As we move into 2023, AI has proven itself to be the number one technology to keep an eye on. From self-driving cars to chatbots to art creation with AI software, this technology is beginning to seep into all kinds of different industries – and the process is only set to continue. It was perhaps inevitable then, that we’d find ourselves now talking about the interesting effects that AI is beginning to show in the world of cryptocurrencies.
Here’s an introduction to how it works, which tokens are using AI technology right now, and what this is likely to mean for your investments.
Understanding the AI Cryptocurrency Boom
As we speak, AI-focused tokens are greatly outperforming tried-and-true cryptocurrencies like Bitcoin. There is a lot of hype around them – but there is speculation too that this rapid growth is unsustainable and that when the hype fades, these AI coins will turn out to be a risky bubble.
However, cryptocurrency has always proved to be a story-driven market, where investments follow the narratives of new technology or initiatives. So at least at the time of writing, the AI boom in cryptocurrency is very much a real thing.
The biggest AI-powered cryptocurrencies on the market right now include some of the first that was announced – Big Data Protocol (BDP) was launched in 2018. It says something about how fast this industry moves that BDP is now considered something of a veteran in its own right. Right now, BDP, as well as 2021’s Measurable Data (MDT), are both very much back on board the AI hype bandwagon. BDP saw an impressive 2,100% growth in just the past week, reports CoinGecko.
MDT, meanwhile, has enjoyed a sudden 150% surge. These growth spurts both come after the respective developers began tweeting about their AI applications and how their tokens make clever use of the blockchain. Apparently, it was just the timely reminder that investors needed, and this technology offers a smart security solution – with data exchanges made anonymous and secure by commoditising user data.
According to the CoinStats research, the market has also seen the birth of a whole litter of new cryptocurrencies that make use of AI technology. For example, there’s Image Generation AI (IMGNAI), with a protocol that lets its users create artwork on Discord and other platforms using text disruptions. IMGNAI has seen in excess of 300% growth over the past fortnight.
Other fast growers right now include Singularity Net (AGIX), Fetch AI (FET), and Artificial Liquid Intelligence (ALI) – and some of these tokens have, according to the industry experts at CoinDesk, seen as much as 220% gains. CryptoSlate also adds that even across an average, AI-backed tokens, in general, are up by 80%.
And as for the old-old school? In comparison, some of the larger and better-established cryptocurrencies are seriously lagging behind the AI boom. Bitcoin, for example, rose only 30% in the last month. As a result, some of the top crypto traders point to AI-backed tokens as the next “big thing.” Not everyone is so enthusiastic, though.
Why All the Interest in AI-Based Tokens?
Artificial Intelligence – computers programmed to “think” and communicate in ways that mimic humans – is the new big thing at the moment. Of course, various AI-powered technologies have been in development for decades, and we’ve already seen the tech make its way into the public realm in the form of optimised search platforms and self-driving cars. But user-focused AI software really hit the mainstream consciousness in a way that captured people’s imaginations in 2022.
OpenAI released their Dall E art generating tool in 2022, and though the early results had a distinctive AI quality about them (some users called it the “melted ice cream” look), things would only develop quickly from there. The subsequent release of AI image generation tools such as Stable Diffusion and Midjourney would cement this as a tool with endless potential – as well as launching a series of high-profile court cases and investigations, as society suddenly had to reckon with issues such as ethics, ownership and copyright in the case of AI-generated art.
Meanwhile, we’ve additionally seen the launch of a next-generation AI chatbot in the form of ChatGPT (which is also made by OpenAI). ChatGPT simulates a very human conversation with an AI client that can answer questions and perform tasks such as writing essays, writing code, or website content.
The possibilities of that technology are near-endless, and similar to the case of AI-powered image generation. ChatGPT has raised enormous new questions for both copyright lawyers and, of course, for educational institutions. It is no surprise to learn that OpenAI recently had a valuation of $29 billion or that it was able to raise $10 billion in investment from Microsoft.
As a result of these fast-moving developments, the near-constant rolling coverage of AI-themed stories in the news media recently has no doubt helped to raise awareness of the new AI-backed cryptocurrencies, and the general buzz has ensured some serious investor interest in these markets. So, if you’ve recently followed stories about AI in the press and the idea of AI-backed crypto interests you – then you’re certainly not alone.
As ever, though (or perhaps more than ever, depending on which way things go), it will pay to go prepared. That means making careful and considerate choices when it comes to your crypto wallet and which crypto platforms you use to buy your currency. These days, an increasing number of industry figures are recommending platforms that are able to boast a seamless blend of user-friendliness with a solid range of trading tools.
What Does the Future Hold for AI Powered Crypto?
Ravindra Kumar is best known as the founder of Frontier, one of the industry’s leading crypto wallets – and now, he reasons that the current boom we’re seeing in AI-backed cryptocurrencies comes from a perfect storm: the meeting point between vast potential, early interest, and a good deal of hope as well. “We are seeing the emergence of innovative and compelling use cases,” he adds, pointing to the opportunity for growth shown by the Web3 and AI space.
The industry has also recently heard from Biconomy’s head of marketing – Aditya Khanduri – who cautions that the trend we’re seeing right now should still be considered as speculative. While tokens like ALI, AGIX and OCEAN have seen a more-than-healthy surge, he says, the current AI buzz may not last as long as some were hoping.
Speaking to CoinDesk recently, he advised that there were “a lot of unanswered challenges and lots to be figured out” because as the technology continues to grow, we “may not yet know what these decentralized AI tools look like.”
Scalability is one of the big issues that experts like Khanduri highlight. He asks how the data will be trained, or how issues like data ownership will come into play as these tokens continue to grow. The current interest might well be enough to fuel a short-term burst, but there are many more conversations to be had around the AI space and how it fits into our society, and these will all be likely to have knock-on effects when it comes to investing into AI-backed cryptocurrencies.
Some of these effects are things that we can perhaps see coming, and prepare for, but others will likely be simply impossible to anticipate. This means that AI-backed cryptos are not necessarily the best option for investors looking for low stress, dependability, and long-term stable growth.
The Final Verdict on AI Cryptocurrencies
In a conversation with CoinDesk, the market consultant Valentina Drofa brought up a very salient point – pointing out how a re-energised market always brings new ideas to the surface, but that many of them just don’t stick. We have certainly seen an uptick in crypto values since the beginning of 2023, with the more optimistic investors already pointing to what they’re calling the beginning of the end of the “crypto winter.” It’s perhaps no surprise then that this sudden excitement brings some new speculative tokens.
Drofa reminds us how some of these new tokens might easily turn out to be “short-term price pumps” that don’t ultimately survive long past their initial buzz phase.
So, for now, at least, the jury is still out on where the future of AI-based cryptocurrencies will take us. Are they the future? Or are they just short-term fads brought about by a general interest in public-facing AI initiatives? Only time will tell us that, but some investors are generating a burst of excitement, the likes of which we haven’t seen in the cryptocurrency industry for a while. And if nothing else, that at least speaks to a positive trend for investors across the board.