AI is Cryptos Killer Use-case.
As artificial intelligence (AI) becomes deeply woven into our daily lives, its centralised nature poses challenges that could lead to a dystopian future. Imagine a world where AI algorithms, controlled by a few tech giants, subtly manipulate our thoughts, purchases, and even political beliefs, shaping society to their interests while we remain unaware. Decentralised AI through crypto offers a remedy to this future - addressing the major issues of control, value for users and lack of transparency. Crypto x AI is more than just a philosophical imperative, it’s core components make it a better solution to achieve factual and resilient AI for the masses.
Problems with centralised AI
Centralised AI systems, typically operated by large technology corporations, pose several risks.
Privacy and Control
Centralised AI platforms gather immense amounts of user data, often without explicit consent. In an age where privacy is a precious commodity, how comfortable are we with our data being commodified? For example, Reddit’s recent decision to sell user data to OpenAI has raised concerns about who truly benefits from our personal information and how it’s exploited.
Black Box Operations
Many AI systems operate as 'black boxes,' providing little insight into how data is selected and processed for model training. This opacity fosters mistrust and questions the accuracy and fairness of AI-generated decisions. According to a study by the AI Now Institute, 71% of AI researchers see the black box problem as a major barrier to trust and accountability.
Economic Fairness
Centralised AI often concentrates power and profit within a few corporations, sidelining the broader community that contributes to these technologies. With entities like Google leveraging data from services like Gmail and Google Drive, are users being excluded from the economic value created by their own data?
The Open and onchain solution
Blockchain technology presents a compelling solution to the problems posed by centralised AI. By offering transparency, verifiability, and immutability, blockchain provides a robust infrastructure for developing open-source AI.
Transparency and Verifiability
Blockchain’s inherent transparency ensures that AI models can be audited and data provenance can be verified. This capability demystifies the ‘black box’ of AI, enabling us to understand and trust AI-driven decisions.
Token Incentives and Decentralised Development
Building AI onchain introduces token incentives, which reward developers for their contributions. This decentralised approach promotes collaboration and innovation, ensuring a more equitable distribution of rewards. Imagine a world where developers receive direct compensation for their innovations, rather than large corporations reaping the profits.
AI Agents and Advanced Privacy
As we advance towards artificial general intelligence (AGI), AI agents will evolve to handle specialised knowledge and decision-making. These agents will manage tasks within specific parameters, adapting to market fluctuations and making sophisticated decisions on behalf of users.
Closed moats are eroding.
Deepmind co-founder Mustafa Suleyman says “technology always diffuses throughout the world and the same will happen with AGI”. It has a period of exclusivity, before seemingly accelerating to almost every corner of the world overnight. We are already seeing this demonstrated with LLMs. OpenAI came to market with a significant advantage, yet open-source models like Claude closed the gap within 12 months.
Despite their moat seemingly being eroded, OpenAI was recently valued at $157B after raising $6.6B. While this is an eye-water valuation, it pales in significance to GPU hardware manufacturer Nvidia which is valued at approximately $2.5B at time of writing.
Figure 2. NVIDIA market capitalisation over time.
There have long been rumours that OpenAI will IPO in 2025, yet other than that there remains very few opportunities for investors. Private deals are highly-sought after and the best AI opportunities like Anthropic and OpenAI are typically allocated to funds such as a16z, Sequoia, Lightspeed, Founders Fund and Accel.
As the venture landscape becomes more competitive, funds will likely move up the risk-curve to get exposure. The combination of the following make investing in crypto-based AI protocols very attractive:
Open-source competitiveness
Blockchain immutability and transparency
Easing regulation of crypto
Total marketcap
The Crypto x AI opportunity.
The entire marketcap of crypto AI projects is ~$27B - a mere 1% of NVIDIA’s marketcap at time of writing. This highlights how small the crypto x AI market is today and the asymmetry of investing here.
The current industry market cap paired with the aforementioned fundamentals of open-source, decentralised AI solutions make it an asymmetric investment opportunity. Traction has been made in verticals such as LLMs, Data Markets and Compute - with Bittensor, Akash and Internet Computer leading respectively. It is our belief that as crypto x AI infrastructure matures, an abundance of task specific autonomous agents will be the power users - both for us and as sovereign sentients. Protocols like Autonolous ($55m marketcap) are working toward this vision. It is likely that the companies that lead and realise this future will be the most valuable companies ever. The next step to this future is increased inflows of capital from institutional investors. Being ‘early’ to this trend provides incredible upside.
As AI and blockchain technologies converge, we’re heading towards a paradigm where these agents could redefine how we interact with technology. This future holds the promise of a more connected, intelligent, and efficient world—where technology works seamlessly to enhance our lives, providing us with the tools to manage and optimise our daily existence in ways we can only begin to imagine. To live in this abundant future, we need to ensure the technology is advanced in an open and onchain manner. Not only is it imperative from a society perspective that we advance open-source, it is incredibly attractive for investors. This should see large inflows of capital acting as a catalyst to accelerate development.
