AI ROLLUP #16: Retail Vs Institutions Who's Right? | New Frontier AI Model | Mind Blowing Image Generation

Welcome Bankless Nation to the AI rollup where we stay up to speed with the emerging trends and developments in the AI crypto space. I'm David Hoffman here with my co-host Ajaz. Ajazz, how was your week?

Week's been good, David. Um I I'm kind of living a paradox of my life at the moment. Like on on one side I'm like taken aback by the rate of innovation in AI. Like literally it's becoming a weekly thing where a new model drops or a new app that I use just kind of blows my mind. Um

It's incredible how consistent it's been.

Yeah, yeah. It's crazy consistent. But then on the other hand, uh markets are crushed. That includes crypt like macro markets or stock markets, as well as crypto markets and within crypto, especially the AI coins, right? So it seems like for now we're at like the whim of wider macro markets, or in other words, whatever Trump says, or whatever the Federal Reserve says. It's funny. Whilst we're recording this, there is currently the FOMC meeting happening. So we'll see where the market turns by the end of this episode. Um, and the other paradox I'm living is uh all the suits and government people that kind of like crypto was burst on kind of opposing or doing the opposite of is more bullish on crypto now than the actual crypto people. So it's a super weird state of affairs that I'm living.

Yeah, yeah, yeah. I think this has been the big cloud that has overhung everyone in crypto and even not just in crypto, but in markets broadly. I actually heard a really good take that I'm starting to really integrate into my knowledge about like why this is the case. Like, why does retail feel bad and institutions feel good about crypto when it's usually the complete opposite? And even not just not just that, but in addition to that, if you ask general consumers or general the general population about their opinion of crypto, it's terrible. It's like, yeah, like it's a terrible industry. It's our our brand publicly is terrible. But then nonetheless, institutions are like, oh yeah, we're totally like, we're going all in. We're going all in right now. And then also our own retail, our own crypto consumers are like, oh yeah, I'm actually just bearish crypto right now. I think what's going on is that like money is hard right now. Donald Trump is like doing whatever he's doing to like literally cause a recession. And we've had we're having a high interest rate environment sustained for two and a half years now. Crypto has never existed in a high interest rate environment. And what I'm starting to understand is like that has fueled like this native DGEN casino speculation, retail dopamine side of crypto for almost all of its existence. And the longer this high interest rate environment goes on, the more we are like actually purging the casino out of our system. And that is like a detox. It actually feels bad. We're in like we are in rehab for like all the all the DJs are in rehab. They're all trying to go, they're all going to like a gambling rehab. And that's also why institutions are like, I feel good about crypto right now, is because that they are also learning that this is now a safe foundation to build on.

Yeah, yeah. I mean, uh, the example I said to a friend the other day was that the lights are now on at the nightclub. You can you look you can look around, you can see everyone. It's like, oh my God, you know, what what what what the hell are we doing here? It's 3 a.m. It's time to go home and like, you know, sort our lives out. Um but yeah, man, it it it is crazy. I do think that this is, however, temporary pain uh for a long term gain. And that sounds, you know, whatever, maybe like.

contrarian or or whatever, but because a lot of people are like calling for like a yeah, well yeah, or cope. It could also be cope. But I I I think that

I I just don't see a way that the that Trump's just gonna let his presidency just like run into shambles for like his his remaining term. I feel like he's gonna have some kind of upswing, right? He's a business guy, right? So and the reason why I mentioned that now on like this AI podcast is a lot of these markets are just attuned to whatever the wider macro markets do, whatever the stock markets do. And we're gonna get into like you know how this is affecting our AI coins and and where you know some of the uh potential for investing might lie.

Yeah. No, I think that's right. Well, while markets are doing like short-term acute dislocations because of this chaotic leadership that we have, who's for some reason interested in a recession, and like we've done episodes on baked list as to like what the strategy is with that. Go listen to our most recent Jim Bianco uh conversation to kind of get a glimpse as to what's going on over there. Nonetheless, like AI innovation is just full steam ahead. So everything is just so crazy, so nuts. And the bet the bet that we are making is like the way that AI, the innovation of AI gets expressed in value as an investor, gets expressed and it gets monetized, is going to be disproportionately on crypto tokens. As in, like if you are interested in investing and growing wealth and gaining access to wealth opportunities to AI, you want AI exposure. Sure, you can invest in the stock market. Sure, there's like, you know, Google, Facebook, uh, not OpenAI, but like all the all the other like AI gargantrians out there. But then also, there's going to be a like explosion of one to $100 million market cap AI related project startups that are like it's worth paying attention to. And that's what we're trying to cover here.

Yep, yep, agreed. Um but actually speaking of that, uh

You know, AI rate of innovation explosion. Um, David, do you remember last week uh on the episode you uh threatened to fire me and replace me with uh uh yeah, an AI podcaster? Well, that time that time might be today, David. Um the this new company called uh Hadera 3, or I think it's called their product is Character 3 Audio, um created this this demo or like released this demo of this girl who's like you know talking about like you know the kind of different rates of innovation of tech. And then I realized, oh shit, that's AI. Um so she she is not real. And to be honest, if you're like looking for it, there are definitely some obvious tells and gives, especially the voice being the most obvious one. But it it's kind of crazy how like I was watching demos of you know fake podcasters or fake, you know, image to um video generation tools before, like about a year ago, and they looked

Terrible, David. Um, but the fact that this has like improved so quickly means that you know, uh, I might not be the best looking person on this on this podcast anymore. You know, you might

She's prettier than you.

yeah, dude. Yeah, it's uh it's a it's a shame, but it's been a good run. So you know, I I'm appreciative of it. Um what one crazy thing, by the way, is this.

Female podcaster that you're watching right now was generated from a single image.

Okay, so they

whoever made this uh had an image probably of an actual real human and they uploaded this.

No, no, no. An AI generated human. Like you they went on mid-journey and they said, Hey, could you create yeah, could you create uh a female podcaster that has a neon red light in the background? And they created that image and then fed it into this product, Hedera, and it generated this like you know, her moving around, speaking into the mic, all that kind of stuff. It's pretty insane. Yeah, look at this demo.

Hedra labs, yeah. Definitely this demo is pretty cool. You you can definitely get the tells where the eye movements and the way that they move their head is not how a human would do it.

But it's definitely like you know the idea of the uncanny valley.

Yeah.

Yeah. Like so the uncanny valley is like there's this weird valley of space where like things that are attempting to look like humans, they're they're a little bit too close.

Where they're they're not quite human, but they're really close. And so it's eerie, it's uncanny. And to me, this is like actually, we're coming out of the uncanny valley. We are no longer going into the uncanny valley. Like, like we're thoroughly progressed through the canny valley. We're not yet out there. It's you can still identify as AI, but it's it's becoming pretty good.

David, can you give us an example of where the Uncanny Valley existed before AI? Or was it is this just an AI thing?

The the first time I think I really saw the Uncanny Valley was with robots. So there's like robots out there with like synthetic rubber skin. And you look at it and you just know it's not real. But like it's real enough that it tricks your brain to like, you know, fire on its like you know, facial recognition neurons, even though you know that it's a robot. Um

And we are this is the the early stages of the uncanny valley. We are definitely on the other side of the uncanny valley right now.

Okay, but in major news this week, David, um Google released um their new uh AI model with a really cool editing feature, uh, which I actually think is gonna change media generation kind of like forever. So it's called Gemini 2.0 Flash with native image generation editing. And the main thing that's getting people excited is the character consistency of images. So what I mean by that is let's say you generated an image or you uploaded an image of like a person or an animal or a dog or whatever, you can now say, uh, can you change the color of this dog's fur to golden? Uh and it'll do it. And it looks like

Crazily realistic, right? Um, and and so it's also able to like add text to images really easily, which was previously like a really you you might be surprised, but like a really tough feature for an LLM to add. And it kind of reminds me of the old mid-journey product days. Um, but there's an array of like really cool examples that put this uh to use, David, like like really effective economic changing things, like uh lying to your boss, for example, right? So uh there's this tweet here where uh you know she's like late for work or whatever. So she takes a selfie at home and then she says, Show a selfie of this woman on the 14th Street platform of the N train at New York, giving a thumbs up with teams of frustrated MTA workers standing in the background, servicing the tracks overhead. A small LED screen displays the date March 13th, uh 2025. Excuse me.

Making a fake timestamp in the real

Yeah.

world.

Yeah. Yeah. So she makes like uh it's kind of like a creative example to kind of like demonstrate the text editing and all that kind of stuff. Um, no more trips to Walmart, David. You can now basically take any image of yourself and say, Hey, can you make uh a passport photo version of that? Um, and you know, you can kind of like sort that out. So, like all these like little gimmicky type situations that you can do. I I think like uh the bankless graphic designer tested it out on you, didn't they?

Yeah, okay, so this is actually the first time I ran into this. The bakeless graphic designer, I don't think I've run into anyone who uses AI more than Gordon. So they what you on the top right corner, this photo right here is just a normal actual snapshot of me on a podcast. Great looking guy. Don't really need to do any AI to it. Uh, but then it really is helpful when like you make me do this open mouth YouTube cringe like thumbnail expression. And so he just made he can turn me into a YouTube cringe thumbnail version of myself.

Well

What do you think there was?

do you think that looks like you on the bottom?

Well there's obviously some stuff that's going wrong, but no.

I don't know. Could you could you give us a rediction?

Not going. I'm a

Okay, okay, okay. Okay, moving on to more serious edits or what this tool can do. You can now create like really cool gameplay with this thing, right? So the example that's used here is okay, they upload an image of like some kind of anime looking character. And then it prompts and says, Hey, can you put this character in a game where the image needs to be kind of like a typical screenshot of gameplay? And then the next screenshot that you see is, you know, this character

doctor in the game. Yeah.

in in the game, right? And so you might be thinking, okay, who cares? This is just like a still version of whatever. But then, you know, you can see the sequence of prompts that they make, which is like, okay, can you make the character move forward?

And then you literally see the character taking a step.

And then you could say, Can you move the character until it gets to like the building with the, you know, where the building is on the left side of the image? And so you can kind of like live action role play a bunch of these games. Interesting. Yeah. And I thought that that was like super cool because like imagine if you put this image, David, into that model that we just showed about that podcaster moving around and talking, right? Suddenly you go from like uh AI generated image to moving video and maybe even a live footage game in like a couple of seconds, which is just frigging insane. Another thing that I thought was pretty cool is uh I I think like product demos or mock ups are completely dead in terms of like human design. You can now just kind of like

Product photography specifically. Yeah, yeah. Well, well, I mean, like, so here what we see, what we're looking at right now is uh what starts off initially as a model uh posing. And I don't know if that model was also AI generated. That's you know where things can get a little confusing. And then someone uploaded just a still stock image of like this jacket, you know, like an outerwear jacket, um, which you know has no association with the model and says, Can you just let this model wear this jacket, please? And literally the next image is super realistic of this model wearing the jacket, you know, there's shadowing on it. It it lit it, it's you know, it's now unzipped versus in the original stock image where it was zipped up. So just some really cool tweaks that we can see on the consumer side of things with AI with this new tool that I think is just like.

Super super cool.

I think for anyone who's listening to this on the podcast, they're probably like, yeah, like I've already like assumed I've seen some versions of this. I've already known that this capacity, this capability is here. It's kind of hard to uh articulate how good these images look, how realistic that these images look.

You gotta be watching this on the video.

The the vi the visual quality of these things are like it. We are, especially this one, since it's not a video and I can just this just a still image. Still images are now

basically at parity with like real real pictures. Yeah, I would say. And that is what this one looks like.

Well well, I I I'd actually disagree with your first point saying that, you know, or agreeing with people that like, you know, they're they were already around. I would say they were around, but they were in, to your to use your term, the uncanny valley. They just weren't realistic at all. They weren't mid-journey was generating things that I didn't ask for, and I had six thumbs for some reason. Do you know what I mean? So uh I'd say the rate of improvement is pretty nuts. All right, so China is now also back again. Like it's been three weeks of China's back, David. So I think China's just like here and kind of like staying. This time, the Google of China, Baidu, releases a model um that is now officially better than GPT 4.5, which is OpenAI's latest model, and 50% cheaper than Deep Seek R1. So the cheaper.

One deep

TR1. Yeah, it was the cheap one already. I think it like reached like, I don't know, 10% of OpenAI's then leading models cost. And now we've got another model coming out from the same country, but a different team that is 50% cheaper than the cheap model.

So I I I just my takeaway here is that I think it completely obliterates OpenAI's costs. China is competing on price extremely aggressively, but also innovation. Typically, China's only competed on like, you know, copycat kind of models, but now they're kind of like paving a new path forward. And I just think OpenAI's moat is no more, David. I don't know what you think, but like this whole idea of like commoditizing these different AI models is now here.

as a I if I was given the opportunity to invest in any of these companies who have like these frontier models, I would actually not invest because it seems so cutthroat and they are just sucking up money and in and just materially commoditizing all of their competitors' products. There's so many of these. There's like

10

Which which company wouldn't you invest in? The

and none of them. None of them.

Okay, okay.

Yeah, they're all well they're because they're all producing frontier models and they're like under they're all undercutting their competitors.