchange scenario, the note's expiration time is only 10 seconds. If we provide a longer-term note with a specific settlement time, this note can serve as a futures certificate.

Bob creates a note for an asset currently valued at $100, with a settlement time of one week later. This note is collateralized with more $HALO, with only 1% collateral in the exchange scenario. In the futures scenario, Bob, as the issuer, needs to provide collateral equal to 20% of the note's current value. Additionally, the note requires the holder to also collateralize 20% of the asset.

Alice collateralizes the required amount and becomes the holder, activating the note. One week later, if the asset's value rises from $100 to $115, Alice can initiate a settlement and receive the $115 worth of the asset. If Bob refuses to deliver the asset, the 20% $HALO collateral will be forfeited and given to Alice.

If the asset's value drops from $100 to $90, Bob can initiate the settlement. Bob will still receive $100, and if Alice refuses to deliver the asset, the 20% $HALO collateralized by Alice will be forfeited and given to Bob.

Similarly, for a long-term note, the expiration time could be one year, and it would include an interest function.

Bob, holding a large amount of $HALO, wants to use it as collateral to borrow from Alice. Bob provides a note with a one-year term, collateralized with 1,000 $HALO (worth $100). The note is valued at $80 and offers an additional 5% annual interest for settlement. Alice pays $80 to purchase the note, and Bob receives an $80 loan.

During the one-year term, as long as the value of 1,000 $HALO remains above $100, Bob can initiate a settlement upon the note's maturity. With a 5% annual interest, Bob needs to pay $80 * (1 + 5%) = $84 to settle the note. After settlement, Bob retrieves the 1,000 $HALO, and Alice receives $84.

If within the one-year term the value of 1,000 $HALO is about to drop below $84 (not $80 because interest is included), for example, at $85, anyone can initiate a settlement. After settlement, Bob will lose all his $HALO, Alice will receive $84, and the settler will get the difference of $85 - $84 from selling 1,000 $HALO, which is a $1 reward for the settler.

There is a close relationship between notes and currency.

Bob can over-collateralize $HALO and issue a note with a value of $1. This note is equivalent to currency, akin to a stablecoin, and can be circulated and used as a stable medium of exchange in the market.

Finance has undergone significant development over the past millennia, especially in the last two hundred years, to keep pace with industrialization and information technology. The financial industry has given rise to many different business types and directions. The emergence of blockchain technology will change all this. By solving the trust issues associated with ledgers, the construction of all financial services becomes much simpler. We have revealed the uniformity of finance, allowing us to simplify and reconstruct complex financial services, ultimately achieving Fusion Finance.

From the self-custody network of Permaswap to AO's AgentFi, blockchain technology has made significant strides. Permaswap will continue to evolve with technological advancements, realizing a complete and unified financial protocol on the Permaweb.