Tech
Cryptocurrencies are feeding off the enthusiasm for artificial intelligence as the technology offers new uses for blockchain
New lawsuits filed by the U.S. Securities and Exchange Commission against Coinbase Global Inc. and Binance Holdings Ltd. have raised serious questions about the future of cryptocurrencies.
As digital assets face increasing regulatory pressure and other market obstacles, they have also been dethroned as the latest technological fad. When OpenAI launched its ChatGPT bot in November, it pioneered the practical uses of artificial intelligence. AI has since captured the attention of founders and investors, the same people who fueled the cryptocurrency boom.
Artificial intelligence may have stolen the limelight, but some cryptocurrency enthusiasts say it can bring new opportunities to the blockchain sector.
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“You could actually see a situation where AI is kind of a catalyst to get back to blockchain,” said Adam Struck, founder and managing partner of investment fund Struck Crypto, who has dived further into AI after the ChatGPT bot released.
Blockchain the technology can bring greater transparency and decentralization to artificial intelligence, which can be extremely opaque in terms of what data is used to train models, according to Alex Felix, managing partner and chief investment officer at cryptocurrency firm CoinFund.
Recently, CoinFund supported Tools for Humanity. The crypto startup co-founded by OpenAI’s Sam Altman, which raised $115 million, shows a real-world use case for cryptocurrencies in artificial intelligence, Felix said.
Tools for Humanity, which developed a digital currency called Worldcoin, created a small sphere that scans people’s eyes to generate a unique ID for that individual based on the blockchain, giving them a digital “proof of personality” that, when combined with Worldcoin, they can also be used to facilitate secure payments.
“For we, it all started with Where is the world going with artificial intelligence? And the way to solve this problem was cryptocurrencies,” said Tiago Sada, product manager at Tools for Humanity.
Felix likens the current AI craze to the initial crypto coin supply boom in 2017, when investors rushed to snap up random crypto tokens, many of which were scams. But he said this time it’s easier to look at new projects and determine whether someone has deep enough expertise in artificial intelligence.
“It’s harder to feign credibility because the circles are so small,” Felix said.
Just as blockchain can bring greater transparency to artificial intelligence, the technology can strengthen cryptocurrencies by improving how digital asset platforms sort data, safeguard information and interact with users, according to some cryptocurrency advocates.
Hackers have managed to drain millions of dollars from blockchain protocols. TO THE bot according to Struck, it can limit the range of cyber attacks plaguing decentralized finance.
“You could essentially do very, very large amounts of what’s called pen testing or penetration testing just by having these bots simulate these attacks,” he said, adding that this test could pinpoint vulnerabilities in the smart contract code that hackers can manipulate to steal money.
Bots can also be used to moderate content in order to filter spam and scams on messaging platforms such as TelegramDiscord, Signal, WeChat AND Whatsapp, Struck said. While this type of advantage is not limited to cryptocurrencies, it is important for an industry where many scams originate means of social communication.
“A lot of users are focused on these messaging apps,” he said.
In addition to protecting investors from scams, many in the industry see other ways that AI can make it easier for users to interact with cryptocurrencies.
Solana Labs, which developed the Solana blockchain, launched a ChatGPT plugin in May “to make the user experience better and easier for people to understand what’s going on in the blockchain,” said Tal Tchwella, product manager by Solana Labs.
Cryptocurrencies have been criticized for being too cumbersome for regular consumers, but the ChatGPT plugin guides users through blockchain transactions in a conversational manner.
In a virtual demonstration, Tchwella showed how a customer can connect their crypto wallet and ask the bot to show them non-fungible tokens they can afford or a specific collection. After browsing the options, customers can ask the bot to help them purchase an NFT. The bot then generates a QR code that customers can scan to complete the sale.
“AI is going to impact every area, every sector, every industry and we’re just trying to embrace it,” Tchwella said.
However, other cryptocurrency companies have been hesitant to fully jump on the AI bandwagon, citing its potential dangers. Derivatives exchange Bitget canceled the ChatGPT integration due to concerns about users receiving misleading information and false facts in their queries.
Tools for Humanity has been criticized for its eye-scanning technology and asked whether the sensitive biometric data it collects is actually protected.
Even though The Graph, an indexing protocol, has been leveraging artificial intelligence and machine learning for more than two years to make blockchain data easier to search and use, it doesn’t want its GRT currency to be classified as an AI token, according to Tegan Kline, CEO of Edge&Node, the startup that created the platform.
Unlike other cryptocurrency companies that have quickly pivoted to AI to capitalize on the hype, he said Edge & Node prefers to be known as a blockchain startup first and foremost because there are still “difficulties” around AI, including how technology makes it harder to tell what’s true online.
Meanwhile, “many people are putting AI into their pitches to attract more venture capital funds,” Kline said.