By Lisa Pauline Mattackal
(Reuters) – What do you get when you combine cryptocurrency with artificial intelligence?
A seemingly sentient bitcoin that encodes itself in the style of a Japanese haiku? Sadly though you do get billions of dollars in new crypto token transactions.
With the launch of bots like ChatGPT and Bard, the machine mania sweeping the tech world has entered the crypto world, and interest in tokens associated with AI blockchain projects has exploded.
According to data firm Kaiko, the average daily trading volume of the largest tokens including SingularityNET, Fetch.AI and Render surpassed $1 billion in early February, hitting a two-year high.
AI-linked blockchain offerings cover a range of services including payments, transaction models, machine-generated non-fungible tokens and a blockchain-based marketplace for AI applications where users can Pay developers in cryptocurrency.
Eric Chen, CEO of decentralized finance platform Injective Labs, said: “It’s exciting, it’s one of the first cases where a machine learning application is going to be on-chain at scale,” though he cautioned : “The digital asset space is no stranger to hype, speculation and overheated expectations.”
Investment returns have been strong so far. The CoinDesk Indices Computing Index, which includes AI-related tokens, is up 60% this year, with a notable spike in February as usage of OpenAI’s ChatGPT surged.
While trading volumes fell back in March, they are still above the long-term average for the crypto industry, with many coins significantly outperforming Bitcoin, with year-to-date returns in the range of 150% to 414%, Kaiko analyst Dessislava Aubert said.
There has also been an increase in investment in this area, such as CryptoGPT, where users can sell their data to AI companies, which raised $10 this Monthly financing of 10,000 yuan.
Yet despite strong returns this year, the AI crypto space remains a niche market – CoinGecko’s AI ledger tokens have a combined market cap of $2.7 billion, compared to the $1.2 trillion total crypto market It pales in comparison.
Market players warn that some projects may ride the AI wave without sustainable plans, meaning the relative newness of the field means winners may be rare.
“There are places where AI and blockchain could see some synergy, but I don’t know how many projects are using it well right now,” said Bitwise research analyst Ryan Rasmussen.
“You have to look under the hood.”
Encrypted AI: Big Hope or Hype?
The potential of AI-related crypto applications has investors hoping that they can use the hype to identify projects that can help solve some problems, drive more users to use blockchain products and guarantee substantial profits return.
“Some specific AI projects may actually end up being the ‘killer apps’ of public blockchains,” said Pranav Kanade, portfolio manager at VanEck.
He divides the AI crypto world into products likely to see short-term adoption because they solve immediate problems, and long-term bets.
In the short term, the rise of decentralized computing networks may allow users with unused graphics processing unit (GPU) capacity to make capacity available to other users for resource-intensive AI learning models, playing explain.
Similarly, some industry observers believe that blockchain-based marketplaces offer an easy way for system developers to gain market share and small users to gain access to new AI technologies.
SingularityNET is one of the largest such marketplaces, with the market capitalization of its token jumping this year from 10 million dollars to over 414 Ten thousand U.S. dollars.
Other potential long-term use cases include the use of blockchain as evidence to distinguish artificial intelligence from human-generated content.
Many investors realize they may be investing for the long term, but hope some runaway success will make up for the risk, said Todd Groth, of CoinDesk Indices’ index research.
“You invest in projects and many of them will never see the light of day,” he added. “You just need a few names that will do well.”