According to the program's stated goals, DARPA is looking to "engineer red blood cells to contain novel biological features that can safely and reliably modify human physiology." In the short term, DARPA wants these bio-engineered red blood cells to improve human performance (think faster recovery times, more resistance to lactic acid buildup that causes muscle soreness, improved cardiovascular fitness, and the like) and "enhanced hemostasis," i.e., better blood clotting.
In his 1963 scifi story "The Invincible," the Polish writer Stanisław Lem imagined an artificial species of free-floating nanobots which roamed the atmosphere of a far-off planet. Like tiny bugs, the microscopic beings were powerless alone, but together they could form cooperative swarms to gather energy, reproduce, and ultimately defend their territory from predators with deadly force. Unlike the story's human protagonists, the "black cloud" of bots was incapable of reasoning beyond the simple logic of animal instincts.
Lack of sleep can have disastrous consequences for the DoD. A report found that lack of sleep contributed to military safety mishaps and multiple deaths.