Crypto Venture Capitalists Invest Millions in Decentralized AI

The rapid advancement of mainstream artificial intelligence (AI) tools has prompted the crypto and blockchain industry to explore decentralized alternatives to Big Tech products. The synergy between AI and blockchain is rooted in addressing the risks associated with centralized ownership and access to data that powers AI. The theory suggests that decentralization can mitigate the concentration of the AI economy in the hands of a few tech giants, thereby fostering a more equitable and secure ecosystem.

Crypto venture capitalists (VCs) are investing millions of dollars to explore the potential of decentralized AI. This sector has already attracted significant funding, indicating a strong interest in its development. Theta Capital, a blockchain investment company, described AI x crypto as "the inevitable backbone of AI" in a recent report. The report highlighted the intersection of AI and crypto, noting examples such as AI agents trading on blockchains and launching tokens. This trend is seen as a sophisticated approach to tackling AI's challenges, leveraging the unique capabilities of crypto.

According to Theta Capital, crypto wallets enable the participation of autonomous agents in financial markets, while decentralized token networks are bootstrapping the supply side of key AI infrastructure for compute, data, and energy. The report concludes that AI x crypto represents "the new meta," a term borrowed from gaming that refers to the dominant way of playing based on the competitive landscape. This suggests that the integration of AI and crypto is not just hype but a significant and transformative trend.

Alex Pack, managing partner of blockchain venture capital firm Hack VC, described Web3 AI as "the biggest source of alpha in investing today." Hack VC has dedicated 41% of its latest fund to Web3 AI, viewing the main challenge as building a decentralized alternative to the AI economy. Pack noted that AI's rapid evolution is creating massive efficiencies but also increasing centralization. The intersection of crypto and AI offers an open, decentralized alternative, presenting a significant investment opportunity.

One of Hack VC's portfolio companies, Grass, encourages users to participate in AI networks by offering their unused internet bandwidth in return for tokens. This is designed as an alternative to large firms installing software code into apps to scrape users' data. Grass founder Andrej Radonjic explained that users unwittingly donate their bandwidth without compensation, and Grass provides an alternative by forming a massive opt-in, peer-to-peer network able to produce high-quality data at the scale of major tech companies.

Decentralized AI presents risks for investors, including the proliferation of undesirable online content and spam. Some VCs see blockchain as a basis for mitigation. Olaf Carlson-Wee, CEO and founder of Polychain, provided examples of proof-of-humanity mechanisms to verify that users are human and disincentivizing spam through micropayments. Carlson-Wee believes that AI will underpin digital and financial systems, outperforming humans in markets. He claims that this reality would be accepted as a beneficial development rather than a dystopian scenario.

Carlson-Wee envisions AI systems evolving into long-term capital allocators, predicting trends and opportunities years into the future. Humans will entrust their funds to these systems due to their superior ability to make data-driven decisions. He concluded that the AI takeover won't be a war we lose but a suggestion we agree to, highlighting the potential for a harmonious integration of AI and human decision-making.