How Can AI Improve Blockchain?
Crypto and AI have been fighting a battle for relevance. In recent months, AI has emerged as the clear winner. What if we could merge the two?
AI is currently the most popular child on the playground. A recent JP Morgan survey reached 835 institutional traders in 60 markets. By 2022, blockchain and distributed ledger technology were considered second only to mobile apps in key technologies expected to shape the future, along with machine learning and AI.
This year, however, 53% of respondents identified AI as the most exciting technology for the future. Only 12% thought blockchain would have the biggest impact. On top of that, a whopping 72% had no plans to trade crypto.
The AI hype is also evident in the crypto markets.
In the first few weeks of the year, the crypto markets went AI crazy. Since then, the market has started to cool down. Most of the most popular AI tokens by 24-hour market volume are down from this year’s ATH. SingularityNET (AGIX) is down approx. 23% since the February 7 peak. Fetch (FET) also peaked on February 7 and is down approx. 16% since then.
Most people are still trading at speed, and investors are still positive that prices will rise again.
But how much of this marketing hype is based on real technology? Or is this a classic case of herding? (Fencing is when investors imitate other investors instead of making independent decisions, which can create a feedback loop where one investor’s actions affect others and create a self-reinforcing trend.)
How can we extend blockchains with AI?
There have been disagreements about how much you can integrate blockchain and AI. Fantom founder Andre Cronje recently said it was like trying to “mix oil and water.” There is also a significant risk that investors do not fully understand the technology. First of all, you can’t set the AI into a blockchain. However, it can significantly improve blockchain’s utility and capabilities.
“Most AI tokens today use decentralized platforms to leverage AI capabilities, including models, data, and other capabilities focused on things like data analytics, bots, and decision-making,” said Tim Tully, co-founder and CEO of Zelcore.
However, most AI is based on machine learning and needs a large data set to effectively learn and make accurate predictions or decisions. The more complex the task, the larger the data set must be.
“Blockchain will never contain all necessary data to present the complete picture (think NFT serial number on blockchain, image on a web page with data backend). It is very likely that AI will be used to index the additional data to the blockchain record.”
From smart contracts to “intelligent contracts”
AI can also improve the accuracy and reliability of smart contracts on the blockchain. Machine learning algorithms can analyze details, identify patterns, learn from past transactions and analyze the performance of smart contracts in real time.
This development could usher in a new era of “intelligent contracts” (IC), says Bill Xing, head of financial products at Bybit. But there are drawbacks. “The main appeal of smart contracts is their ‘trustless’ nature, so proponents of the IC model must answer why a user would prefer to trust an AI over a trustless, verifiable smart contract.”
Anyone who has interacted with AI-based tools knows that they can be wrong. As for self-driving cars, they could be disastrous. Whether it’s strange hands from AI image generators or actually incorrect output from ChatGPT, we still have a long way to go.
“In terms of integration, an AI can interact with blockchain-based systems, including smart contracts and data storage, to create efficiencies across the modular components of the system – for example, by interpreting large amounts of decentralized data and coming up with solutions at rapid speed .”
At the moment it’s more hype than substance
Most people BeInCrypto spoke to agreed that the current market pump was more hype than substance. Traders were mostly excited about the potential for easy or big returns. Most people don’t seem to read the project’s whitepapers.
“The recent rise in the prices of AI-related digital assets has been largely driven by speculation rather than real technological breakthroughs, although those will come,” Xing continues.
“This has caused prices to skyrocket rapidly, leading to a flurry of trading activity where traders (and copycats!) continue to find rich pickings as hype cycles come and go. However, long-term investors should be cautious and always investigate each token project carefully before making any decisions about how heavily to invest their money in them.”
ChatGPT is just a glimpse of the future, says Aaron Rafferty, CEO of StandardDAO and co-founder of BattlePACs. But we should not become delusional or complacent.
“The hype has also led to many tokens without solid use cases or teams behind them. Some AI crypto projects have been around for 5+ years. However, they are not the same teams launching the most innovative AI technology today. We will see a real use case for this merger, but expect it to come from a variety of new players, not old ones. Invest wisely and remember, the crypto market is inherently speculative.”
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