Explore the potential opportunities in the four "AI+Crypto" areas

Authors: William M. Peaster, Jack Inabinet

Compilation: Luccy, BlockBeats

Editor’s note: With the arrival of a new round of crypto bull market, the topic of AIxCrypto is gradually heating up.

Bankless analyst Jack Inabinet and Bankless Senior Writer William M. Peaster delve into the potential opportunities in four AIxCrypto areas: AI currency brokerage, decentralized AI computing, AI output market, and intelligent entertainment. They believe that the convergence of AI and cryptocurrency will redefine industries from finance to entertainment, challenging traditional paradigms and empowering individuals and small entities.

With a new round of crypto bull market on the horizon, it seems that the booming AI sector in the crypto economy is also poised to make its mark in this cycle. But why?

AI is a potentially era-defining technological innovation that can advance every field. So it’s no surprise that there’s a huge amount of anticipation in the investment narrative for this technology.

In the crypto economy, there is an increasingly optimistic group that is very optimistic about the intersection of AI and blockchain because they believe that there is consistency between the two, so they bet and work accordingly. At the moment, many projects may seem basic or overhyped, but today we’re going to focus on real opportunities and highlight four key “AI+Crypto” areas that should be focused on right now.

AI Currency Agent

Cryptocurrencies have always had bots. With the advent of AI, these bots are expected to evolve from simple task managers to autonomous currency agents capable of performing complex financial operations on-chain on their own.

Source: iant

Of course, AI agents can use funds outside of cryptocurrency, but the mainstream financial system is fragmented and inefficient. Conversely, blockchains like ETH Fang are always-on, borderless, and full of composable, fully ownable “money Lego,” so the AI agent’s efforts can go further on-chain.

The scenario is still in its very early stages, but we’re already starting to see some experiments that point in the direction of the future. For example, the experimental Rocky AI trading bot created last year relies on zero-knowledge cryptography to prove the effectiveness of its off-chain operations on-chain and is profitable during the campaign.

This experiment is just an attempt for the future, but it’s clear that the combination of AI’s analytical capabilities and blockchain’s immutable infrastructure could lead to an explosion of innovative financial applications that would reshape the way we think and interact with money.

While cryptocurrencies may become the preferred transaction method for hierarchical AI, the compute-intensive AI algorithms don’t work well with the gas limits of the blockchain! because the computation required for AI-powered crypto applications will need to be done off-chain.

Cryptocurrency companies like Modulus, the developer behind the Rocky AI trading bot, are using zero-knowledge technology to verify these off-chain computations, preserving the trustless nature of the intersection of cryptography and AI.

Decentralized AI computing

Creating AI models, especially advanced models such as GPT-4, requires a significant amount of GPU (graphics processing unit) computation.

Decentralized marketplaces such as Akash Network and Render Network help democratize computing access, enabling anyone to create AI models. You don’t need to spin up your own large GPU farm to do this, you just pay to take advantage of Akash and Render’s existing compute network.

Through these networks, individual developers and smaller organizations gain the ability to participate in the creation of advanced AI models, promoting a more inclusive and diverse development environment. As the demand for specialized AI continues to grow, decentralized computing networks are expected to symbolically sell shovels in some kind of new gold rush.

The AI computing market has been successful in carving out markets for a variety of GPU types. Decentralized marketplaces allow anyone to offer any amount of computation at any price, which means that Akash and Render can provide users with the latest chips that are not yet available from centralized providers. These networks are still struggling to gain adoption from the most well-resourced customers who are squeezing every bit of today’s top-of-the-line chips.

The native token is used to incentivize computing providers. This token distribution helps to make the pricing of the decentralized network competitive compared to centralized alternatives and aligns the incentives of computing providers with those of the network.

AI Output Market

While big venture-backed startups like OpenAI are making waves with their large language models (LLMs) and being overtaken by tech’s biggest centralized giants, there are still some crypto projects that focus on training their own models in a specific environment. The ability to decentralize.

While blockchains like ETH and BTC sell immutable block space, projects like Bittensor focus on creating decentralized smart marketplaces that aim to leverage a network of nodes to collectively train decentralized, incentivized language models that improve over time.

Again, the optimistic rationale for such projects is that over time, they can democratize and open up demand for AI services, while using their tokens to incentivize the transfer of resources to their own models.

OpenAI has been years ahead of its tech giant rivals, so the question is whether the decentralized option has a chance to enter a market that many believe may be a winner-takes-all.

The market is certainly bullish, with Bittensor’s TAO token currently trading at a whopping $8.1 billion in FDV, but the extent to which this is an indicator of future promise versus investor hype is unknown, but it’s an ambitious product that is in the hot phase. Cryptocurrency investors are keen on the area of rewards.

Smart Entertainment

When it comes to the synergy of cryptocurrency and AI, it’s far from just work and no fun. Another area ready for innovation is AI+ entertainment. When this interaction happens on top of the blockchain orbit, I call it the foundation of the smart open metaverse.

As mainstream games like Grand Theft Auto VI continue to grow in complexity and expense, it’s likely that the world’s largest game publishers themselves will begin to fund AI-powered environment creation. Web3 developers who put this experience on the crypto track will be able to leverage the decentralized web to curate and implement quality control.

This convergence will enable a new level of interactivity and personalization in the entertainment virtual space. These are evolving into places where AI can create autonomous, dynamic, and responsive personas and environments that provide a unique experience for each user. Here, we think of Parallel Colony, a new type of “1.5 player game”.

The shift to AI-driven characters marks a major shift in the entertainment landscape, from static, pre-designed virtual worlds to ever-changing, intelligent, and full of memories and emotions. This transformative approach paves the way for more immersive and engaging virtual experiences.

Summary

As we explore the AI-powered crypto economy more deeply in the coming years, the convergence of AI and cryptocurrencies is not only a novelty, but a potential harbinger of system transformation.

This is a departure from the centralized, top-heavy dynamics of mainstream technology, and heralds a more democratized and decentralized future for AI. This convergence will redefine industries from finance to entertainment, challenging traditional paradigms and empowering individuals and small entities.

Incentivizing transparency and decentralized control over the technology that is reshaping our world is worth the bet for a number of reasons.