Ways crypto and AI can enhance or worsen each other.

Poor cryptocurrency. Once the beloved technology of the tech world, cryptocurrency, blockchain, Web3, or whatever we call it today, has been facing lawsuits from the SEC, a declining bear market, and now, the painful reality of playing second fiddle to artificial intelligence.

Jeremiah Owyang, an influential entrepreneur who has been active in the Web3 space and lives in San Francisco, informed me that his community experiences three to five AI events daily, but there are now very few Web3 events. (Owyang is now diving deep into AI.)

Jeff Wilser, a blockchain feature writer, is the author of 7 books including Alexander Hamilton’s Guide to Life, The Book of Joe: The Life, Wit, and (Sometimes Accidental) Wisdom of Joe Biden, and an Amazon Best Book of the Month in both Non-Fiction and Humor.

Sheraz Ahmed, Managing Partner at Storm (a blockchain consultancy), said that when he traveled to Dubai for a cryptocurrency event, “it was a bit shocking that in every blockchain keynote panel, AI was included. It was a blockchain conference, but only AI was being spoken.”

• BOCI issues tokenized securities on Ethereum in Hong Kong.
• Dismissal of BitGo’s $1.2B lawsuit against Galaxy Digital by Delaware Judge.
• SEC ex-Chief warns to exit crypto platforms immediately.

There is no doubt that AI is currently in the spotlight for start-up capital. As Meltem Demirors, Chief Strategy Officer at CoinShares, jokingly tweeted, “2019: we are a crypto fund. 2020: we are a DeFi fund. 2021: we are a blockchain gaming fund. 2022: we are a web3 fund. 2023: we are an AI fund.”

Perhaps, however, it is wrong to pit cryptocurrency against AI. While Web3 might be in a “winter” phase, it is not dying, and projects continue to quietly build. If it is true that AI will impact every industry, then it will undoubtedly include Web3. As Michael Casey recently wrote about blockchain, “AI will need Web3, and vice versa. Why not build both?”

Projects such as SingularityNET, Ocean Protocol, and Cortex are already working on various types of decentralized AI solutions, with many more to follow. Nathaniel Whittemore, who now hosts a daily AI podcast in addition to his daily Web3 podcast, says, “I feel like there’s a lot of training that you get from the crypto space that’s weirdly useful if you’re starting to think and engage about AI.” By “training,” he means getting accustomed to things like regulatory issues, educating others on a new technology, and how to deal with being disliked by some people.

Read more: Michael Casey – Why Web3 and the AI-Internet Belong Together

As for how AI and cryptocurrency will interact and intersect? “There’s a whole slew of possibilities,” says Whittemore. Some are obvious, some are outlandish, some are hopeful, and some are nightmarish. To impose a bit of order to the chaos, we’ll consider ten possible areas of overlap…which range from boosts in productivity to Armageddon.

1. AI will make Web3 projects more productive and efficient.

This is less about the unique properties of cryptocurrency and more about how AI will change everything, including Web3. “I think AI will impact [Web3] in all the normal ways it does for other industries,” says Haseeb Qureshi, Managing Partner of Dragonfly. “Productivity will increase dramatically. Smaller startups will be able to do more.” He expects that Web3 projects will need to spend less on things like marketing, copywriting, and other elements of operations.

Whittemore agrees. “AI will almost certainly radically increase the number of people who are capable of building blockchain and Web3 applications,” says Whittemore. And there could be a knock-on effect. He thinks that because it will become easier for non-tech people to learn things like how to code, that could potentially help “reduce the power gap” that’s ingrained in the community.

2. Blockchain could bring decentralized values, governance, and guardrails to AI.

This is the chocolate-meets-peanut-butter solution that many in the space have craved. “Blockchain platforms can support the creation of decentralized AI models,” says Ahmed, who adds that this solution would — in theory — keep data private, reduce biases in the models, and curb the growth of centralized monopolies.

There is a lot of training in the crypto space that can be surprisingly useful if you are starting to think about AI

Of course, there are skeptics. Qureshi says that “[AI] is not a technology that lends itself to distributed systems” because they are being built by small groups of experts and require a huge amount of computing power. “They’re not the kind of thing where you can leverage a lot of decentralized resources, like you can with bitcoin mining.” However, many in the Web3 space disagree and are trying to make it work.

Whittemore admits that he is “enormously skeptical” every time he sees a new crypto/AI project, but adds that “there are a lot of really smart people thinking about exactly this,” and he imagines we’ll see more “interesting overlaps” in the second half of this year. He’s also encouraged that “open-source approaches [to AI] are outperforming everyone’s expectations,” which gives a jolt of optimism for a decentralized approach.

3. AI will upend crypto trading.

Crypto trading is 24/7, without borders, and it happens across a dizzying range of assets and markets. Even in the pre-AI status quo, humans struggle to keep pace with the always-on casino. That will get harder. Quant and algorithm-fueled trading “bots” have existed for years, of course, but they’ll get exponentially better. This could be lucrative for those who use them, death for those who don’t. The millions of “retail traders” could get squeezed. “AI is going to be the enemy of the stubborn-minded,” says Ahmed. “If a trader does not want to use [AI] and wants to do everything manually, they’re going to get left behind.”

4. Blockchain could save us from AI’s ocean of misinformation.

AI-injected deep fakes have already gone viral and tricked millions, and if the trend continues —  which it almost certainly will —  we could soon be living in a dystopian world that some have called a “post-truth society.” Reality will be up for grabs.

Crypto advocates have long argued that blockchain could be used to authenticate that digital assets — like photos and videos — are what they claim to be. “Zero-knowledge proofs do not get enough attention, but they will be extremely important for AI going forward,” says Joseph Raczynski, a technologist and futurist. “They will serve as the technology that helps prove something is something, without divulging anything sensitive.”

5. AI could make crypto compliance and auditing easier.

“Especially after the events of the last year, regulators are becoming more hands-on and demanding more compliance,” says Elbruz Yılmaz, Senior Vice President of Web3 and Crypto at Paysafe, a payments provider. Auditing is a manual and time-consuming process, says Yılmaz, and many Web3 companies aren’t set up to do it. They’re playing catch-up. “AI will help these companies get to a competitive level in compliance faster,” says Yılmaz.

Read more: Paul Brody – When AI and Blockchain Merge, Expect the Mundane at First

6. AI could make life easier (or harder?) for crypto hackers and scammers.

The large language models of AI make it “easier to attack smart contracts,” says Qureshi. In the same breath, he adds that perhaps AI could also make smart contracts “easier to defend.” He doesn’t yet know which way that will tip — no one does. The only thing we can say with confidence is that AI will be weaponized by the bad guys and used as a shield by defenders; who wins is an open question.

The text discusses the role of AI in the world of cryptocurrency. The article highlights how scammers are becoming more sophisticated with the use of AI, including the creation of deep fake videos to promote fraudulent investments. On the other hand, AI could potentially help improve the metaverse, making it more immersive and engaging for users. However, the article also notes that AI could exacerbate environmental concerns related to cryptocurrency mining, which requires substantial amounts of energy. Finally, the article explores the idea that AI agents could use cryptocurrency for transactions, potentially leading to the first mass-market use of cryptocurrency-for-transactions being not from humans, but from machines.

10. AI could use cryptocurrency to bring about the worst-case scenario.

Let’s consider one more possibility that’s not so optimistic. (And “not so optimistic” is putting it lightly.)

If you’ve been following AI news at all, you’ve probably heard the statistic that more than half of AI researchers believe there’s at least a 10% chance that AI could wipe out humanity. (Side note: This statistic is slightly exaggerated and has been misreported to some extent, as the survey response rate was only 4% and not truly representative of scientists. But still, even if the chances are as low as 1%, the “nightmare scenario” is still a possibility.)

And cryptocurrency could play a role in that nightmare.

“With greater reliance on digital assets, an AI agent could easily manipulate a financial institution, affect a government, or bring down a government without anyone even realizing it until it’s too late,” says futurist Raczynski, who also imagines that AI could cause chaos in a metaverse. Raczynski is concerned that AI’s advancement will soon surpass that of humans, “and blockchain is an enabler.”

Final thoughts

So let’s end on a less apocalyptic note. Although AI is currently receiving most of the attention and funding from investors, the experts I spoke to were not worried about the impact on the Web3 ecosystem. “This is something silly to worry about,” says Qureshi, who acknowledges that an enormous amount of money is being poured into AI “with sky-high valuations,” but he doesn’t anticipate this will materially harm the Web3 ecosystem. “There’s a lot of capital in the U.S.,” says Qureshi, who adds that nobody can say with a straight face, “We don’t have enough money,” and “I haven’t heard that in the last three years.”

And on a more positive note, Ahmed ultimately believes that AI and cryptocurrency don’t have to be in competition with each other, but rather are just “tools in a toolbox.” They complement each other. “They’re not fighting against each other,” says Ahmed. “Ultimately they’re going to be connected, just like electricity is used to power the internet.”

Edited by Ben Schiller.