As the tech behind both AI and crypto continues to mature, there’s a complex relationship forming which is very exciting for the future.
Artificial intelligence (AI) and cryptocurrency may seem like completely separate technologies at first glance. But that’s not entirely true. There’s a complex relationship between the two, birthing a new trend in the crypto market: AI tokens.
These digital tokens enhance scalability, user experience, and security. As crypto assets, AI tokens pay for AI services and artificial generation projects on the blockchain, helping users access AI technology.
The popularity of AI tokens has (predictably) surged alongside the meteoric success of AI projects like ChatGPT by OpenAI. This in turn has caused many organisations to begin experimenting with AI in information processing and answering queries, and the integration of AI with blockchain for decentralised payment frameworks.
This popularity has sparked investor interest, contributing to the rapid growth of the AI cryptocurrency market.
The market size of AI crypto tokens was $1.6 billion in early February 2023, and according to Forbes, it has reached a $4.27 billion market cap. The significant spike in AI tokens and the proliferation of AI-based projects have drawn attention to the role of AI in crypto platforms.
Fetch.ai, which helps build ‘autonomous agents’ to automate tasks, utilises the tradable token FET to power requests from users for its AI services. The token gained almost 200% in the first few months of 2023.
There are some serious synergies between the two technologies that we are likely to see explored in the coming months. Accurately pricing a surge in demand so that AI providers do not find themselves overwhelmed is very difficult – OpenAI lost $540M last year.
Not all AI providers have such deep pockets. AI crypto tokens allow them to adapt price to demand very quickly, whilst its use-case specificity will (in theory) lower the risk of market manipulation, because that utility will always retain value.
On the other side of the equation, AI’s ability to detect threats and malicious activity inside a blockchain makes the associated ecosystem less susceptible to hacks and other exploits.
Finally, there’s significant anxiety around how we humans will be able to distinguish AI content from that which is real, and how we can ensure that the AIs we build are free of bias. By recording AI activity & decision making on an auditable blockchain, this could be a method of alleviating these concerns.
If you’re just focused on today, you don’t have to look far for examples of popular AI cryptocurrencies: SingularityNet is a popular decentralised AI marketplace that utilises the AGIX token throughout the platform for transaction management and community governance.
Numerai (NMR) uses AI algorithms and techniques to optimise and manage investment portfolios – in other words, it’s software acting like a hedge fund.
Numerai users can make trades based on artificial intelligence and on predictions made by a global network of data scientists using blockchain technology.
AI tokens, born out of the intersection of very recent technologies (blockchain and large language models), have shown great potential for growth.
The potential benefits of combining crypto and AI are vast – providing investors with a type of proxy for investing into promising new AI startups whilst in turn providing users with easy access and the startups themselves with a myriad of benefits discussed above.
As both technologies continue to mature, we can expect to see even more exciting developments in the years to come.
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This article was developed in collaboration with Kraken, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.