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Daily Brief

Is AI Bullish for Crypto?

Tracking down the crypto opportunity in artificial intelligence.
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Bankless Bankless May 26, 20235 min read

Dear Bankless Nation,

AI fever has been sweeping the tech industry over the past several months, and now even crypto-centric venture capitalists smell the opportunity.

While there have certainly been a few AI shitcoins that have popped up, is there a real opportunity for the combination of AI and Crypto? Today, we look for an answer.

- Bankless team

Where AI and Crypto Meet

Bankless Writer: William Peaster

With incredible feats of creativity and thought now just a text prompt away, AI will revolutionize many fields. So what’s this epochal rise mean for crypto? Bullish or bearish?

Well, keep in mind that while the AI sector is only set to become more impressive from here, AI and crypto are already beginning to converge in unprecedented ways. And these crossroads are pointing to, yes, bullish pastures ahead for the cryptoeconomy.

In this article, let’s explore the profound relationships AI can and will have with crypto going forward and how these connections could drive the next major wave of innovation and growth in the web3 space!

Public AIs with Token Governance

The chatbot service ChatGPT is a marvel of human engineering, but its code base is owned by OpenAI, and OpenAI is a privately-owned company.

Fair enough, of course. Yet in crypto many of us strongly support open-source building and public goods software, so it’s no stretch to assume many of us also think we should have open-source and public complements to private AI services.

It is no stretch to assume that we’re on our way towards a Decentralized Autonomous Organization (DAO) leveraging its own decentralized compute marketplace (e.g. in the manner of Golem Network) with an ERC-20 utility/governance token to train and manage a public AI model.

In other words, the DAO could incentivize the continuous contribution of computational resources for model training, rewarding contributors with tokens. The complexity of AI training could be managed by attracting skilled contributors with token rewards while using token voting for key decisions related to the training, or for settling ethical and legal guidelines.

Undoubtedly, this “slap a token on AI” approach could be fraught with absurdity and peril. But if implemented well, it could enable a DAO to train and manage a sophisticated AI in a public, decentralized fashion. If these AI tokens do come to be, the ensuing transactional activity could be immense. Bullish for crypto.

Very Smart, Smart Contracts

Last week, Accelxr published a write-up outlining the potential of integrating machine learning (ML), an AI subfield centered on helping computers understand and create predictions from data, with smart contracts via zkSNARKs, a type of zero-knowledge proof.

The idea here, is that adding “zkML” capabilities to smart contracts will allow them to evolve into more complex and intelligent systems that can become autonomous and dynamic, and thus able to make decisions based on real-time onchain data rather than the static code written when they were first programmed!

The potential use cases here are vast and varied to be sure, but let’s just focus on the DeFi space as an example. Projects could use zkML solutions to facilitate AI-optimized automated yield strategies, super yield farming if you will. zkML could also be used to automate parameter updates for DeFi protocols in real time, e.g. a lending protocol needing to respond to a surprise liquidation crisis. And there could also one day be oracles powered by zkML that sign data off-chain and pass it into DeFi, e.g. to an insurance protocol contract. Bullish for DeFi, bullish for crypto.

Authenticity Verification

“...AI is going to create an explosion of images, audio, software. It will be hard to distinguish what's real from what’s not. Amid this, defending against spoofing, deepfakes, people copying work, verifying the creation/creator/person you're talking to will be important. Public/private key cryptography, zk-proofs and the like can play a major role...” — Bitwise CEO Hunter Horsley

The above, from Horsley, is right on the (magic internet) money with the coming flood of AI-generated media. Across audio, text, video, and other visual content, AI levels the playing field between beginner and expert like never before. This new reality also means it’s easier than ever to fake reality with AI-generated content.

Going forward, look for the rise of things like people signing their content from their public ENS names to “notarize authenticity,” as Horsley put it, as the demand for public verifications grows. Bullish for crypto.

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A New AI-Generated Content Boom

On the flip side of an AI-driven content explosion is that AI makes it considerably easier for anyone to be a content creator, or at least a more effective content creator, particularly in areas where they didn’t previously have subject expertise.

Here’s a framing to consider. In the context of cinema, an “auteur” is a director whose vision and control are so singular over a film that they’re considered the author of, and not just the leader of, that film. Now AI brings us all toward the status of auteur in our general creative endeavors because it gives us the ability to readily prepare audio, text, video, and beyond in the ways we see fit.

For example, with just an idea and some time and determination, you can now use a ChatGPT plugin + Stable Diffusion combo to create and code up an NFT project from scratch as a non-technical creator. This axing of the friction to create and launch projects will lead to more activity, not less, like the internet has shown us over time.

Of course, though, it’s not just indie NFT creators that stand to benefit greatly from AI here, any group involved in creative work does too, like animation studios or metaverse projects or web3 game companies. For example, the team at Parallel, makers of an NFT-based sci-fi card game, are already exploring potential ways to enhance their gaming ecosystem via AI-based agents.

Expect a ton more experimentation like this in the months and years ahead as new kinds of content generation come to the fore. Bullish for crypto.

The Big Idea

The convergence of AI and crypto is not just a possibility, but a reality that’s already coming into focus and holds immense potential for the web3 space.

The integrations of AI into decentralized systems could revolutionize everything from content authentication to smart contracts, and right now these crossroads are all pointing toward a more bullish future for crypto. There’s a major wave of transformation washing over our ecosystem, and this wave is making magic internet money that much more magic!


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