The Rise of AI Crypto??, Paris Hilton's dating game??, the great Bitcoin cat scam ??

Crypto never misses out on a fad. And the new fad in town is artificial intelligence. While the rest of the world has been fawning and fearing the rise of Chat GPT, and now Google and Microsoft’s own iterations, crypto has jumped on to the bandwagon too.?

A sector index of 73 cryptocurrencies with ties to some form of AI, compiled by data group CryptoSlate, is up 87% in the past week, with some individual tokens going even higher.

Singularity NET, which facilitates monetizing AI services on the blockchain, is up 675% since the start of the year. Artificial Liquid Intelligence, which records property rights for blockchain AI assets, has rallied 500% over the same period. Fetch.ai has gained more than 200% since the beginning of 2023, an endorsement of its ecosystem’s mission to build a decentralized machine-learning network.

So being the dedicated public servant that I am, I’m going to give you a rundown of what they are, and what they definitely are not.?

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What on earth are AI Crypto Tokens??

Like with all things with crypto, it’s a wooly term. The best guess, given the explosion of AI-named tokens, is that they are tokens designed to power AI-based apps or projects. These have been anything from decentralized marketplaces or exchanges, to image or text generation services, to AI-based investment tools.

One thing they definitely are not, is AI on a blockchain. Artificial intelligence cannot run “on” a blockchain, because it would be unimaginably slow and expensive. So the AI bit sits next to a blockchain typically.?

Inside this jumble of ideas are projects with, of course, varying degrees of seriousness. Some, like SingularityNET, launched in 2017 by veteran AI researcher Ben Goertzel. Goertzel has been working on AI since the late 1980s, is the author of more than a dozen academic books on the topic and is credited with popularizing the term “artificial general intelligence.”

Then there are ones with less historical connection to the AI research industry and appear to be little more than tokens with AI in the title. It’s a weird, meta reversal of the craze of companies adding ‘blockchain’ to their title to capitalize on Bitcoin’s first major boom.

And lastly, and probably the most dangerous, is AI used to place bets on crypto prices based on signals and sentiment analysis. I’ll kick the crap out of these later.?

What’s this all about then??

Two words: “money”, and “what is crypto actually good for?” Ok that was more than two words.?

After the crash of last year, a great big whopping question has been bubbling beneath the surface of the industry: has crypto found a use case yet? The answer is huge and I don’t have the time and inclination to answer it right here, right now. But it has forced investors to look elsewhere.?

JP Morgan concluded in a recent report that 53% of the institutional investors believe AI and machine learning will do more to change the future of finance over the next three years. Only 12% of those surveyed thought crypto would.?

Given the jaw-dropping sums being thrown around the ChatGPT, and Google AI space at the moment, the upside appears clearer than the fog-filled uncertainty around crypto’s long-term future.?

This has led many projects to try and find a way through the fog by using tokens as a way of making renting and using AI for project work more efficient.?

Crypto has long been criticized as a solution looking for a problem, and the AI explosion in the industry has, for many, felt like another attempt at solving something that didn’t really need solving.?

But alas, crypto AI tokens are here to stay. But one area that’s particularly worrying is the rise of AI trading bots. These bots are designed to try and detect early signals and beat the market before anyone else does, or enacts a trading strategy.?

These bots are being advertised A LOT at the moment, presumably to capitalise on the AI trend. They’ve also been around for a lot longer than most people think. Bots are relatively easy to build and deploy.?

But like all things in crypto, the reality is so much of what happens in crypto is determined by factors that make history a surprisingly poor predictor of where prices will go. Just ask anyone that was betting on the markets last year.

So if anyone offers you a trading AI, bot, thingy, turn the other way and run as fast as you can.

What people are shouting about: ???

• Crypto banks are disappearing - The mainstay of getting your crypto out of your digital wallet into your bank account is having second thoughts about crypto. Silvergate Capital, Signature, and Metropolitan Bank, all big boys in the US dollar deposit space, are dumping their deposits, leaving Binance without a bank in the US, and customers, very, very angry.?
• The Do Kwon manhunt steps up a gear - The cuddly Korean who legged it after his stablecoin collapsed has been dodging authorities since September. But new reports this week suggest he’s in Serbia, and South Korean law enforcement paid a visit there last week to see if they could find him.?
• The NFT space is up, but so is borrowing - NFTs are back, but so is buying and then borrowing against them. Data from NFTfi, a DeFi protocol that lets NFT holders list their items as collateral for crypto loans, listed a record 4,399 loans, totaling 18,000 ETH in January alone. That's almost double the previous high of 2,481 loans made in March 2022, per a report from The Defiant.
• The NFTs on Bitcoin creator is now censoring NFTs - after someone inscribed a pornographic image onto the Bitcoin blockchain, Ordinals creator Casey Rodarmor agrees that censorship is needed. It took about a week for him to change his tune about allowing the internet to be censor-free. Oh well.?
• The SEC is mulling banning staking in the US - this has been a weird story. First, Brian Armstrong, the CEO of Coinbase tweeted a ‘rumor’ he heard that staking might be banned for US citizens, which of course everyone is now perceiving as true. But in reality, the real story is that the SEC wants to ban third-party companies (like Coinbase) from offering staking as a service. Which is what just happened with Kraken. Staking as a service has been a massive boon for exchanges, and Armstrong wants you to be pissed on his behalf.?So the real story is how Armstrong used public opinion for his own ends.

The at first glance incredibly boring, but in reality, incredibly insightful and interesting thing you should read this week ??

Paxos is being investigated by US authorities. Oh snooze, what’s new? Well, dear reader, Paxos is the company that’s been issuing Binance’s stablecoin on its behalf. And we’ve been talking VERY LOUDLY about all the strange happenings taking place on the exchange.?

Everyone is being very tight-lipped about what they are investigating, but given US law enforcement is loving arresting crypto people right now, expect this investigation to be thorough. ?

Chart of the week ??

This slightly odd-looking chart shows a series of transactions by secret wallets attached to FTX that allegedly led to the collapse of Celsius and Three Arrows Capital last year.?

Strange but true ??

• Paris Hilton is launching a dating experience in the Metaverse - * sigh * Yes, Paris Hilton is creating a dating game in the metaverse. Called Parisland, the gamified experience is being billed as an “imaginary reality show” in the metaverse. Besides hitting on random strangers online, activities in Parisland include shopping for outfits, selecting wedding rings, investigating a secret inside a burger (yes, really), and “rescuing a castaway.”?
• The Bored Ape online game is riddled with cheats - Yup, Dookey Dash, Yuga Labs game for Bored Apes is rife with people cheating to get higher scores. The game, which caused such a storm in the NFT world, it accounted for nearly half of all NFT volume in January, is full of people offering their services to play for others in order to get a high score. Have we nothing better to do??
• North Korea made $1.7 billion stealing crypto last year - It was a bumper year for North Korea’s state-sponsored hacking teams. They stole nearly $2 billion last year, far outstripping any previous year’s haul.?Most think it's likely to go on the state's nuclear program. FUNNNNNNN.
• The final hours of the FTX collapse are as weird as you might expect - The FT has done an amazing job cobbling together the death of FTX from staffers who were there when it happened. References like, “it felt as bad as if Luke Skywalker joined forces with Darth Vader” abound.?
• Someone got scammed $764,000 while trying to buy a cat - A fashion executive in Hong Kong who thought she was adopting a kitten from Thailand was tricked into giving scammers more than $764,000 in Bitcoin. The details of this one feel a bit odd. Like, who has that much money to send a stranger without noticing ?

That's your lot this week! Remember, you can catch my daily and this newsletter over here, gratis.

I love you all. ????