What is Artificial Intelligence in crypto?
In recent years, the digital assets industry has seen a rise in the significance of topics such as Decentralized Finance (DeFi) and Real World Assets (RWA). Within this landscape, strong themes, beliefs, or ideas that influence perceptions and values of cryptocurrencies are referred to as "narratives." These narratives hold sway over investor sentiment, market trends, and the adoption of new technologies. In 2023, a powerful narrative that gained traction was the Artificial Intelligence (AI) narrative and it's continuing at a strong pace in 2024. In this blog, we highlight its emergence, growing popularity, and projected future impact.
What is AI?
AI is a field, that combines computer science and robust datasets, to enable problem-solving. This problem-solving can be everything that usually requires human intelligence such as writing a poem, creating an image or reconstructing faces, which the world has experienced with deep fakes.
However, creating an image or a video is not the main problem AI is aiming to solve. Throughout our human civilization, we have strived to increase our productivity in all facets of our lives. We witnessed this with the agricultural revolution where humans domesticated plants and animals such as grain and cattle or with the invention of tools or implementation such as plows and irrigation systems. This was followed by the Industrial Revolution, where humans started to harness all kinds of energy and technology, increasing our productivity and efficiency once again.
We are currently at the dawn of a new era driven by AI. Similar to past revolutions, AI seeks to enhance productivity in both our professional and personal lives, leading to more efficient operations and cost reduction. Unlike anything seen before, this technology leverages vast amounts of data points and is continuously improving in speed and intelligence. Consequently, its progress isn't limited by human capabilities, given its current trajectory.
Concurrently, we are also experiencing the revolution of digital assets and blockchain technology and we are slowly seeing the two technologies intertwine. As a result, in the digital assets sector, there is a whole subsector dedicated to AI-driven projects. Although some projects are only riding the AI hype wave, some projects are solving real-world problems such as making AI decentralized.
One of these rapidly emerging projects is Bittensor, a decentralized intelligence network, fostering machine learning and reshaping the landscape of AI development. Bittensor aims to democratize AI by leveraging the blockchain, allowing users to upload their data and generate returns. Allowing more people to reap the benefits of this emerging technology instead of only big technology companies. If you want to read more about Bittensor, read our free research report.
Other projects implement AI to increase their efficiency and productivity such as making a decentralized autonomous organization (DAO) even more decentralized through AI or portfolio management as the technology can leverage thousands of data points.
The Growing Popularity of AI
The AI sector lingered within the industry for a while without drawing substantial investor attention. This interest was reawakened with the launch of ChatGPT, marking the emergence of the first widely accessible AI tool. For the first time, the general public could use a properly working instrument and understand its power and potential. In the months that followed, increasingly more people and businesses started to implement AI, increasing their efficiency and productivity.
The successful adoption of AI prompted investors to explore investment opportunities, recognizing its pivotal role in shaping future economies and lifestyles. Consequently, businesses heavily involved in AI, such as NVIDIA, experienced significant growth, given the essential role of graphics processing units (GPUs) in AI. This investor demand also extended to the digital assets industry, leading to a strong upward trend in various AI protocols.
This growth is attributed to the realization that AI will enhance productivity and efficiency, while digital assets represent an emerging market. Investors recognize the potential in both sectors, both of which are experiencing significant growth. As time progresses, we anticipate this integration to strengthen further, as blockchain technology can address challenges faced by AI. Firstly, it enables the decentralization of AI, currently controlled by a few organizations, allowing broader societal participation. Secondly, blockchain ensures the protection and verification of data, critical for AI development and enhancement. Thus, blockchain emerges as a suitable solution to safeguard and validate the data utilized in AI applications.
The Future of AI
The AI sector has experienced remarkable strides, reflected in the global AI market's valuation at approximately $136 billion in 2022, projected to soar to $738.76 billion by 2030. This number focuses on AI robotics and machine learning and excludes sectors such as hardware providers like NVIDIA which is valued at over $2T. Simultaneously, the current market capitalization of the AI & Big Data cryptocurrency market is approximately $40B, providing the market with a significant upside growth potential.
Furthermore, these decentralized AI initiatives experience a distinctive advantage: the ability to build upon one another's advancements. Given their open-source nature and the availability of public data, these projects continually enhance their products through collaborative development. Internal discussions among Google employees revealed through leaked documents, acknowledged their underestimation of the potential power of open-source AI learning.
AI development requires substantial datasets and training for continual improvement. Once developers achieve a sizable AI network, the compounding effect of learning becomes so formidable that isolated AI companies may struggle to surpass it. Consequently, AI holds promise within the digital assets industry. However, similar to most technologies, a few dominant winners are anticipated in this sector. The network effect, where value increases as more participants join, underscores this trend. Thus, the industry may culminate in either a single expansive decentralized AI network or a select few protocols offering similar services.
Hodl's Takeaways
For many years, AI was merely a buzzword, but in recent years, the public has started to witness the power of this emerging technology. Currently, there is an arms race among various technological companies to create the most powerful AI and become market leaders. However, as aforementioned, the winner may emerge from the decentralized environment. We are witnessing various AI projects operating on open-source platforms that leverage the development of collaborative data. So, although some projects in the digital assets sector are quite experimental, we do expect that the sector will continue to grow and become a crucial aspect of the digital economy.
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