Crypto and AI: How the two industries will emerge in 2024

Key Takeaways

• AI’s market is set to hit $13 trillion by 2030, while crypto could reach $1.9 trillion by 2028. AI emulates human intelligence; crypto uses blockchain for secure, decentralized transactions.
• Merging AI and blockchain leads to advances like decentralized AI and zkML, improving data processing and decision-making. Innovations include AI crypto coins and decentralized compute networks.
• Cryptocurrency impacts retail, finance, healthcare, supply chain, and real estate, enhancing transparency and efficiency through DeFi and blockchain applications.
• AI boosts finance with fraud detection and healthcare with diagnostics. Blockchain projects leverage AI for autonomous operations and secure data.
• Privacy issues from public ledgers, scalability problems, and security risks like 51% attacks and smart contract vulnerabilities challenge AI and blockchain integration. New protocols and regulations are needed.
• AI and blockchain integration promises enhanced security and efficiency. Future projects include precision farming, unmanned exploration, and AI-powered metaverse experiences, indicating transformative shifts in technology.

When two powerful waves come crashing together, they merge to form a seamless and amplified flow of energy. This is the imagery that encapsulates the convergence of these two innovative technologies, Crypto and AI. Cryptocurrency was born from the revolutionary technology of blockchain, and crypto has already carved its mark as a disruptor. Meanwhile, Artificial Intelligence, with its unparalleled potential to mimic and exceed human intelligence needs no introduction. Both technologies are evolving really fast and stand as powerhouses in their own right. While each boasts distinct features that set them apart, their real-world applications reveal not just coexistence but a dynamic interweaving that is redefining the future. 

The fascination begins as we dive deep into these seamless flowing waters, exploring the synergy of Crypto and AI, uncovering how crypto is revolutionizing various sectors with the rise of DeFi, delving into real-world AI use cases, conducting a quick comparative analysis, and navigating the future and challenges ahead. 

Understanding AI and Crypto

Before we highlight the sparking synergy between the two, let’s explore how these are functioning. AI refers to the simulation of human intelligence by machines designed to perform tasks that typically require human cognition like learning, decision making, reasoning and problem-solving. One of the fundamental components behind this power is the neural network, a structure inspired by the human brain. Recent market research predicts the AI market will grow to approximately $13 trillion by 2030 driven by advancements in machine learning and deep learning. Long Short-Term Memory (LSTM) and Generative Pre-trained Transforms (GPT) are quite notable in giving AI groundbreaking breakthroughs. 

Cryptocurrency is a form of digital or virtual currency that uses cryptographic techniques for security. Bitcoin, Ethereum are leading cryptocurrencies and along with numerous altcoins, they have established themselves as significant asset classes. Blockchain enables crypto by providing a decentralized and immutable ledger, storing each transaction by linking chronologically in a block ensuring transparency, security, and tamper-resistance across the entire network. According to Fortune Business Insight, the cryptocurrency market is projected to reach USD 1,902.5 million in 2028. 

Synergy of Crypto and AI

Looking at the wonders of synergy of crypto and AI, an emerging concept is Decentralized AI. It aims to combine AI with blockchain to enhance data processing and decision-making without relying on central authorities. AI handles large volumes of data. AI algorithms can analyze and learn from distributed data, leading to more tamper-proof outcomes. Smart contracts on the blockchain facilitate autonomous AI systems that can adapt and make decisions verified by all network nodes, ensuring accuracy and transparency.

A high-level summary of crypto+AI intersections from a uETH blog post.

The idea of AI Crypto Coins is supported by Decentralized AI. These coins enable AI models to operate on blockchain networks. These coins go beyond mere cryptocurrency, utilizing blockchain’s decentralized and secure framework to advance AI development. This fusion establishes a new ecosystem where AI can independently flourish, driving innovation while benefiting from blockchain’s transparency, security, and decentralization. A prominent example of stepping up early in this integrated domain is NEAR protocol. 

Growing synergies like decentralized compute networks, verifiable ML on-chain, AI rail agents, and addressing the issue of deepfakes through Zero-knowledge proofs is a significant benchmark on how crypto is resolving existing problems in AI. Let’s have a look at them briefly.

Decentralized compute networks use blockchain technology to distribute computing tasks across multiple nodes, enhancing scalability and enabling parallel processing. Unlike centralized services like AWS, which rely on single data centers, these networks tap into underutilized global resources for cost efficiency and censorship resistance. Prominent examples include Render Network and Akash Network, which specialize in GPU services and support decentralized machine learning and advanced applications like ZKML. This technology is crucial for the future of AI development, promoting a more distributed and resilient infrastructure.

Verifiable machine learning on-chain is made possible by zkML which is introduced by the convergence of blockchain and AI. As a result smart contract functionality in industries like DeFi gaming social media and decentralized physical infrastructure networks (DePIN) is expanded while maintaining privacy-preserving and verified machine learning. zkML improves dependability and trusts in AI-driven processes. 

AI agents can integrate on-chain by leveraging crypto infrastructure rails for payments and digital resources. This approach bypasses traditional banking complexities and offers permissionless, faster, and cheaper transactions. Additionally, AI agents will utilize Decentralized Physical Infrastructure Networks (DePINs) for resources like storage and computing, enabling direct access at lower costs without intermediaries. This seamless integration of crypto infrastructure provides an efficient system for AI agents to operate autonomously.

Crypto offers solutions to combat deepfakes through cryptographic digital signatures and verifiable provenance records. By using zero-knowledge proofs (ZKPs), AI models can ensure computational integrity and privacy. This combination of AI and cryptographic techniques provides robust mechanisms to verify the authenticity of digital content and protect against malicious alterations.

Also Read: Top 5 Crypto Projects Tokenizing Real-world Assets (RWAs)

How crypto is revolutionizing various sectors?

Imagine a powerful waterfall channeling its waters into different streams, nourishing the landscape, and creating new paths, crypto is channeling innovation across diverse sectors, infusing them with new possibilities. Retail and e-commerce are at the forefront of crypto adoption. Companies like H&M, Gucci, Ralph Lauren, Adidas, Chipotle, and  Uber Eats are also accepting crypto payments. 

Where blockchain is transforming sectors like Healthcare, Supply Chain Management, Gaming, and Real estate. All of these may not or may operate independently without crypto, focusing instead on the technological benefits offered by blockchain. Crypto is integral to certain blockchain applications, particularly those involving financial transactions, incentivizing participants, rewarding contributions, and DeFi (Decentralized Finance).

Rise of DeFi

DeFi represents a leap from a traditional financial system to one driven by mathematical and computer science principles like cryptography and consensus mechanisms. DeFi, a financial system built on blockchain technology, emphasizes disintermediation, aiming to eliminate the need for intermediaries and central authorities like banks or brokers. The trustless mechanism is employed where trust is placed in verifiable code like smart contracts rather than in institutions. The total Value Locked in DeFi currently is more than $100 billion.

DeFi is better understood as a digital financial ecosystem operating on shared infrastructure. It provides typical financial services like borrowing, lending, and trading on a public network accessible to anyone with an internet connection, relying on open-source protocols or modular frameworks for asset issuance. Ethereum is a foundational ecosystem for DeFi enabling Dapps (Decentralized Applications) and smart contracts. MakerDAO is a prominent application on Ethereum that features stablecoin pegged to the US dollar, collateralized debt positions, and decentralized governance.

The DeFi ecosystem is made of these thriving sectors which fill up spaces in the traditional world and add to its effectiveness and popularity. 

• Lending and borrowing platforms like Compound is a great example, while Aave is known for its flash loan features. 
• Decentralized Exchanges (DEXs) like Uniswap, is a leading DEX enabling peer-to-peer trading of crypto without a third party, known for its automated liquidity pools. SushiSwap is a fork of UniSwap introducing new features like yield farming and staking rewards. 
• Stablecoins like DAI are pegged by the US dollar, created by locking up collateral in MakerDAO’s smart contracts.
• Synthetix allows the creation of synthetic assets that track the value of real-world assets like commodities, stocks, and fiat currencies
• Decentralized insurance platforms like Nexus Mutual offer insurance against smart contract failures and exchange hacks. 

DeFi is transforming various sectors using blockchain technology and cryptocurrencies for decentralized, transparent, and efficient systems. In gaming, it enables secure trading of in-game assets, as seen with Axie Infinity. It enhances financial inclusion by providing the unbanked with access to lending, borrowing, and payments without traditional banks.

DeFi streamlines payments and remittances, offering faster and cheaper cross-border transactions through cryptocurrencies. It reduces risks associated with centralized control, improves interoperability, and creates a flexible financial ecosystem.

Unlike AI, which operates within centralized frameworks, DeFi is decentralized, ensuring transparency and accessibility. Its open, distributed networks and consensus mechanisms offer a robust alternative to the opaque nature of many AI systems. Nevertheless, harmony between AI and DeFi use cases is an emerging concept and has high potential for novel applications.

Real World AI Use Cases

Remember when ChatGPT by OpenAI launched, it took the world by storm. OpenAI is a project to watch, which is continuously pushing its boundaries of AI with projects like anticipated GPT-5, DALLE-3, Codex, etc. Similarly, the magnificence of AI can be better understood when tools like Midjourney and DALLE-3 exhibit creativity at its finest. AI is just not robotics anymore; it’s transforming various sectors, from healthcare, and finance to creative industries like content creation, video editing, and beyond.

AI in finance is emerging as a powerful player as it enables fraud detection, automated trading, and assess credit risk accurately. These use cases complement the fundamental concept of Blockchain. Darktrace is an example of such a finance application. AI-powered tools like IBM Watson Health and Aidoc Always On Healthcare AI are revolutionizing medical diagnostics, enhancing the accuracy and speed of disease detection.

Some blooming AI blockchain projects like Fetch.ai, integrate AI and blockchain to enhance legacy systems without changing APIs. It provides access to secure datasets and enables autonomous task execution, making it adaptable to various digital systems reliant on large-scale datasets.

Initiatives such as Bittensor encourage open-source AI development by rewarding users for their knowledge contributions. Although there are still issues with equitable compensation and preventing manipulation, cryptocurrency networks encourage the creation of datasets and Reinforcement Learning from Human Feedback (RLHF). This leverages the strengths of decentralized finance to create an ecosystem for AI development that is more equitable and collaborative. 

We saw how crypto and AI are two power stations fueling growth in their respective fields, with some exciting merged applications but let’s link it back to where we started, and explore how these two complement each other to reach their full potential and make up for each other’s shortcomings, like best friends in the tech world.

How AI can transform blockchain

Many evolving researches and studies are ongoing to see whether missing puzzles can fit, meaning when two puzzles join together they not only fill each other’s missing part but also boost each other’s ability and effectiveness to give a complete picture. In this regard, both play their role and therefore blockchain and AI both have abilities to transform each other. 

One of the crypto OG’s, Vitalik Buterin’s paper explores the synergies between AI and crypto, emphasizing four major categories that seem more promising with the advancement of modern AI technologies and sophisticated cryptographic methods. In short, he states categories as the following:

• AI as Player in a Game: AI’s participate in blockchain mechanisms, acting as players where ultimate incentives come from human inputs improving market accuracy and participation. eg: Arb bots in DEX and AIs make predictions and decisions in prediction markets. 
• AI as Interface to the Game: AI assists users in understanding and interacting with blockchain applications ensuring their actions align with their intentions enhancing user experience and security. Eg: AI-enhanced wallets that detect scams, and simulate transactions. 
• AI as Rules of the Game: AIs enforce rules with blockchain smart contracts and DAOs, making subjective decisions. eg: AI judges in DAO’s, AI-based oracles. This might be challenging to achieve due to adversarial ML attacks, cryptographic overhead, and model security. 
• AI as the Objective of the Game: Blockchain systems are designed to construct and maintain AI models for broader applications. Decentralized AI training uses crypto incentives, AI models with privacy guarantees using cryptography.

“Crypto decentralization can balance out AI centralization, AI is opaque and crypto brings transparency, AI needs data and blockchains are good for storing and tracking data.” -Vitalik Buterin

Moving on, let’s understand a few concepts of AI that have a strong impact on blockchain and resolve its implementation issues as also depicted in the diagram below. 

• By using ML algorithms, AI can analyze blockchain transactions for anomalies, it can detect suspicious patterns and fraudulent activities in real-time, enhancing the security of blockchain networks. 
• AI boosts the efficiency of blockchain systems by predicting and mitigating transaction congestion. This optimization contributes to better scalability, handling more transactions with reduced delays. 
• AI integrates with smart contracts for automated decision-making, making it dynamic to adjust terms and conditions based on data analysis, and responsive to changing circumstances. 
• Through ML and data mining, AI can offer valuable insights into market trends, and transaction patterns, assisting stakeholders in making informed decisions. 
• AI powers Decentralized Autonomous Organizations (DAOs). By leveraging AI, DAOs can operate more autonomously, managing tasks such as voting, resource distribution, and policy adjustments without human intervention.

The fusion of AI and blockchain is transforming multiple industries:

• Supply Chain: Enhanced by AI and blockchain, supply chains are digitized for accuracy and automated transactions, improving carbon emissions tracking and transparency. VeChain exemplifies this with its digital IDs on the Thor blockchain, offering real-time tracking for clients like Walmart. 
• Healthcare: AI improves treatment and data analysis, while blockchain secures health records, boosting care quality and privacy. 
• Life Sciences: The combination optimizes pharmaceutical supply chains and clinical trials, ensuring data integrity and efficiency. 
• Financial Services: Blockchain and AI streamline transactions, enhance trust, and speed up processes such as loan applications.

Also Read: Blockchain in Telecommunication

Quick Comparative Analysis

Discussing Challenges of Integrating AI and Blockchain

Aiming to reach the peak of the mountain has setbacks and hindrances, navigating through them paves the way for a bright future. Some of the foreseeable challenges related to the unification and integration of both technologies are listed below:

• Public blockchain ledgers enable secure data processing but make collected data publicly accessible, raising privacy concerns. IoT systems also collect sensitive data, and placing it on open ledgers can exacerbate privacy issues. Private blockchains can enhance privacy through encryption and controlled access, but they limit the data volume accessible for AI, potentially affecting the accuracy of AI decision-making and analytics.

• Solutions like side chain and new platforms like Algorand show promise but still lack the requirement to match the scalability of large-scale systems. Bitcoin and Ethereum handle 4-20 transactions per second as compared to Facebook which handles million per second. Scalability issues in blockchain can be a roadblock for AI integration as large volumes of data need to be processed in AI but blockchain does not fully accommodate that.

• Blockchain security faces challenges such as the 51% attack, where a few mining farms can control consensus and settlement in public blockchains like Ethereum and Bitcoin. This could affect integration with AI and overall security. Private blockchains are less vulnerable due to predefined consensus protocols. To enhance security, newer blockchain platforms are incorporating Trusted Execution Environments (TEEs) like Intel SGX to protect execution outcomes.

• Smart contracts must be secure and free from vulnerabilities, as shown by the 2016 DAO hack on Ethereum that resulted in a significant loss. Poor programming practices in languages like Solidity and Chaincode contribute to these vulnerabilities. The deterministic nature of smart contracts presents challenges for decentralized AI, where outcomes are often probabilistic and approximate, necessitating new solutions for approximate computation and consensus protocols for mining nodes.

• Smart contracts require external events or functions to be invoked by blockchain participants and cannot autonomously pull data from the outside world. To address this, trusted oracles are used to push data and events to smart contracts, though this introduces complexity and centralization risks. Voting among oracles is often used to reach consensus.

• Existing consensus protocols do not account for AI-specific needs, such as model quality or data provenance. Developing new consensus protocols is needed that consider the quality of AI models and data used. 

• The absence of standardized practices and regulations for blockchain, especially in the context of AI and public transactions can create difficulties. Developing technical standards and regulatory frameworks for blockchain deployment, governance, and interoperability is vital to address the issue.

• Managing a blockchain involves complex decisions about technology, deployment, smart contracts, and dispute resolution. Establishing effective governance models for blockchain management and stakeholder coordination can help resolve governance complexities and ensure ethical compliance.

• Algorithmic bias in AI can lead to discriminatory outcomes by reinforcing existing inequalities. Ethical AI development aims to identify and mitigate these biases to ensure fairness and equity for all individuals

• Integrating different blockchain networks and AI systems can be a daunting task due to varying protocols and standards. Additionally, adopting new technologies requires significant investment in financial resources, awareness, and training of users, which may further complicate seamless integration.

Also Read: Anti Money Laundering in Crypto vs Traditional Banking

Future of Crypto and AI

The integration of generative AI and blockchain networks promises to revolutionize industries by enhancing security, transparency, and efficiency. The intersection of AI and blockchain technology is expected to be worth over $2.7 billion by 2031. Generative AI can automate tasks and provide scalable intelligence, while blockchain offers decentralized trust and transparent value transfer. 

There are endless project ideas, leveraging AI and blockchain for real-world scenarios such as precision farming and the energy sector are just a few of them. Let’s have a look at each of these in the infographics below.

Intelligent precision farming with Blockchain

For unmanned ocean exploration, AI-driven autonomous vehicles or robots can gather and verify data with blockchain. Another project such as combining AI and blockchain can be really beneficial for the banking and finance sector. These project ideas are also depicted in the figures below.

. Blockchain-based unmanned intelligent ocean bed exploration

                Combining AI and blockchain in banking and finance

Amazon Go is fascinating, and Metaverse shopping with VR/AR is also an emerging wild idea. Imagine shopping in an AI-powered metaverse where your avatar bot handles purchases, suggests the best prices, and speeds up your shopping, and transactions are conducted via cryptocurrency. This concept merges virtual shopping experiences with decentralized finance, offering a glimpse into a futuristic retail landscape. Possibilities are endless, while mimicking human intelligence or creating robots to exceed human intelligence can pose threats to human jobs and lives, it is best to experiment with new technology with precaution and not go overboard. 

The convergence of Artificial Intelligence (AI) and Blockchain is set to revolutionize technology. Smart contracts are anticipated to evolve into dynamic entities that adapt and optimize processes on the Blockchain. 

This synergy promises transformative improvements in decision-making through decentralized governance, fostering inclusivity and fairness. The integration of AI and Blockchain signifies more than just advancements in algorithms—it heralds a fundamental shift in data ownership. With Blockchain’s security and AI’s capabilities, individuals will regain control over their data, paving the way for a decentralized future where applications, from predictive healthcare to personalized retail, demonstrate the vast potential of this powerful combination.

Conclusion

The ideas and projects are emerging at the speed of light. The fusion of AI and crypto is not only fascinating but extremely powerful. Only time will tell what AI cannot do, as Elon Musk said in 2014, “The pace of progress in artificial intelligence (I’m not referring to narrow AI) is incredibly fast.

Unless you have direct exposure to groups like Deepmind, you have no idea how fast—it is growing at a pace close to exponential. The risk of something seriously dangerous happening is in the five-year time frame. 10 years at most.” Today in 2024, we see the extraordinary revolution and are so close to the GPT-5 launch, which Sam Altman, CEO of OpenAI declared it a ‘virtual brain’.

Who knows what the next three to five years will bring for these dynamic fields? As we venture into the exciting frontier, BlockApex, a blockchain consulting company, is at the forefront of integrating AI and blockchain and is dedicated to delivering cutting-edge research and exceptional services to navigate this revolutionary landscape.

References:

• Blockchain for AI: Review & Open Research challenges

https://ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber=8598784

• Growing synergies in crypto & AI https://messari.io/report/growing-synergies-in-ai-and-crypto  
• Promise + challenges of crypto and AI https://vitalik.eth.limo/general/2024/01/30/cryptoai.html     

• Blockchain & AI

https://arxiv.org/pdf/1802.04451