DeFAI, the integration of Decentralized Finance (DeFi) and Artificial Intelligence (AI), is transforming on-chain asset management by enabling AI agents to autonomously execute financial tasks. Since Q4 2024, the sector has gained momentum through key developments, including the viral success of the Truth Terminal Twitter bot and the rise of Virtuals Protocol, which peaked at a $3.5 billion market cap. Projects like Giza and Almanak are now deploying AI agents for on-chain operations, marking a shift from narrative-driven to product-oriented phases. Despite the enthusiasm, a gap remains between capital interest and industrial adoption. A McKinsey report from November 2025 highlights that while 88% of organizations use AI in some capacity, only a small fraction have achieved scaled deployment. DeFAI's technological foundation relies on AI agents built on large language models, which perform strategy calculations off-chain and convert results into on-chain transaction signals. This architecture introduces security considerations, including private key management and permission controls. DeFAI applications are maturing across four core areas: yield optimization, quantitative strategy automation, natural language command execution, and risk management. These applications aim to enhance efficiency, democratize institutional-level capabilities, simplify DeFi operations, and improve risk control. However, the sector faces challenges such as security, trust mechanisms, and the need for systematic progress in compliance and infrastructure development. As DeFAI evolves, it presents significant opportunities for teams adept in both Web3 and AI to innovate and fill existing gaps.