Unleashing the power of AI in Crypto: The future of Decentralized Everything

Artificial intelligence or AI has taken almost every field by storm, and changing the way we even conceptualise about things. And cryptocurrency says a no stranger to facing the eye of the storm. So it is no surprise that cryptocurrency is which are leveraging AI technology skyrocketing in demand.

But, exactly how is AI changing the way crypto operates? And are there any real world problems that these 2 front runners of modern technology are looking to solve?

Well, this week, your favourite Fintech Chronicler read an explosive report , by Galaxy Research, and here is what she found out for you.

A Brief overview of the intersection of AI and crypto/fintech

AI coins are like the cool kids at the party,? supporting AI-driven projects in the decentralized marketplaces and predicting market trends. And the best part? These tokens give you the power to make decisions and keep everything running smoothly in the ecosystem. AI can do it all - spotting shady behavior, analyzing market shifts, finding the next big investment opportunity, and so much more. The possibilities for AI in the crypto universe are as endless as a buffet at a bottomless pit.

Here is a one line explainer of the concepts int he above AI coins.

1. Internet Computer (ICP ): Offers limitless on-chain smart contracts for full-stack decentralization in web 3.0, focusing on scalability, utility, and low carbon footprint for greentech solutions.
2. Near Protocol : Incentivizes a computer network for decentralized app development using sharding for efficiency, operating like cloud services but maintained by a distributed network.
3. Injective Protocol (INJ) : A DeFi platform enabling decentralized asset trading with high throughput and low fees, pioneering in decentralized derivatives with a commitment to revolutionize finance.
4. Render : A distributed GPU network on Ethereum blockchain, providing creators with GPU power for rendering, compensated by Render tokens, fostering a creator-node operator ecosystem.
5. The Graph : A decentralized protocol indexing blockchain data for efficient DApp queries, using subgraphs as open APIs to specify and store indexed data, akin to Google’s web indexing.

Pretty interesting use cases each of them are solving for. And their market cap btw, just shot way up.?

The Role of AI in Bitcoin

Last week, we saw how AI is replacing and often case supplementing workers in the financial services world. The dynamic duo of blockchain and artificial intelligence are swooping in to save the day in the ever-changing world of ESG. With their combined powers, they can help companies gather and analyze ESG data more efficiently, leading to smarter decisions, less boring tasks, and faster responses to market changes. And, a lot of people are looking at Bitcoin, and smart contracts written on level 2 blockchain solutions, to reward the ESG compliant companies.?

Examples of AI-powered trading bots in the crypto market

That isn't all. AI is being used to also trade in the asset. but you already knew that, didn't you!

But I found a little scary were that there were trading birds whose only job was to pump and dump crypto tokens. Now when the industry already faces so much of regulatory scrutiny and lack of trust from the general public such bots and the fact that now it is so easy to bill search box thanks to AI is very scary for the adoption of crypto in general.

I mean, one never really knows how they is bots were trained and other any back doors to these trading bots??

And if such bots were to go rogue what would the impact be on the value of the coin as well as its underlying fundamentals?

Potential benefits and risks of using AI in Bitcoin trading

And that brings us to the not so bright side of AI in crypto and Bitcoin.

One major concern that I can see off is that of data security and data privacy we all know that cryptocurrency is like Bitcoin are not really anonymous transactions, but really pseudonymous transactions. Meaning that with the right kinds of mathematical and compute power you can easily triangulate back to the original originator of the transaction. Now with AI the mathematical part of it becomes just so fast and we've all seen north videos stock price soar right? Do you know why? That is because their GPUs have a wait time of over 6 months. And no i am not referring to the custom made gpu units that a lot of minners are ordering.

Worldcoin: A Game-Changer in Crypto?

When we think of AI who comes to your mind first? If you like me then you probably thought Geoffrey Hinton first right? But I'm pretty sure you first thought of Sam Altman! Why? Simple. Heres after all the CEO and founder of open AI the company behind the household app , ChatGPT.

What's funny however is that even in the crypto world when people think of AI in crypto the one coin that comes top of everyone's mind is, Worldcoin.?

So, let us first try and understand the history of world coin and the genesis behind its foundation!

History of Worldcoin and its mission

Tools for Humanity (TFH), led by Sam Altman, Max Novendstern and Alex Blania, embarked upon the ambitious Worldcoin project in 2019. Despite its ambitious goals of creating a more unified global economy, the project has stated that its token (WLD) will initially be available outside of the United States. This cryptocurrency, built on Ethereum's Layer 2 architecture, combines the security of the Ethereum blockchain with its own decentralized economic system. In October 2021, the project successfully raised $25 million in initial funding. By March 2022, an additional $100 million had been secured, causing the token's value to surge to $3 billion. Over the next six months, an extra $100 million was collected, increasing the token's value to a remarkable $3 billion.

Power things get interesting is how world coin was envisioned to provide equitable global resources to people. And they would do this by giving you coins in exchange for your biometric scans. Not any biometric data by the way but your iriscan.

And if that doesn't have you spoke it should. Most AI enabled personal devices run on? You guessed it, openAI's ChatGPT or other advacned models.?

And it's not just me who thinks this is a huge breach of privacy. Recently just last week the government of Spain cited major concerns and breaches to the gdpr norm and banned world coin in Spain. The Spanish regulator said the processing of biometric data, which has special protection under the European Union's General Data Protection Regulation (GDPR), "entails high risks for people's rights, taking into account their sensitive nature". And if this doesn't serve as a wake up call for the 120 countries and 4 billion people who have already registered at world coins or with their iris data, well, I don't know what will!

AI Crypto Tokens and what do they do?

And besides, the only AI i could figure out in WorldCoin was the Sam Altman association. Unless of course they were planning to use all the devices that are seated with open AIS LLMs and augment it with the iris scans of people to figure out where they are, what they are doing, how they are doing? Not atall spooky.

So, that really begs the question. Are there any real world applications of AI in cryptocurrency? I found 4 of them.

Decentralised Compute and the role of Bitcoin

It highlights the emergence of decentralized compute protocols that offer AI-tailored GPU services, addressing the shortage of high-performance GPUs and enabling more accessible hardware for AI training.

Now if I had to explain this to a 5 year old how would I?

Decentralized compute is like a big, shared toy box. Imagine you have a powerful toy that can think and solve puzzles, but it needs a lot of energy to work. Now, imagine lots of people have these toys which can provide that energy needed, but they’re not using them all the time. Instead of letting the toys sit around, they put them in a big toy box, which in turn allows for that energy to be used up to power that super toy.

And also, every time some uses your toys, to generate that energy, they also pay you.?

Now instead of toys, think GPUs, and instead of energy think of computational power. And oh, in case I forgot. The rewards? You guessed it. Mostly in Bitcoin! However, Internet Computer is trying to change that with its own native coin.

What are AI Agents and how do we reward them?

Imagine you have a super-smart friend who knows you very well, can follow instructions perfectly and even learn from experience, and cherry on the cake, can even read your mood and prepare ahead for it. That's kind of what an AI agent is! It's a computer program that can act on its own based on the goals you set for it. All of it personalised just for you.?

(P.s.: If you're wondering if these AI Agents will every come to be a reality, then yes they can. But you have to let go Large language models, for them, and focus on small target oriented models instead)

Here's how AI agents can be used in DeFi:

• Auto-pilot for your crypto: An AI agent can be your crypto manager, constantly watching the market and making trades based on your goals. Like an automated chess player, it can analyze the situation and make the best move (trade) to get you more crypto.
• Loan approvals in a flash: Imagine applying for a loan and getting approved instantly! AI agents can analyze your financial situation (like your bank statements) super fast and decide if you're a good borrower. This can make getting DeFi loans a breeze.
• Spotting shady deals: The DeFi world can be risky, with fake projects trying to steal your money. AI agents can be like bloodhounds, sniffing out suspicious activity and keeping you safe from scams.

However, AI agents in DeFi are still pretty new, and there are some things to keep in mind:

• Training wheels are on: These AI agents are still learning, so they might not always make the perfect decisions. It's like having a trainee assistant - they'll get better with time!
• Double-check their work: Even the smartest AI agent might make mistakes. It's always a good idea to review its actions before anything major happens.

Overall, AI agents have the potential to make DeFi easier, faster, and safer for everyone. Just like your super-smart friend, they can be a valuable tool in the exciting world of crypto!

Now when it comes to AI agents, there are 3 parts to that ecosystem

• AI Agent Provider: These are like the companies that create and offer these smart digital helpers.
• AI agent consumer: People like you and I who use AI as their personal assistant
• Transaction: The rewards for these autonomous bots for the activities performed

Bitcoin is becoming popular among AI agents because it allows them to handle transactions quickly and without needing a bank. AI agents can use Bitcoin to manage small payments and settle accounts almost instantly. And we have had proof of concept of the same.

Lets rewind back to July 2023, where Lightning Labs is cooking up something fresher than Walter White’s blue meth. They’re rolling out the LangChain Bitcoin Suite, a nifty tool for those digital Heisenbergs on the Lightning Network. It’s a game-changer, breaking down the barriers of those pricey API keys that AI apps usually hoard behind lock and key.

LangChain is handing out the keys to the crypto kingdom, letting developers’ agents buy, sell, and stock up with Bitcoin, and enabling micropayments, which so far where exorbitantly priced.? And faster than Jesse Pinkman can say “Yeah, science!”

Plus, with LangChain’s L402 payment system, companies can play with their API fees like they’re mixing the perfect batch, scaling up or down based on demand, instead of sticking to one price that’ll have you breaking the bank.

Fast forward to a future where it’s all about agent-to-agent chit-chat on the blockchain, and you’ll need a setup that doesn’t cost an arm and a leg. LangChain’s early moves are setting the stage for a whole new era of marketplaces and digital wheeling and dealing, where everyone’s free to trade, transact, and tango without getting their pockets picked. It’s the beginning of a brave new world where permissionless payments are the name of the game, and the possibilities? They’re as endless as the New Mexico desert.

And while I love this project. There is only 1 doubt that keeps niggling away at the back of my mind. None of the "AI" is on chain, so again, we do not really know of the veracity and privacy of the model do we?

Smart Contracts & zero knowledge ML

Smart Contracts:

• They are essential for blockchain ecosystems, automatically executing based on predefined conditions, reducing the need for intermediaries.
• However, they face limitations in flexibility and efficiency, which can be improved by integrating AI, particularly machine learning models1. This integration enhances user experience but also introduces risks due to the immutable nature of contracts.

zkML (Zero Knowledge Machine Learning):

zkML allows for the training and execution of machine learning models without exposing the underlying data or proprietary information, addressing privacy concerns and computational limitations. Projects like EZKL and Glaze are developing tools for zkML, ensuring privacy and overcoming the high computational demands and gas fees associated with blockchain platforms. These points highlight the potential for AI to enhance smart contracts and the role of zkML in maintaining privacy and efficiency in blockchain applications.

And that tells me that the one major application of AI in Crypto isn't going to be about financial inclusion.?

In fact, after reading about all these, I feel convinced the one place AI and Crypto will find synergies, will infact be in the decentralised gaming world.

Gamers would often complaint that their rewards are gated within that particular game alone. Great for professional players, but not much incentives for casual gamers to stay hooked. But what if AI could then figure out the best crypto tokens to execute and reward to these casual gamers ? Or, even provide upcoming professional gamers a smart contract that gives them a decentralised loan, to level up with all the right tools and gadgets? And as they keep winning tournaments, a part of that reward goes towards their loan repayment. Smooth right? That is all for now. And I will be back next week. With a slightly more boring topic. About RBI and credit card companies. Till then, keeo sharing with me, what you found interestig from the world of Fintech.

And oh, don't forget to join me tomorrow evening, on a LinkedIN live and wind down as we discuss how banks are adopting technologies like AI.