The following is a guest post by Tim Haldorsson, CEO of Lunar Strategy.
Over the first half of this year, one thing became clear: AI and cryptocurrency are converging to create a powerful technology. By integrating on-chain tools, developers are creating smarter, more secure, and more efficient ways to support AI tasks, validate data, and train AI models. Just as the internet has permeated modern business, we are witnessing an innovation on a scale that could transform entire industries.
ETF approval for Bitcoin and Ethereum (and the possibility of a Solana ETF) has firmly established cryptocurrencies among traditional investment vehicles. This leaves only one question: what are the defining opportunities for early entrants in the greatest bull market of all time? In this article, we present the convergence of cryptocurrencies and AI as a strong candidate.
Synergy between AI and blockchain
Developers are naturally drawn to the intersection of AI and blockchain, and it’s easy to see why: these technologies have natural synergies, and blockchain provides the perfect infrastructure for AI to operate securely, decentralized, and efficiently.
Blockchain technology supports AI in a variety of important ways, from validating data to efficiently allocating computing power, from training AI models to providing much-needed privacy to end users in an increasingly digital world. Unlike previous generations of AI that were connected only to the internet, AI agents on the blockchain can operate on a scalable and secure infrastructure. This allows them to perform simple to complex tasks with incredible efficiency and reliability, without the risks of centralized servers and databases.
Perhaps the most well-known figure in the AI industry, Sam Altman, has demonstrated his belief in the integration of blockchain and artificial intelligence systems with his Worldcoin project. Cryptocurrency pioneer Eric Vorhees has also made inroads in the AI field with Morpheus and Venice AI, two projects that explore mechanisms for the provision and use of artificial intelligence to provide fair and open access to all.
Developers aren’t the only ones who believe crypto and AI are growing in lockstep. Smart investors are joining in too: Pantera Capital, an early investor in Coinbase, Circle, and BitStamp, is raising $1 billion for a new fund focused solely on crypto AI projects.
The growing AI and blockchain market
In the two quarters starting in January 2024, interest in the crypto AI sector has seen a tremendous surge, with over $98.8 million flowing in. The valuation of AI tokens is even more impressive, reaching a combined market value of $26 billion. These figures clearly show that growth in this sector is booming.
As things stand, the integration of AI and blockchain is predicted to add a staggering $20 trillion to the global economy by 2030. There are also a number of startups catching the attention of venture capitalists, with projects like Nexus Laboratories and Bittensor already demonstrating a strong ability to grow and maintain market share.
Nexus Laboratories has closed a $25 million Series A funding round to continue leveraging the power of blockchain to validate AI data and ensure accuracy and reliability. Bittensor takes a different approach by integrating the entire crypto ecosystem into the AI model training process. Bittensor runs a blockchain similar to Bitcoin. The main difference is that rather than relying on energy-intensive mining, Bittensor miners validate blocks by completing AI-related tasks.
By completing these tasks, they are essentially contributing to training an AI model. In return, they are rewarded with incentives that motivate them to continue validating blocks honestly and supporting the network. Like Nexus, Bittensor is also backed by VC firms. Its eponymous native token, $TNSR, boasts a market cap of around $75 million, making it fair to say it is at the forefront of the tokenized artificial intelligence ecosystem.
The smart money’s perspective on cryptocurrency AI
Investing in projects that combine blockchain and AI may be the most undervalued opportunity for angel investors in the current market. However, simply investing is not enough. You have to strike while the iron is hot. Judging from the growth trajectory of crypto AI projects, they are likely to attract more attention from the mainstream market and rise in valuation. Angel investors can reap asymmetric superior returns from this growth by being first movers.
Despite all the excitement about the opportunities at the nexus of AI and blockchain, we cannot ignore the challenge of doing something bold and new.
First, the space is still in its early stages, meaning many projects are sound in theory but far from battle-tested and high risk. Then there’s regulatory scrutiny: governments around the world are exploring how to use AI responsibly and are only just getting comfortable with the concept of cryptocurrencies. Regulation that stifles innovation may be on the decline, but we’re not out of the woods yet.
Finally, it is important to avoid opportunistic entrepreneurs who lack a clear vision. With ventures built on cutting-edge ideas, the potential for long-term success is just the starting point. Investors should look for companies with strong core values that align with their mission. As always, be sure to do your own research, as due diligence is an invaluable tool for investors looking at the crypto-AI sector.
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