10 areas where cryptocurrency and artificial intelligence may overlap

Author: Jeff Wilser, CoinDesk; Compiler: Songxue, Jinse Finance

Poor cryptocurrency, once the darling of the tech world. Today, cryptocurrencies — or blockchain or Web3 or whatever we call them today — are mired in SEC lawsuits; and now, perhaps most painfully, they succumb to AI.

Jeremiah Owyang, an influential entrepreneur who has been active in the Web3 space, lives in San Francisco and his community has three to five AI events a day, but “there’s very little Web3 activity right now.” (Owyang is now delving into artificial intelligence.)

Sheraz Ahmed, managing partner of Storm, a blockchain consulting firm, said that when he traveled to Dubai to attend an event in the crypto space, “it was shocking that in every blockchain keynote panel, AI was Included. It was a blockchain conference, but only AI was discussed.”

There’s no doubt that low-key start-up funding is now being drawn to AI. As CoinShares chief strategy officer Meltem Demirors joked on Twitter, "2019: We are a crypto fund. 2020: We are a DeFi fund. 2021: We are a blockchain gaming fund. 2022: We are web3 Fund. 2023: We are an AI fund.”

But perhaps comparing cryptocurrency to AI is the wrong framing. Web3 may be in “winter,” but it’s not dead, and projects continue to build quietly. And, if AI is truly going to impact every industry, then obviously this will include Web3. As CoinDesk’s Michael Casey recently wrote, “AI needs Web3 and vice versa. Why not build both?”

Projects such as SingularityNET, Ocean Protocol, and Cortex are already working on various types of decentralized AI solutions, and more will follow. Nathaniel Whittemore said: “I think you can get a lot of training from the encryption field, and if you start thinking and participating in the AI field, these trainings will be very useful.”

As for how AI and cryptocurrencies will interact and intersect? “There are a lot of possibilities,” Whittemore said. Some are obvious, some are weird, some are hopeful, and some are nightmarish. To bring some order to the chaos, we’ll consider ten areas of potential overlap…from productivity gains to nightmare scenarios.

1. AI will make Web3 projects more productive and efficient

It’s not so much about encryption’s unique properties, but how AI will change everything, including Web3. “I think AI will impact Web3 in all the normal ways it has impacted other industries,” said Haseeb Qureshi, managing partner at Dragonfly. “Productivity will increase dramatically. Smaller startups will be able to do more.” Web3 projects will need to spend less on marketing, copywriting, and other operational elements.

Whittemore agrees. “AI will almost certainly radically increase the number of people who can build blockchain and Web3 applications,” Whittemore said, and there could be a knock-on effect. He argues that since it will be easier for non-technical people to learn things like how to code, it could help “close the entrenched power gap in the community.”

2. Blockchain can bring decentralized value, governance and protection to AI

“Blockchain platforms can support the creation of decentralized AI models,” Ahmed added, a solution that would theoretically keep data private, reduce bias in models, and curb the growth of centralized monopolies.

If you’re starting to think about AI, there’s a lot of training in the crypto space that’s really helpful.

“In theory” is of course the problem. There are skeptics: “[AI] is not a technology suitable for distributed systems,” Qureshi said, because they are built by teams of experts and require staggering amounts of computing power. “They’re not something that you can tap into a large number of decentralized resources, like you can mine with bitcoin.”

Whittemore admitted that every time he sees a new crypto/AI project he is “very skeptical,” adding that “there’s a lot of really smart people thinking about it” and that he thinks that in the second half of the year, we’ll See where AI and encryption overlap. He is encouraged that “an open-source approach to AI has outperformed all expectations,” leading to optimism about a decentralized approach.

3. Artificial intelligence will subvert encrypted transactions

Cryptocurrency trading is 24*7, without borders, and it happens across a dizzying range of assets and markets. Even before artificial intelligence, humans had a hard time keeping up with always-on casinos. Sure, quantitative and algorithm-driven trading “bots” have been around for years, but they’re getting exponentially better. This could be lucrative for those who use them, and death for those who don’t—and millions of “retail investors” could be squeezed. “AI will be the enemy of stubborn minds,” Ahmed said. “If traders don’t want to use AI and want to do everything manually, they will fall behind.”

4. Blockchain can save us from AI’s sea of misinformation

If deepfakes enabled by the use of artificial intelligence have gone viral and deceived millions of people, and if this trend continues – almost certainly – we may soon be living in what some are calling a “post- In the dystopian world of the Truth Society. Reality will hang in the balance.

Encryption advocates have long argued that blockchains can be used to verify digital assets such as photos and videos, but whether it is really what they claim. “Zero-knowledge proofs don’t get enough attention, but they will be extremely important to the development of artificial intelligence,” said technologist and futurist Joseph Raczynski. “They will help prove that something is something without revealing any sensitive information.”

5. AI Can Make Encryption Compliance and Auditing Easier

“Especially after last year’s events, regulators have become more hands-on and demanded more compliance,” said Elbruz Yılmaz, senior vice president of Web3 and cryptocurrencies at payments provider Paysafe. Auditing is a manual and time-consuming process, Yılmaz said, and one that many Web3 companies aren’t prepared to do. “Artificial intelligence will help these companies reach competitive levels faster in terms of compliance,” Yılmaz said.

6. Artificial intelligence could make life easier (or harder?) for crypto hackers and scammers

AI’s large language models make it “easier to attack smart contracts,” Qureshi said. At the same time, he added, perhaps AI could also make smart contracts “more defensible.” He doesn’t know yet which direction it’s going to lean - no one knows. The only certainty is that the AI will be weaponized by the bad guys and used as a shield by the defenders; exactly who wins is an open question.

Then there are liars. “Crypto scams involving artificial intelligence are much more sophisticated,” said technology researcher and crypto skeptic Pete Howson. “For example, ‘deepfake’ videos of celebrity endorsements are encouraging fools to invest in the next shitcoin.” This isn’t just speculation, it’s already happening. Howson continued: “In November 2022, a verified Twitter account impersonating Sam Bankman-Fried posted a deepfake video offering ‘damages’ to users of FTX, a network designed to drain their crypto wallet deposits Phishing scams. Fraudsters are using artificial intelligence platforms to create fake deal sites.”

7. AI can stimulate the development of the Metaverse

IMHO Apple’s Vision Pro, the Metaverse’s infrastructure is still a questionable half-finished product. The space needs better UI, better graphics, better content, better community. AI can help solve all of these problems. AI will dramatically reduce the time it takes to build immersive worlds, and it can even populate those worlds with human-like characters. Nvidia has recently incorporated faces in the game developer community, for example, by showing how AI can power real-time conversations with NPCs (non-player characters), unlocking the full potential of world-building. “AI can help make these games more engaging and faster,” Yilmaz said.

8. Artificial intelligence may exacerbate cryptocurrencies’ environmental concerns

Well, maybe it’s not about making anything “better,” but we should acknowledge the concerns and risks of environmental impact. “Just like cryptocurrencies, generative AI platforms consume a lot of energy,” Howson said. “ChatGPT’s training consumes 1,287 megawatts of electricity per hour and produces 550 tons of CO2. That’s equivalent to a person traveling between New York and San Francisco 550 times.”

9. AI agents can use cryptocurrency

this is my favourite.

Qureshi envisions a future where bots like ChatGPT can essentially act as your personal assistants or agents as they become more advanced. They can book a flight for you, place an instant cart order for you, or summon your Uber at just the right moment. (Three years ago, I interviewed Dele Atanda, a Web3 entrepreneur, who described exactly this situation.)

Sure, some of this might fit into the current financial framework, but what about when my AI agent starts transacting with your AI agent? Or what if the way AI agents spend money becomes too complex for the law or banks to keep up with?

“They need money,” Qureshi said. “The idea that JPMorgan Chase is going to open a bank account for AI is nonsense.” Qureshi suspects that “the law won’t catch up in time,” but cryptocurrencies are already a feature that can be implemented immediately sexual solution.

Whittemore said something similar. He offers a hypothetical: imagine you want to open an online store for band logo keychains, and AutoGPT (or your AI “agent”) devises a set of tasks, one of which might be figuring out how it becomes 3D printed keychain. “Can it send bitcoins to a 3D printing AI agent running autonomously in the background?” If the 3D printing agents were spread across the globe – which is often the case – then bitcoin would be a more elegant solution than dollars.

So in the end, after years of seeking “adoption,” the first mass-market transactions in cryptocurrencies may not be humans, but machines.

10. AI Can Use Crypto to Realize Nightmare Scenarios

We’ll discuss another, less optimistic possibility. (“Not too optimistic” is an understatement.)

If you’ve been curious about AI, by now you’ve probably heard the heady statistic that in a survey of AI researchers, more than half thought AI had at least a 10% chance of wiping out humanity . (Side note: This statistic is a bit exaggerated, and somewhat misreported, since the survey response rate is only 4%, not really a representative sample of scientists. But whether it’s a 1% chance or a 10% chance, "Nightmare Scenario “” is still largely a scenario.)

Cryptocurrencies can play a role in this nightmare.

“With greater reliance on digital assets, AI agents could easily alter financial institutions, influence regulatory agencies, or overthrow governments without anyone knowing,” said futurist Raczynski, who also believes AI Can wreak havoc in the Metaverse. Raczynski worries that advances in artificial intelligence will soon surpass human capabilities, “and blockchain is a driver.”

FINAL THOUGHTS

Let’s wrap up something a little less like the end of the world. While AI is now in VC favor, the experts I spoke to weren’t concerned about the impact of funding on Web3. “It’s a foolish thing to worry about,” Qureshi said, acknowledging that a lot of money is being poured into AI at “sky-high prices” but not expecting it to cause material damage to the Web3 ecosystem. “America has a lot of capital,” Qureshi added, and no one can say bluntly, “we don’t have enough money”.

Ultimately, on a more hopeful note, Ahmed argues that AI and cryptocurrencies are not competing but merely “tools in a toolbox.” They are free. “They weren’t fighting each other,” Ahmed said. “Eventually they will be connected in the same way that electricity is used to power the internet.”