AI is widely seen as a breakthrough technology of the next decade with revolutionary potential. It can revolutionise business, bring new technologies to market, and create social & financial networks previously unimaginable — making it the talk of the town.
And it's not just the buzz, JPMorgan's recent survey of 835 institutional traders confirmed that AI and machine learning are the hottest trends of 2023, with over half of the traders agreeing that these technologies will dramatically reshape finance in the next three years.
But what if we took that further? By combining AI with crypto, we can unlock a whole new world of untapped possibilities. And it's not just about trading bots and financial applications — but use cases that could improve lives and make the world a better place.
Combining AI with crypto
The promise of AI is that it can bring intelligence and automation at unprecedented efficiency to any situation. People are already taking that premise, and combining it with the blockchain to create the first AI-linked cryptos. These include Alethea, an image generator that uses a token to offset costs for non-fungible tokens (NFTs) and offer user incentives; or Fetch.ai, which helps people build decentralised autonomous software with possible applications in the “internet of things”.
And according to CryptoSlate, the market value of these types of tokens has skyrocketed, with its index of 73 AI-linked cryptos surging 57.29% in just the past seven days, now being valued at a staggering $4.25 billion. Some of the biggest tokens include Alethea's ALI, Fetch.ai, and SingularityNET, which have seen gains of up to 350% over the past 30 days.
But what's behind this explosive growth? For one, the public launch of OpenAI's chatbot ChatGPT and image generation software Dall-E has ignited a spark of interest in AI technology among crypto investors and even those outside of the crypto community. Prominent traders are hailing AI tokens as the next big thing, the sector that could lead the next bull market cycle. And they might just be right.
Frontier Crypto wallet founder Ravindra Kumar states, "The growth opportunity around the AI and Web3 space combines early interest, potential and hype. While it's true that there may be some hype surrounding AI intervention in the crypto space, we are seeing the emergence of innovative and compelling use cases.”
Emergence of innovation
Successfully integrating artificial intelligence and cryptocurrency together provides fertile ground for innovation. In the same way that artificial intelligence has been used to reduce costs, streamline businesses and improve customer experiences in other industries, it can be applied to create seamless experiences within the crypto space — one that encourages innovation in new, previously unfeasible ways.
- Fraud detection: Many AI and machine learning techniques have been proposed to detect anomalies and fraud in digital transactions. This is particularly true for crypto and its underlying blockchain technology, which is based on the premise of anonymity. Fraudulent schemes like market manipulation or outright theft take advantage of this vulnerability — but an AI algorithm trained to detect anomalies in transactions could help prevent these rampant cash grabs.
- Reducing risk: With help from AI, cryptocurrency trading may become a more stable and secure form of investment. AI can spot trends and make decisions faster than any human. This is especially invaluable for mitigating risk in a market as volatile as crypto. As the risk associated with crypto decreases, more investors will feel comfortable joining in.
- Automation: Investing in crypto requires a deep understanding of the market, and this can be both time-consuming and error-prone for individual investors. However, artificial intelligence may soon take the place of extensive research when it comes to identifying promising coins — freeing up time and reducing human error.
These are just a few nascent examples of how AI is encouraging innovation within crypto. Though relatively basic, these concepts will help create an infrastructure for more advanced applications to thrive. Let's look at examples of what we could expect five, or ten years down the line.
- Medicine & Healthcare: Blockchain and AI integration have the potential to enhance personalised cardiovascular medicine by making data more accessible, sharing AI algorithms, decentralising databases, and promoting improved outcomes. However, there are still several challenges to be addressed in this field, including trust, competition, reimbursement, and ethical considerations, which require further research and examination.
- Decentralised Autonomous Agents: DAAs are coded programs that can make decisions autonomously. In the world of crypto, DAAs function as AI-powered fund managers, removing the risk of human error or bias in portfolio management. This allows for a more hands-off approach to crypto investment as the AI takes care of the management process.
- Lowering Entry Barrier: AI can help overcome the technical entry barrier of crypto on a large scale. It could offer personalised advice based on a user's risk tolerance, personalise marketing and communication based on their browsing habits, or provide a list of educational resources on crypto. We're already seeing customer support tools that use AI to help users resolve basic problems and answer simple questions. With better development, this technology could make cryptocurrencies as widely accepted as traditional payment methods such as Visa and Mastercard.
- Compliance & Security: Financial institutions have the opportunity to leverage AI for improved compliance and security measures. With the implementation of AI, it would become easier for financial institutions to enforce compliance and anti-money laundering protocols by continuously monitoring for signs of financial crime. AI-powered real-time transaction systems could also provide an extra layer of security by flagging any suspicious activity, addressing the current concerns by banks of inadequate security in the crypto industry.
A new era for crypto?
The myriad of exciting use cases, combined with the surge in market value of cryptocurrencies linked to artificial intelligence and the recent ubiquity of ChatGPT have only served to bolster people’s confidence in this technology.
And so, the question that we'll see answered over the next decade is whether AI will bring about a new era in crypto trading, payment systems and beyond.
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