What Are Crypto AI Coins? A Beginner’s Guide

If crypto and AI are new technologies that have just passed you by, you may be wondering: what are crypto AI coins? Crypto AI coins are tokens that support the fusion of crypto and AI. In addition to facilitating transactions, Crypto AI tokens power AI projects by providing decentralized governance structures and monetary incentives for users to help improve AI platforms.

The merging of these two technologies is likely to be mutually beneficial for both sectors. Let’s dive in and see how crypto AI tokens work and how they power AI systems.

Table of Contents

Key Highlights

AI crypto coins mix artificial intelligence with blockchain technology to create a unique kind of digital asset and use case.
With blockchain’s open and permissionless setup, AI systems can achieve decentralized governance structures to improve transparency and accountability.
This will help to manage AI’s huge data demands, and power needs and add incentive rewards for better AI output.

The Intersection Between Crypto and AI

The tech sector is currently hyped up on AI, with the potential for large language models (LLMs) and the flagship Chat GPT making all the headlines. In a nutshell, LLMs work by taking lots of written text from the internet into their databanks. When a person asks a question, the LLM searches through its data and generates the most likely response.

However, LLMs have been criticized for collecting, storing, and using data they don’t have permission to use; for example, the New York Times sued OpenAI in 2023 for copyright infringement. In addition, there have been concerns that AI companies could use their position to influence what information people can or cannot access.

One way to address these opaque processes is to employ blockchain technology. As blockchain is built from the ground up to accommodate open, permissionless protocols, a merging of the two technologies could be mutually beneficial.

“One of the critical aspects where crypto can assist AI (and vice versa) is in the realm of data management and security. AI systems require vast amounts of data to learn and improve. By leveraging blockchain technology, this data can be securely and transparently shared across different platforms and stakeholders. This not only ensures the integrity of the data but also opens up new avenues for collaborative AI research and development, breaking down data silos that often hinder innovation.” – Source

For example, OpenAI, the brainchild behind ChatGPT, recently got into hot water over its use of Scarlett Johansson’s likeness for its virtual assistant. In addition, despite its huge success, ChatGPT continues to run at a loss due to factors such as high computing costs and the project still being in its “growth phase.”

Introducing crypto AI coins could solve both of these problems; they could offer renewed accountability and governance systems, as well as adding a further revenue stream to AI projects.

Crypto AI coins under analysis — Source: Shutterstock

How Can Crypto Help to Improve AI?

Decentralized vs centralized AI

One of the biggest problems with AI, and LLMs in particular, is misinformation. Although LLMs are great for quickly producing written content, fact-checking (and quality assurance) are still tasks humans need to perform to ensure accurate content.

By creating an AI platform with an integrated blockchain payment system, blockchain technology could help incentivize good actors to ensure content is accurate —much in the same way that Bitcoin miners work to ensure the network only delivers valid transactions.

Another example of this is how Ethereum staking is managed. Good validators are rewarded, while bad ones are punished through its slashing mechanism.

If we take this concept, crypto’s decentralized governance structures could be hugely beneficial in incentivizing AI systems, such as ChatGPT, to ensure they use good, reliable data to answer their queries.

Crypto networks are the perfect oven-ready delivery method for incentive rewards. As crypto transactions are cross-border and low-cost, they could be the ideal way to improve AI content.

There’s Only So Much Power to go Around

The current setup for AI data centers is highly centralized. In Virginia, the largest market for data centers in the world, data centers consume 24% of the state’s total power needs. The mounting power costs aside, this level of centralization could be an operational hazard if, for example, Virginia had a major power outage due to some unforeseen reason.

Data center power usage — Source: Semianalysis

These mounting costs are another area where blockchain could be a solution. If large computer centers were decentralized, this could help to reduce single points of failure for AI projects and to process data more efficiently.

The Gensyn Protocol is an example of a project doing just that. Backed by veteran venture capitalists, a16zcrypto, Gensyn is a layer-1 protocol that promises to decentralize LLM computing to help capture more computing power from across the world to achieve its aim of running at “low cost and high scale.”

The project’s Litepaper outlines how this will be achieved by having network participants work to verify Machine Learning (ML) projects with a system that uses Submitters, Solvers, Verifiers, and Whistleblowers, who all hold each other accountable.

By using this system, Gensyn claims it will:

“Remove the centralized overheads on scaling and reduces the barriers-to-entry for new supply participants, allowing the network to potentially encompass every computing device in the world.”

If AI systems can tap into blockchain’s network effect to combine a decentralized payment system for incentivized improvements with distributed computing nodes, crypto AI coins could be profitable investments for this cycle.

Benefits of AI for Crypto

The integration of these two technologies is a two-way street. AI could bring numerous benefits to crypto networks, such as:

Higher speed: AI could help to speed up data processing and analysis.
Better security: Advanced analytics improve the detection of potential security threats to the network.
Improved scalability: AI can handle growing data volumes and transaction complexities.
Greater precision: AI algorithms enhance the accuracy of analyzing trends and data.
Better efficiency: Automation introduced by AI streamlines operations across the board.
Accelerated innovation: Implementing AI in crypto fosters the development of new tools and methodologies within the cryptocurrency ecosystem.

How Crypto AI Coins Differ from Traditional Cryptocurrencies

Traditional cryptocurrency coins, such as Bitcoin, are, at their core, networks that facilitate peer-to-peer electronic transfers across borders and around the world.

Ethereum and other DeFi layer-1s like it allow for more complex transactions, such as smart contracts and staking. In addition, they allow projects to build their own tokens for valuation and governance purposes, such as Uniswap’s UNI token, which it uses to manage its decentralized exchange (DEX).

AI crypto coins tend to support tokens for an underlying AI project. For example, Fetch.AI uses “AI agents” that can integrate with existing APIs to fulfill various tasks, such as healthcare data analysis, energy distribution, and improving self-driving cars.

Users pay the agents using the FET token, a layer-2 token built on Ethereum. This means Fetch.AI is delivering an AI product but is using a crypto network payment system to create incentives for network participants.

Is Crypto AI the Investment Opportunity of the Cycle?

The opportunity for crypto AI coins is huge, with Coinmarkecap’s aggregated list showing a combined value of $27 billion.

List of AI Crypto Coins — List of Crypto AI Coins. Image Source: CoinMarketCap

Sam Altman, CEO of OpenAI, appears to believe that crypto and AI complement each other with the launch of WorldCoin, which puts privacy and blockchain-based ID verification at the heart of its mission.

In addition to this, a report by Bitwise predicts the combined AI and crypto market values could exceed $20 trillion by 2030. The report points to the gains that have already been made by chip manufacturer NVIDIA due to the increased demand driven partly by the burgeoning AI space.

A couple of projects we have our eye on are:

WienerAI –WienerAI —Wiener AI is part meme token, part AI. The Ethereum-based native token, $WAI will provide holders with a swaps platform, zero trading fees, and a trading partner in its Wiener dog mascot.
eTukTuk – a crypto coin that supports eco-friendly transportation solutions by utilizing electric tuk-tuks in urban areas. As the electric vehicle space continues to grow, this project is one to watch.

You can find more of our favorite projects in our article on the Top AI Crypto Projects in 2024

Notable Crypto AI Coins

Render: The Render Network rents out GPU power to AI applications and has seen massive gains of 233% since 2023. Render also recently successfully launched an update and could be set for more gains.
NEAR Protocol: One of the biggest crypto AI coins, with a market cap of $5.6 billion. The project’s founders, llia Polosukhin and Alexander Skidano actually worked in the AI field before developing NEAR in 2017. NEAR recently partnered with NEAT to develop AI applications.
Internet Computer: Another giant of the crypto AI space. Internet Computer’s $ICP token has a market cap of $4.2 billion, putting it second to only NEAR. ICP hosts decentralized servers that can process computing power – a helpful tool for developing DeAI (decentralized AI).
Artificial Superintelligence Alliance: This is an upcoming project that will merge Fetch.AI’s $FET token with $AGIX and $OCEAN. Then, plans are to create a new token called $ASI, which will be the big one to keep an eye on. ASI will help fund decentralized AI tools for everyday applications. Imagine your phone’s Notes app, but with AI assistance, for example.
The Graph: Built on Ethereum, The Graph is a data platform that archives blockchain data to make it more accessible to users. As parsing through blockchain is notoriously difficult, the project uses AI to help interpret the data and make transaction searching more manageable.

Are Crypto AI Coins Safe?

Crypto AI coins, like all investments, carry risks. Whether they are “safe” depends on various factors, including the technology behind them, market conditions, and individual risk tolerance. Here are some key considerations:

Pros

Advanced Security: AI can enhance security by identifying and mitigating potential threats more effectively than traditional methods for crypto AI coins. Additionally, AI systems can be adaptive to new threats to provide better protection against hacking attacks.
Enhanced Efficiency: AI can automate complex tasks, reducing human error and improving operational efficiency. AI systems can analyze large volumes of data rapidly to provide valuable insights.
Innovation: The integration of AI in crypto can lead to innovative solutions and tools, enhancing the overall ecosystem.

Cons

Market Volatility: Crypto AI coins can be highly volatile, with prices fluctuating rapidly based on market sentiment, technological developments, and regulatory news. Many crypto assets, including AI coins, can experience significant price swings.
Regulatory Uncertainty: The regulatory environment for cryptocurrencies is still evolving, and new regulations could impact the value and legality of crypto AI coins. Ensuring compliance with regulations can be challenging and may affect the operations of companies developing and managing AI crypto projects.
Scams and Fraud: Investors need to be cautious and conduct thorough due diligence before investing to mitigate against rug pulls and poorly conceived projects. Cybersecurity threats such as phishing attacks and hacking attempts can also result in the loss of funds.
Rug Pulls: Investors should also be aware of projects that are just trying to jump on the AI trend and will likely never fully develop their projects. These projects will likely go to zero.

Conclusion

Crypto AI coins could easily be a big opportunity in the next market cycle. The combination of the hype surrounding AI, combined with innovations over recent years seen in the crypto space, could make the two technologies a perfect storm.

If economic necessity can push AI projects to a more decentralized model, it would make perfect sense to use the existing technology found in blockchains – especially given the research and development made into the blockchain space over the last 10 years or so.

FAQs

What Are the Benefits of AI Crypto Coins?

AI crypto coins combine the power of AI with the transparency and governance structure of blockchain technology. This has numerous benefits, including in-built incentives for good actors and governance rights for token holders.

Can AI Crypto Coins Be Mined Like Other Cryptocurrencies?

This depends on the crypto AI coin. Many AI crypto coins use proof of stake rather than proof of work, so their tokens will be generated by staking rather than mining.

Are There Any AI Crypto Coins Focused on Specific Industries?

Yes! AI projects that use crypto can cover a wide range of use cases, such as healthcare data analysis, AI Trading Bots, virtual assistants that can book your plane tickets, and improving self-driving cars.

How Can AI Enhance the Security of Cryptocurrency Transactions?

AI certainly has the potential to improve cryptocurrency transactions. One of the biggest vulnerabilities for crypto holders is social engineering attacks, whereby a hacker tricks their victim into clicking a phishing link by using their personal information to lure them into a false sense of security. As AI is not a human, it is hoped that these systems would not fall into the same trap.

What Should Beginners Know Before Investing in AI Crypto Coins?

Beginners should be aware of the risks of investing. They should be prepared to lose all of the money they invest and never invest more than they can afford to lose. Due diligence, such as speaking to a financial advisor, is also best practice before investing in AI crypto coins.

References

“OpenAI Pulls AI Voice That Was Compared to Scarlett Johansson in the Movie ‘Her’.” NPR, 20 May 2024:
https://www.npr.org/2024/05/20/1252495087/openai-pulls-ai-voice-that-was-compared-to-scarlett-johansson-in-the-movie-her

“How Does OpenAI Make Money?” Techopedia:
https://www.techopedia.com/how-does-openai-make-money

“Dominion Connected 15 Data Centers Totaling 933MW in Virginia in 2023, 15 More Expected in 2024.” Datacenterdynamics:
https://www.datacenterdynamics.com/en/news/dominion-connected-15-data-centers-totaling-933mw-in-virginia-in-2023-15-more-expected-in-2024/

“Crypto and AI: A $20 Trillion Megatrend?” *Bitwise Investments, https://experts.bitwiseinvestments.com/cio-memos/crypto-and-ai-a-20-trillion-megatrend?

Reflexivity Research. “Intersection of Crypto and AI.” Reflexivity Research, https://www.reflexivityresearch.com/free-reports/intersection-of-crypto-and-ai