The proliferation of mainstream artificial intelligence (AI) tools in the last couple of years has stirred the crypto and blockchain industry to explore decentralized alternatives to Big Tech products.
The synergy between AI and blockchain is built on addressing the risk of centralized ownership and access to data that powers AI. The theory is that decentralization can mitigate against the AI economy being driven by data owned by a few tech giants.
It remains unclear whether this will prove to be a significant issue or if the blockchain industry will be able to address it. Nonetheless, crypto venture capitalists (VCs) are currently investing millions of dollars to explore the potential of decentralized AI. This area has attracted $917 million in VC and private equity funding, as reported by the startup deal platform Tracxn.
The critical question is whether investing in blockchain-based AI is still driven by hype or has become a genuine development.
Blockchain investment company Theta Capital described AI x crypto as "the inevitable backbone of AI" in a recent "Satellite View" report, which delves into insights and outlooks from the sector's key investors.
AI agents
"No trend stands out more than the intersection of AI and crypto," the report stated, highlighting examples of AI agents trading on blockchains and launching tokens.
This may appear to be a sophisticated form of speculation, but Theta argues it's a solution to some of AI's challenges that only crypto can address.
"Crypto wallets enable the participation of autonomous agents in financial markets," according to the report. "Decentralized token networks are bootstrapping the supply side of key AI infrastructure for compute, data and energy."
The conclusion of the report suggests that AI x crypto is "the new meta," a term from gaming referring to dominant strategies in a landscape.
Decentralized AI
Alex Pack, managing partner of blockchain venture capital firm Hack VC, described Web3 AI as "the biggest source of alpha in investing today" in the "Satellite View" report.
Hack VC has allocated 41% of its latest fund to Web3 AI, viewing the primary challenge as building a decentralized alternative to the AI economy.
"AI's rapid evolution is creating massive efficiencies, but also increasing centralization," Pack commented.
"The intersection of crypto and AI presents the biggest investment opportunity, offering an open, decentralized alternative."
One notable portfolio company of Hack VC is Grass, which incentivizes users to participate in AI networks by offering tokens in exchange for their unused internet bandwidth. This approach serves as an alternative to large firms scraping users' data via software code in apps.
"Users unwittingly donate their bandwidth without compensation," Grass founder Andrej Radonjic noted in Theta's report.
"Grass provides an alternative by forming a massive opt-in, peer-to-peer network capable of producing high-quality data at the scale of Google and Microsoft."
The dreaded AI "takeover"
Decentralized AI carries certain risks for investors, as acknowledged by Theta. It could foster the amplification of undesirable internet phenomena: toxic discourse, spam emails, or low-value social media content like blogs, videos, or memes. In the crypto world, AI may even efficiently manage meme tokens and questionable trading practices.
Some VCs view blockchain as a mitigating tool. Olaf Carlson-Wee, CEO and founder of Polychain, mentions proof-of-humanity mechanisms to verify users and microtransactions to deter spam.
"If sending an email costs $0.01, it would undermine the economics of spam while remaining affordable for average users," he remarked.
With blockchain potentially contributing these safeguards, Carlson-Wee envisions AI underpinning digital and financial systems, outperforming humans in markets and thereby being embraced rather than feared.
"Over time, AI systems will evolve into long-term capital allocators, predicting trends years in advance, and humans will entrust them with funds due to their superior data-driven decision-making," Carlson-Wee said.
"The AI takeover won't be a war we lose - it will be a suggestion we agree to," he concluded.
The synergy between AI and blockchain is built on addressing the risk of centralized ownership and access to data that powers AI. The theory is that decentralization can mitigate against the AI economy being driven by data owned by a few tech giants.
It remains unclear whether this will prove to be a significant issue or if the blockchain industry will be able to address it. Nonetheless, crypto venture capitalists (VCs) are currently investing millions of dollars to explore the potential of decentralized AI. This area has attracted $917 million in VC and private equity funding, as reported by the startup deal platform Tracxn.
The critical question is whether investing in blockchain-based AI is still driven by hype or has become a genuine development.
Blockchain investment company Theta Capital described AI x crypto as "the inevitable backbone of AI" in a recent "Satellite View" report, which delves into insights and outlooks from the sector's key investors.
AI agents
"No trend stands out more than the intersection of AI and crypto," the report stated, highlighting examples of AI agents trading on blockchains and launching tokens.
This may appear to be a sophisticated form of speculation, but Theta argues it's a solution to some of AI's challenges that only crypto can address.
"Crypto wallets enable the participation of autonomous agents in financial markets," according to the report. "Decentralized token networks are bootstrapping the supply side of key AI infrastructure for compute, data and energy."
The conclusion of the report suggests that AI x crypto is "the new meta," a term from gaming referring to dominant strategies in a landscape.
Decentralized AI
Alex Pack, managing partner of blockchain venture capital firm Hack VC, described Web3 AI as "the biggest source of alpha in investing today" in the "Satellite View" report.
Hack VC has allocated 41% of its latest fund to Web3 AI, viewing the primary challenge as building a decentralized alternative to the AI economy.
"AI's rapid evolution is creating massive efficiencies, but also increasing centralization," Pack commented.
"The intersection of crypto and AI presents the biggest investment opportunity, offering an open, decentralized alternative."
One notable portfolio company of Hack VC is Grass, which incentivizes users to participate in AI networks by offering tokens in exchange for their unused internet bandwidth. This approach serves as an alternative to large firms scraping users' data via software code in apps.
"Users unwittingly donate their bandwidth without compensation," Grass founder Andrej Radonjic noted in Theta's report.
"Grass provides an alternative by forming a massive opt-in, peer-to-peer network capable of producing high-quality data at the scale of Google and Microsoft."
The dreaded AI "takeover"
Decentralized AI carries certain risks for investors, as acknowledged by Theta. It could foster the amplification of undesirable internet phenomena: toxic discourse, spam emails, or low-value social media content like blogs, videos, or memes. In the crypto world, AI may even efficiently manage meme tokens and questionable trading practices.
Some VCs view blockchain as a mitigating tool. Olaf Carlson-Wee, CEO and founder of Polychain, mentions proof-of-humanity mechanisms to verify users and microtransactions to deter spam.
"If sending an email costs $0.01, it would undermine the economics of spam while remaining affordable for average users," he remarked.
With blockchain potentially contributing these safeguards, Carlson-Wee envisions AI underpinning digital and financial systems, outperforming humans in markets and thereby being embraced rather than feared.
"Over time, AI systems will evolve into long-term capital allocators, predicting trends years in advance, and humans will entrust them with funds due to their superior data-driven decision-making," Carlson-Wee said.
"The AI takeover won't be a war we lose - it will be a suggestion we agree to," he concluded.
