Jul 21, 2023

AI and Crypto: The Intersection

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Crypto and AI are both buzzwords. What opportunities arise when they connect?

#AI has taken the world by storm and is the hottest topic in town. hashtag#Crypto was the hottest topic in town in 2021, but 2022 was a very dark year for crypto. Around the same time of the hashtag#FTX collapse, hashtag#ChatGPT came out and the whole world got introduced to AI and its potential, while market sentiment around crypto was near the most negative that it has ever been. ChatGPT, developed by hashtag#OpenAI, is an AI chatbot that utilizes natural language processing to simulate human conversation. It's a generative AI, capable of responding to questions and creating diverse written content, akin to automated chat services on customer service websites. As 2023 has progressed, AI has definitely stolen crypto's thunder, with many US tech companies massively outperforming cryptocurrencies and crypto developers leaving the ecosystem to find jobs elsewhere.

Although from the outside these two technologies might seem totally different and totally incompatible, this couldn't be any further from the truth. In our opinion, the intersection of AI and crypto will be a game changer. All sectors will benefit from AI in the long term, but crypto could benefit from AI tremendously in both the short term and long term. AI will benefit from crypto, too—a beautiful, symbiotic relationship.

First let's have a look at potential ways in which AI could benefit crypto:

  • Code development

  • Code auditing

  • Interoperability

  • 'Smart' cryptocurrencies

  • Analyzing blockchain data

  • Regulatory Compliance

  • Fraud Detection

  • Risk Management

  • Automated trading

Some AI models/applications enable anyone to create code simply by requesting it using words. This implies that nearly everyone could craft high-quality code and deploy it swiftly, not only reducing the time needed for programmers to code, but also permitting non-programmers to create their own smart contracts and dApps (decentralized applications). Not only will individuals be able to devise new and interesting applications built on top of blockchain technology, but existing crypto apps will also become stronger through optimized code auditing with the assistance of AI.

Given the multitude of different cryptocurrencies, each with its own operating parameters, AI could serve as a bridge between them. For instance, there are now code converters that can effortlessly transition code written in one language to another, thereby facilitating seamless usage across blockchains/platforms. We even speculate that the rise of 'smart' cryptocurrencies, which might include AI components within their blockchain, is on the horizon. In this manner, these decentralized systems could adapt to various conditions and even self-correct or heal if a bug is detected.

Lastly, since blockchains often house a plethora of different types of data, AI could aid in analyzing this information and potentially offer privacy solutions or enhanced compliance measures by rapidly detecting illicit activity. It could assist investors in avoiding scams by supplying superior tools for project evaluation, offering them improved risk management tools, as well as automated trading solutions, to help remove subjectivity and emotion from the trading process.

Now let's have a look at potential ways crypto could benefit AI:

AI Models/Bots and Crypto Transactions: Using cryptocurrencies like Bitcoin, AI models or bots can now transact with each other. The integration of Bitcoin with AI applications, particularly via the Lightning Network, allows these models to hold, send, and receive Bitcoin payments. This is particularly advantageous for implementing micropayments, which can be used for tasks such as ID verification or value transfer between machines. For instance, a smart car could receive micropayments for sharing real-time data, which could then be used to pay for services such as tolls, creating a seamless interaction between AI systems.

AI Marketplaces and Blockchain: Blockchain technology can revolutionize AI marketplaces by fostering decentralization, transparency, and security. Decentralization facilitates data sharing across various players, leveling the field and speeding up AI development. The inherent security of blockchain protects intellectual property rights of developers and secures privacy of data. Transparent validation of AI models is made possible through blockchain's immutable record-keeping, enhancing trust in AI marketplaces. Tokenization provides an incentive system for data providers, developers, and users, promoting marketplace growth. The auditable trail of all transactions assures the integrity of AI models. Lastly, smart contracts automate transactions, improving efficiency and trustless interactions. In a nutshell, blockchain can address key challenges in AI marketplaces, making them more efficient and user-friendly.

Distributed AI Models: Decentralized Artificial Intelligence (DAI) systems can leverage the parallel and scalable nature of blockchain technology to solve complex problems. Decentralization allows for large scale computation and spatial distribution of computing resources. Also, cryptocurrencies can offer a secure, transparent way to store and distribute AI models, enhancing data security and offering an audit trail for data provenance. This can improve trust in the model's recommendations. Furthermore, DAI systems can be more resilient to cyber attacks and system failures, and they can speed up decision-making by distributing it across multiple agents. There are diverse applications for DAI models, such as in healthcare for medical diagnosis, in finance for fraud detection, and in education for personalized learning.

Cryptocurrencies and Content Authenticity: As AI systems generate vast amounts of content, determining the authenticity and ownership of this content becomes challenging. Secure, immutable cryptocurrencies can provide a solution by verifying the creator and the originality of the content. This is crucial in establishing the validity and ownership of AI-produced content, thus fostering trust and accountability in the digital space.

While AI has taken the spotlight in recent months, especially with the advent of large language models like ChatGPT, it's clear that the synergy between AI and crypto could be a game changer for both sectors. The mutual benefits these technologies offer could stimulate a renaissance in both fields, enhancing their growth and development, and potentially lead to a symbiotic relationship where each technology strengthens the other. It is a relationship worth exploring, nurturing, and investing in for the future.

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