From Productivity Boosts to Nightmare Scenarios: 10 Areas Where Cryptocurrency and Artificial Intelligence Could Overlap

10 Areas Where Cryptocurrency and Artificial Intelligence Could Overlap

Author: Jeff Wilser, CoinDesk; Translation: Song Xue, Blocking

Poor cryptocurrencies, once the darling of the tech world. Today, cryptocurrencies – or blockchain or Web3 or whatever we’re calling them today – are mired in lawsuits from the U.S. Securities and Exchange Commission; and now, perhaps most painfully, they’re being overshadowed by AI.

Jeremiah Owyang, an influential entrepreneur active in the Web3 space who lives in San Francisco, says his community used to have three to five AI events per day, but “now there are very few Web3 events.” (Owyang is now diving into AI.)

Sheraz Ahmed, managing partner at Storm, a blockchain consultancy, says that when he went to Dubai for a crypto event, “what was shocking was that in every blockchain-themed panel, AI was included. It was a blockchain conference, but they only talked about AI.”

• Explaining the Maverick protocol mechanism, which entered the top five in DEX after three months of release.
• Binance US hires former chief of the US SEC enforcement division to lead defense
• Sequoia Capital leads investment, testnet goes live, Quick Guide to Taiko’s Layer2 Network Interaction

There’s no doubt that the quietly launched funding is now being drawn to AI. As CoinShares Chief Strategy Officer Meltem Demirors joked on Twitter, “2019: we’re a crypto fund. 2020: we’re a DeFi fund. 2021: we’re a blockchain gaming fund. 2022: we’re a web3 fund. 2023: we’re an AI fund.”

But perhaps comparing cryptocurrencies to AI is the wrong framework. Web3 may be in a “winter,” but it hasn’t died, and projects continue to quietly build. And if AI really is going to impact every industry, it will obviously include Web3. As CoinDesk’s Michael Casey recently wrote, “AI needs Web3, and vice versa. Why not build both at the same time?”

Projects such as SingularityNET, Ocean Protocol, and Cortex are already exploring various types of decentralized AI solutions, with more to follow. Nathaniel Whittemore says, “I think you can get a lot of training from the crypto space, and if you start to think and engage in the AI space, that training is going to be really useful.”

As for how AI and cryptocurrencies will interact and intersect? “There are a lot of possibilities,” Whittemore says. Some are obvious, some are weird, some are hopeful, some are nightmare scenarios. To make sense of the chaos, we’ll consider ten areas of possible overlap… from productivity enhancement to nightmare scenarios.

1. AI will make Web3 projects more productive and efficient

This is less about the unique properties of crypto and more about how AI will change everything, including Web3. “I think AI will impact Web3 in all the normal ways it impacts other industries,” says Haseeb Qureshi, executive partner at Dragonfly. “Productivity will go up dramatically. Smaller startups will be able to do more.” He expects Web3 projects to need to spend less on marketing, copywriting, and other operational elements.

Whittemore agrees. “AI is almost certainly going to fundamentally increase the number of people who can build blockchain and Web3 applications,” says Whittemore, and it could have a domino effect. He believes that because non-technical people will be able to learn things like coding more easily, this could help “narrow 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 adds, which in theory would maintain data privacy, reduce biases in models, and curb the increase of centralization.

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

“In theory” is, of course, the rub. There are skeptics: “AI] is not a technology that works well for distributed systems,” says Qureshi, because they’re built by expert teams and require staggering computing power. “They’re not the kind of thing you can harness a lot of dispersed resources for, like you can with Bitcoin mining.”

Whittemore acknowledges that every time he sees a new crypto/AI project, he’s “very skeptical,” he adds, “there are a lot of very smart people thinking about this,” and he thinks we’ll see an intersection of AI and crypto tech in the second half of this year. What’s encouraging him is that “the performance of open-source approaches to AI has exceeded everyone’s expectations,” which is making people optimistic about decentralized approaches.

3. AI will disrupt crypto trading

Crypto trading is 24/7, borderless, happening across a dizzying range of assets and markets. Even before AI came along, humans struggled to keep up with the online casino that never sleeps. Of course, algorithm-driven, quant-style “robots” have been around for years, but they’ll get exponentially better. That could be profitable for those using them, and a waiting-to-die outcome for those who don’t — millions of “retail” traders could be squeezed. “AI will be the enemy of stubbornness,” says Ahmed. “If traders don’t want to use AI and want to do everything manually, they’ll fall behind.”

4. Blockchain Can Rescue Us From the AI Ocean of Misinformation

The deep fakes that have come with the use of artificial intelligence have been widely disseminated and deceived millions of people, and if this trend continues – which is almost certain – we may soon find ourselves living in what some call a “post-truth society” dystopian world. Reality is pending.

Crypto advocates have long believed that blockchain can be used to verify digital assets (such as photos and videos), but whether they really can is open to question. “Zero-knowledge proofs have not received enough attention, but they are going to be extremely important for the development of artificial intelligence,” says tech expert and futurist Joseph Raczynski. “They will help prove that something is something without revealing any sensitive information.”

5. AI Can Make Crypto Compliance and Auditing Easier

“Regulators have become more involved, demanding more compliance, especially after last year’s events,” says Elbruz Yılmaz, Web3 and cryptocurrency senior vice president at payment provider Blockingysafe. Auditing is a manual and time-consuming process, Yılmaz says, and many Web3 companies are not prepared to do it. “Artificial intelligence will help these companies achieve competitive levels of compliance more quickly,” Yılmaz says.

6. AI Can Make Life Easier (or Harder?) for Crypto Hackers and Fraudsters

Qureshi says that AI’s large language models make it “easier to attack smart contracts.” At the same time, he adds, perhaps AI can also make smart contracts “easier to defend.” He doesn’t know which way it will lean – no one does. The only thing that is certain is that AI will be weaponized by bad actors and used as a shield by defenders; who wins is a pending question.

Then there are the scammers. “Cryptocurrency fraud involving artificial intelligence is much more complex,” says tech researcher and crypto skeptic Pete Howson. “For example, deepfake videos of celebrity endorsements are encouraging fools to invest in the next trash coin.” This is not just speculation, it has happened. Howson continues: “In November 2022, a verified Twitter account impersonated Sam Bankman-Fried and posted a deepfake video offering ‘loss compensation’ to FTX users, a phishing scam intended to drain their cryptocurrency wallet deposits. Fraudsters are using AI platforms to create fake trading websites.”

7. Artificial intelligence can stimulate the development of the metaverse

Frankly, Apple’s Vision Pro, the infrastructure of the metaverse, is still a problematic work in progress. The space needs better user interfaces, better graphics, better content, better communities. Artificial intelligence can help solve all these problems, greatly reducing the time it takes to build immersive worlds, and even making those worlds populated with human-like characters. Nvidia recently injected itself into the gaming developer community, for example, by showing how AI can power real-time conversations with NPC (non-player characters), unlocking all sorts of potential for world-building. “AI can make these games more engaging, faster,” Yilmaz said.

8. Artificial intelligence may exacerbate concerns about cryptocurrency and the environment

OK, maybe this isn’t for making anything “better,” but we should acknowledge concerns and risks about environmental impact. “Like cryptocurrency, generative AI platforms consume a lot of energy,” Howson said. “Training ChatGPT consumes 1,287 megawatts of power per hour, producing 550 tons of carbon dioxide. That’s equivalent to flying a person between New York and San Francisco 550 times.”

9. Artificial intelligence agents can use cryptocurrency

This is my favorite.

Qureshi envisions a future where, as robots like ChatGPT become more advanced, they can essentially act as your personal assistant or agent. They can book your flights, place instant orders in your shopping cart, or summon your Uber at just the right time. (Three years ago, I interviewed a Web3 entrepreneur named Dele Atanda who was precisely describing this scenario.)

Of course, some of these might fit within current financial frameworks, but what happens when my AI agent starts transacting with your AI agent? Or if AI agents spend money in ways too complex for the law or banks to keep up with?

“They need money,” Qureshi said. “The idea of JPMorgan opening bank accounts for artificial intelligence is ridiculous.” Qureshi is skeptical “the law will catch up in time,” but cryptocurrency is already a functionally viable solution.

Whittemore has said something similar. He offers a hypothesis: Imagine you want to open an online store for band logo keychains, and AutoGPT (or your AI “agent”) devised a set of tasks, one of which might be to figure out how it became a 3D printed keychain. “Can it send Bitcoin to 3D printed AI agents running autonomously in the background?” If 3D printing agents are spread out globally – which is often the case – Bitcoin will be a more elegant solution than the US dollar.

So, in the end, after years of seeking “adoption,” the first to use cryptocurrency in the mass market may not be human, but rather a machine.

10. Artificial Intelligence can use encryption to realize nightmare scenarios

We’ll discuss another, less optimistic possibility. (“Less optimistic” is an understatement.)

If you’ve been curious about AI for a while, you may have heard of an exciting statistic that over half of AI researchers believe AI has at least a 10% chance of wiping out humanity. (Aside: This statistic is a bit exaggerated and somewhat misrepresented, as the survey response rate was only 4% and not a truly representative sample of scientists. But whether it’s a 1% or a 10% chance, the “nightmare scenario” is still largely a scenario.)

Cryptocurrencies can play a role in this nightmare.

“With greater dependence on digital assets, AI agents can easily change financial institutions, influence governing bodies, or overthrow governments without anyone knowing,” futurist Raczynski says, who also believes AI can cause serious damage in the metaverse. Raczynski is concerned that AI’s progress will soon surpass human capability, “and blockchain is a driving factor.”

Final thoughts

Let’s summarize some things that are not quite like the end of the world. Although AI is now favored by venture capitalists, the experts I’ve spoken with are not worried about the impact of funding on Web3. “Worrying is foolish,” Qureshi says, acknowledging that a lot of money is flowing into AI at “astronomical” rates, but he doesn’t expect it to cause substantial harm to the Web3 ecosystem. “There’s a lot of capital in the United States,” Qureshi adds, and no one can say outright, “We don’t have enough money.”

Ultimately, from a more hopeful perspective, Ahmed believes that artificial intelligence and cryptocurrency are not in competition, but rather “tools in the toolbox.” They are complementary. “They are not fighting each other,” Ahmed says. “Ultimately, they will be connected, just as electricity is used to power the internet.”

We will continue to update Blocking; if you have any questions or suggestions, please contact us!