Exploring the Integration of AI and Cryptocurrency

By Mohammad Musharraf

Artificial intelligence or AI has been around since way before every second post on your social media feed was singing praises of ChatGPT or Midjourney.

In fact, AI is already a part of more things than you would care to count. From chatbot popups and trading robots to speech-to-text solutions and self-driving cars, AI is almost omnipresent (in a good way, so far!).

That is not to say that the recent hype around AI is without reason. Language models like GPT-3, powering ChatGPT, are nothing like what the world had ever seen before. AI has certainly come a long way.

But what does this rapid advancement in AI mean for crypto, and how can it impact the crypto industry or work alongside it to disrupt other industries?

How Is AI Used in the Cryptocurrency Industry?

Artificial intelligence is the technology that enables machines or computers to exhibit human-like intelligence, i.e. take certain inputs, understand the goal, and enact actions or decisions that achieve that goal, in a fully automated way.

When we combine AI with its subset machine learning, which refers to a computer’s ability to rapidly assess huge amounts of data and learn to perform tasks or draw reasonable conclusions, we get a technology that could potentially disrupt almost every industry.

And crypto is no exception.

Much like AI, the blockchain and cryptocurrency industry is branching out in multiple directions: decentralized finance, decentralized autonomous organizations, NFTs, the metaverse, and so on. And AI can play a significant role in shaping the future of these technologies.

Beyond the AI token hype and crypto bros pumping random AI tokens to multi-million dollar market capitalization for no reason, there are actual use cases of AI in crypto.

Primarily, AI can help the cryptocurrency industry with two things: analysis and automation.

Analysis

The human brain can assess data with sophistication – but it is nowhere near as fast as AI and machine learning models; it is also limited to parsing relatively small amounts of information at a given time. 

By contrast, artificial intelligence models can assess vast sets of data to find certain patterns and anomalies. 

AI Analytics for Crypto

Crypto Risk Identification

When used to assess data related to crypto transactions, AI can help flag and block suspicious transactions such as money laundering or wash trading, scams, and frauds. This can be especially helpful, considering cryptos are mostly pseudonymous or anonymous in nature.

Crypto Market Sentiment Analysis

Further, AI can assess market sentiments based on crypto transaction records, social media content, and news. This can help traders make informed decisions and plan their investments.

Automation

AI and automation are almost synonymous. That’s because, similar to humans, AI can assess inputs and autonomously take actions. Artificial intelligence has one major advantage though – unlike a human, it’s always on. Which makes it perfect for the 24/7 world of crypto.

This could mean a wide array of things for the blockchain ecosystem. 

Trading Bots

Traders already use algorithmic trading, which involves feeding a set of trading rules to a computer application and allowing it to execute trades based on those rules. AI-powered trading tools can assess micro and macroeconomic circumstances in real-time, analyze market data, and make predictions about the market.

AI Agents and Metaverse Customer Service

In a crypto’s decentralized and autonomous ecosystem, AI can also act as an automated agent to help users with queries, manage DAO treasuries, bring exciting experiences to metaverses, detect bugs in smart contracts, write code, and so on.

But these basic use cases that stem from AI’s ability to analyze and automate only offer a minor glimpse of what it can do. 

Beyond the potential for AI to drive forward crypto projects, crypto also offers opportunities to drive the AI space. To fully understand the potential for AI and crypto integrations, let’s check out some real projects working on the intersection of these two technologies.

Projects Using AI and Cryptocurrency

Ocean Protocol (OCEAN)

AI runs on data. The more data it is fed, the more accurate it becomes.

And as it is said, data is the new oil. Much like oil, a few oligarchs like Google, Meta, Amazon, and Microsoft control the majority of internet data. That means, these companies have the best chance at building the most effective AI tools, while smaller players are left scavenging for quality data to feed their AI models.

Ocean Protocol uses blockchain and cryptocurrency to democratize access to data. They aim to allow AI startups, which they consider to have higher AI expertise than tech giants, to access quality data.

The protocol achieves this by connecting data providers (such as individual internet users or organizations) directly with data consumers (such as AI startups and data scientists) in a blockchain-based decentralized data marketplace. 

Data Tokenization

Ocean Protocol packs data in the form of data NFTs and data tokens, which can be used across wallets, exchanges, and DAOs that support ERC721 and ERC20 tokens

Incentivizing Data Sharing

The Data Farming program, powered by the platform’s native token OCEAN, ensures data providers have the incentive to share their data. Users can also use OCEAN for staking and governance votes.

The project’s USP of using crypto and blockchain tech to level the playing field for AI businesses is one of the strongest examples of AI and crypto integration.

SingularityNET (AGIX)

Founded in 2017, SingularityNET is an AI-focused project based on the Proof-of-Stake blockchain Ethereum, with plans to launch on the third-generation blockchain Cardano. 

Decentralized AI Tool Marketplace

SingularityNET has two primary solutions: a blockchain-based decentralized AI Marketplace and an AI Publisher. They enable developers to create AI tools, algorithms, and libraries and share or sell them directly to users instead of going through intermediaries. 

Community-Funded AI Projects

Users on the platform can also create requests for specific kinds of AI tools, which the developers can then work on and get paid for it.

The marketplace’s economics is powered by its native token AGIX, which is used for all kinds of trade within the ecosystem. The platform also allows AGIX holders to stake their tokens and earn rewards.

The Graph (GRT)

It’s simple to query a blockchain for basic data such as the amount sent in a specific transaction. Anyone can log in to a blockchain explorer and do that. However, doing the same for more advanced queries or filters can be extremely difficult. 

And Web3 applications often need such data.

AI Blockchain Explorer

The Graph is a blockchain indexing protocol that aims to solve this problem. It’s like the next stage of a block explorer, and it allows developers to query a blockchain for all kinds of complex data. There are various subgraphs (an alternative term for open APIs coined by The Graph) within The Graph’s ecosystem, each of which can extract data based on different queries or filters.

Fully Searchable Blockchain Data

For instance, a subgraph could query Ethereum to extract all addresses that have transacted on a dApp before a certain date. Another subgraph could query Ethereum to extract the top 10 most high-value transactions conducted using a particular smart contract. The possibilities here are endless.

GRT is the native token of The Graph. It powers the decentralized ecosystem by acting as an incentive for contributors, including indexers and delegators who help operate nodes and help process queries.

In December 2021, The Graph invested in an AI and crypto project called Semiotic AI in a bid to use artificial intelligence to “streamline and upgrade web3 decentralized infrastructure.”

Semiotic AI helps The Graph with automating query negotiations through reinforcement learning (RL), determining query costs using AI, and predicting query latency. They have also built an AI-powered query generator for The Graph.

Fetch.ai (FET)

Fetch.ai is one of the most popular projects working at the intersection of AI and crypto. Founded in 2017, Fetch.ai is a Cosmos SDK-based blockchain that offers tools powered by machine learning, artificial intelligence, and cryptocurrency to build decentralized applications (dapps).

dApps Powered with Business Intelligence 

Fetch.ai offers developers access to smart contracts development tools, artificial intelligence, and vast sources of data to use within blockchain-based decentralized applications. With this, developers can build smart applications, for industries such as finance, supply chain, healthcare, energy, etc., that offer the most optimized performance. Access to vast datasets can help apps operate autonomously and make smart decisions without reliance on intermediaries.

FET is the native utility token of Fetch.ai, meaning users on Fetch.ai can use FET to pay for everything within the blockchain’s ecosystem. The blockchain also allows FET holders to stake their tokens to help network operations and earn a reward.

dKargo (DKA)

The logistics and supply chain industry can be cumbersome: some processes are redundant, entail excessive paperwork, human errors, and inefficient systems.  

dKargo, powered by its native AI crypto token DKA, integrates blockchain and AI into the supply chain to offer a steady flow of transparent, reliable information and revolutionize global logistics using AI-powered route optimization. 

Through its various solutions like dFULL, dKLIP, dScanner, and others, dKargo aims to make supply chain operations and logistics more efficient and seamless.

Future of AI and Crypto

Despite how rapidly AI has grown over the last few years, it is far from achieving its full potential. As we saw, AI and crypto are currently being used to innovate data sharing, crypto trading, supply chains, marketplaces, blockchain querying, and more.

However, as AI becomes smarter over time, we’ll see a host of other projects using AI and cryptocurrency for more innovative solutions across industries. 

As these AI and cryptocurrency projects grow in number and you interact with or invest in AI tokens, you must not forget to prioritize your AI crypto token’s security. Ledger devices can be the best way to protect your assets from online threats while still having maximum flexibility to explore new projects in the crypto and AI space.