So far, artificial Intelligence dominated nearly all crypto media in 2023. Various AI-related projects spiked by 200-300% in market value, while more skeptical investors tried to investigate whether all this hype was backed by strong fundamentals.

Therefore, in the following paragraphs, we’ll conduct due diligence on the AI x crypto marriage and examine both opportunities and risks related to the trend.

Blockchain and Artificial Intelligence – a megatrend or a fad?

The idea of combining cryptocurrencies and artificial intelligence isn’t new. Both technologies have co-existed since the early years of blockchain, with AI playing the role of a more mature and older brother. AI crypto projects such as SingularityNET, Fetch.AI, or Ocean Protocol fit under the “adult” category of web3 protocols, having existed on the market since 2017.

Then, what caused the sudden rise or, should we say, the rebirth of this concept? Obviously, ChatGPT. The generative AI tool created by OpenAI took over the minds of technological geeks (and many more!), dominating the business discourse in late 2022/2023. Hence, it’s not a surprise that the web3 world – always opportunistic and hungry for catchy trends and ideas – started to build the “AI cryptocurrency” narration.

How does AI impact cryptocurrency?

However, the connection between these two technologies is more than just the hype. AI and blockchain can exchange value and create a natural, beneficial synergy.

How can artificial intelligence help blockchain?

  • By improving security thanks to automated and more reliable fraud detection.
  • By enhancing scalability because of optimized processing of data.
  • By extracting more insights from blockchain data and activities conducted on-chain.

How can blockchain help artificial intelligence?

  • By enhancing the trustworthiness of data provided for AI thanks to decentralization.
  • By improving the security of data.
  • By raising the transparency of activities conducted by AI.

AI cryptocurrency – most renowned projects

The aforementioned benefits nudged a lot of bright minds to create projects that combine blockchain and artificial intelligence. Regarding how hyped and cluttered this category currently is, it’s difficult to indicate clear leaders in terms of innovation and development. However, there are at least a few projects every web3 enthusiast should keep a close eye on:

  • Fetch.AI – AI-based platform that provides automated trading services and serves as an autonomous economic agent.
  • Cortex – a platform that enables incorporating artificial intelligence models into basic blockchain functionalities like smart contracts. Its main goal is to decentralize the current AI ecosystem thanks to the distributed ledger.
  • Ocean Protocol – a platform that uses blockchain to build a decentralized data marketplace. In other words, thanks to Ocean Protocol, data scientists, coders, and other professionals interested in data can obtain it in a quicker and safer manner (as Ocean decentralizes and tokenizes datasets).
  • SingularityNET – a blockchain-based marketplace that enables buying and selling artificial intelligence algorithms. It basically serves as the Uniswap for the AI industry.
  • The Graph – a protocol focused on indexing on-chain data, often referred to as a “Google of Blockchains.” It uses AI to make all the data processing tasks more efficient.

AI and cryptocurrencies – security risks

Obviously, combining artificial intelligence and blockchain doesn’t result in positives only. The main category of risks associated with this intersection relates to security concerns and AI’s potential to exploit various vulnerabilities.

And it’s not difficult to find a vital example of such activities. The infamous DAO hack in 2016 that resulted in stealing 3,7 million of Ether (and the hard fork of the Ethereum blockchain itself) was “backed” by a smart AI algorithm that found a vulnerability in the code and exploited it. Hence, even though artificial intelligence can play an important role in spotting such problems and preventing hacks, it could also be used to prompt them.

AI and cryptocurrencies – ethical risks

The discussion over the growth of AI cannot be done without mentioning various ethical concerns. In the case of cryptocurrencies, it could be easily related to creating an artificial (pun intended!) hype around various tokens – in the form of propaganda and misinformation.

AI algorithms are also often vulnerable to various biases, which could potentially make the interpretation of blockchain data less accurate.

Lastly, further implementation of artificial intelligence into the web3 world can result in less transparency of all blockchain operations – due to the complexity of such models.

AI and cryptocurrencies – regulatory risks

The last group of AI and crypto risks can potentially have the most significant negative consequences for both areas. And as artificial intelligence and web3 are currently under the watchful gaze of various financial and legal institutions, regulatory-related implications will likely come soon.

Currently, there are no clear rules on how to cope with these technologies from a legal perspective as well as no common standards related to methods of combining them. It creates a lot of grey areas that could be exploited both by bad actors (focused on fraud) and governments (looking to ban or constrain the development of crypto and AI).

Moreover, as artificial intelligence can drastically improve blockchain efficiency, we may see the emergence of a lot of money-laundering services trying to exploit the current vulnerabilities of the crypto world. It will obviously nudge institutions to tighten regulations.

The future of AI and cryptocurrencies marriage

Even though we devoted three relatively extensive sections to the risks associated with AI and cryptocurrencies intersection, it’s wise to say that its benefits can easily cover them. As always, in the case of groundbreaking technologies, it’s their users’ intention that will determine whether the innovations are good or bad.

However, the optimistic approach to web3 makes us wear pink glasses. If we consider the main problems of blockchain technology, the lack of efficiency and security vulnerabilities will undoubtedly be one of them. On the other hand, if we take AI’s issues into account, we’ll indicate data centralization as one of the most important ones.

Well, as it happens, artificial intelligence can be easily used to solve security and efficiency issues of crypto, while blockchain should help AI in decentralizing datasets. Therefore, we’ll pay a very close look at the following stages of the discussed intersection – as it looks to be one of the most revolutionary ones to date.