June 8, 2023
By Murtuza Merchant
Two technologies, Artificial Intelligence (AI) and blockchain, have reshaped various sectors in recent times. AI’s transformative impact is notable across diverse industries, while blockchain, with the advent of cryptocurrencies, has been redefining the financial domain.
The latest innovation wave emerges from the fusion of these two disruptive technologies, giving birth to AI-powered cryptocurrencies.
AI cryptocurrencies mark a new breed of cryptocurrencies that are built on blockchain technology and integrate AI in some form. Each project’s reliance on AI varies significantly, with a broad spectrum of applications ranging from financial services to gaming.
AI’s Role in Enhancing Cryptocurrencies
AI’s capacity to streamline and refine existing processes is commendable. Here are a few instances of AI’s positive impact on cryptocurrencies:
Process Automation: AI can expedite and simplify a variety of processes, from identifying investment prospects to automating data compilation.
Fraud Detection: AI can identify irregular patterns, alerting users to suspicious wallet addresses or potential scams associated with certain crypto projects.
Autonomous Operations: AI can elevate the functionality of smart contracts, enabling the automatic adaptation or generation of new smart contracts based on specific conditions.
Enhanced User Experience: AI can analyze user behavior and usage patterns and optimize or provide certain services based on these insights, like auto-filling transaction forms.
Limitations of AI in Cryptocurrency
While AI is potent, it also has its share of drawbacks:
Data Requirement: AI depends on large quantities of data, necessitating users to disclose sensitive personal and financial details to the algorithm, which could be misused.
Potential Errors: AI relies on programming that may contain errors. Although AI technology has advanced significantly, it’s not flawless, posing various risks.
Dependency Increase: Dependency on an AI-powered assistant for executing certain tasks can become a potential issue.
Promising AI Crypto Projects
Evaluating AI-based crypto projects can be complex, but here are five noteworthy projects:
SingularityNET: This platform allows developers to offer their services on a decentralized platform and receive the native AGIX token in return.
Fetch: Fetch aims to develop AI platforms and services enabling anyone to build and deploy AI services at scale.
Ocean Protocol: This platform facilitates a decentralized approach to publishing, discovering, and consuming data.
iExec RLC: iExec RLC is working towards creating a decentralized marketplace for computing resources such as computing power, applications, and data sets.
Numerai: Numerai is constructing a decentralized data science platform on Ethereum, enabling developers to compete in crafting effective machine learning prediction models.
The Current State of AI Crypto Projects
At present, roughly 60 cryptocurrencies utilize AI in some capacity. Given AI’s rising popularity, it’s likely that several more AI-based crypto projects are under active development.
Investment Potential of AI Cryptos in Today’s Crypto Market
Since the surge in popularity of ChatGPT last December, AI cryptos have exhibited exceptional performance. The leading AI cryptos, in terms of market capitalization, have outperformed Bitcoin in the past month, even though they’ve experienced an 80-90% downturn.
Gracy Chen, managing director of the crypto derivatives exchange Bitget stated on Twitter that the rise of AI and increased uncertainty in crypto have prompted some VCs to redirect their focus from crypto projects to the field of artificial intelligence, resulting in a temporary cooling-off period for cryptocurrency investments.
“It’s not all bad though, each crisis is its own opportunity. While regulatory challenges exist, they don’t imply a rejection of crypto. The recognition of the innovative potential and social value of crypto remains and only expands day by day,” she said on Twitter.
Notably, according to Coinbase, the intersection of artificial intelligence and crypto represents an important opportunity for entrepreneurs, including helping to prevent some of the excesses cited by critics of the technology.
“As applications within AI and blockchain mature, the disruptions these technologies represent may lead to areas of collaboration and the emergence of new use cases for crypto to help address specific societal challenges posed by AI,” David Duong, head of research at Coinbase, said in a report published on the company’s website.
About the author
Murtuza Merchant is a senior journalist and an avid follower of blockchain and cryptocurrencies.
