AI and DePIN: Revolutionizing The Future of Web3

• Understanding Cryptocurrency: The Internet Currency for Robots
• Lex Sokolin and Generative Ventures
• On-chain/off-chain Transactions
• Emerging Trends in Crypto and AI
• Decentralized Physical Infrastructure (DePIN)
• The Potential Impact of AI on Web3
• AI Agents and Self-custody

Understanding Cryptocurrency: The Internet Currency for Robots

Cryptocurrency functions as an internet currency, largely managed and maintained by automated systems and bots. These bots manage the intricacies of crypto arbitrage and Miner Extractable Value (MEV), navigate social media, drive algorithmic content feeds, and even create AI-generated art. Additionally, they handle numerous background operations facilitated by services such as Zapier. Indeed, the prevalence of bots in the digital world is undeniable and is set to increase further with the evolution of the Web3 machine economy.

Lex Sokolin and Generative Ventures

Generative Ventures, established by Lex Sokolin, former Global Fintech Co-Head at blockchain technology company ConsenSys, has been making investments in innovative companies since mid-2023. The firm concentrates on the intersection of cryptocurrency, artificial intelligence (AI), and fintech. Despite a promising macro thesis at the outset, the realities and patterns of the industry continue to evolve, shedding more light on key trends including AI and decentralized physical infrastructure (DePIN).

On-chain/off-chain Transactions

The first distinction to note is the differentiation between on-chain and off-chain operations. For instance, in terms of currency, dollar bank deposits occur off-chain, while DAI transactions happen on-chain. Similarly, tokenized real-world assets are off-chain, whereas wrapped tokens or liquid staking are on-chain. These examples illustrate how the same concepts can be executed differently depending on whether they occur on or off-chain.

The same applies to artificial intelligence. It's possible to have off-chain AI that occasionally interacts with Web3. Such crossover requires the presence of services functioning as oracles or on/off ramps for machine intelligence. The drive that led fintech to develop embedded financial products could similarly propel GPTs to integrate with crypto markets. The challenge then becomes keeping AI in check within these trustless environments, ensuring their integrity while verifying their outputs.

Emerging Trends in Crypto and AI

There are ongoing efforts in the market to incorporate crypto technologies, such as Zero-Knowledge proofs, into machine learning processes. This ensures the legitimacy of AI operations and prevents potential deception. While still in the early days, it presents the future possibility of being able to verify your interaction with the intended AI entity.

Others are considering the potential of transferring the entire language model and neural network stack onto decentralized infrastructure. With the open-source nature of generative AI, it's conceptually feasible to deploy and maintain various open-source models on protocols that distribute computational load, thereby incentivizing the provision of superior machine intelligence services. While this remains largely in the realm of science fiction, it presents interesting possibilities for the future.

Decentralized Physical Infrastructure (DePIN)

Another concept in this field is DePIN or Decentralized Physical Infrastructure. Some DePINs use coin-protocol incentives instead of newer tokenomics approaches. For example, nodes participating in the network provide hardware storage, computing power, GPU, or training data, and are rewarded for work conducted on their device, similar to Bitcoin$42,260 -0.64%'s proof-of-work mining. It's anticipated that like Helium$6.74 6.56%, most DePINs will evolve from coin-like structures to function more like dApps operating on top of a computational blockchain like Peaq, Solana$104 5.03% or an EVM rollup.

Although Web3 has leveraged centralized cloud services so far, the high costs and demand make it unclear whether this will be feasible for decentralized AI. Centralized AI providers currently have an edge over their decentralized counterparts. Therefore, scalable DePINs could be a key to unlocking resources for on-chain crypto-AI.

The Potential Impact of AI on Web3

AI could just be a narrow feature to improve applications. For instance, a digital wallet could be equipped with conversational abilities about the tokens and investments it holds. Alternatively, AI could become the new platform for distributing solutions to a wide range of general problems and cryptocurrency could be one of the many functionalities of AI. In this scenario, the concern is that the AI agents are essentially centralized and held by a single provider, resulting in significant personal risk in terms of data, privacy, and finance. This calls for inevitable regulation in the tech world to protect the individual.

AI Agents and Self-custody

The Web3 approach to these potential issues is self-custody of information and AI agents. Individuals would be able to generate their GPTs on a centralized platform and pull those trained models into a cryptocurrency wallet for ownership. In a world where multiple successful open-source models exist, and if some of them are effectively running on decentralized infrastructure, it's expected that crypto custody and control of AI agents

Edited by Jonathan Stoker