By Arjun Chand, Bankless
Compiled by: Felix, PANews
There is no doubt that venture capital firms are interested in Crypto x AI. Just last week, Sentient announced that it had received $85 million in seed round financing. This round of investment came from heavyweights such as Peter Thiel's Founders Fund, Pantera Capital, and Framework Ventures.
While both AI and crypto have attracted a great deal of attention, some might view their combination as a fleeting narrative. But as more projects catch the eye of top investors, it becomes increasingly likely that these projects will bear fruit.
Let’s analyze why venture capital firms are betting heavily on Crypto and AI.
First Principles
Crypto x AI provides a unique opportunity to build a new financial and AI ecosystem based on Crypto as the first principle.
The world doesn’t need another Instagram or a slightly delayed Nasdaq, it needs entirely new ways to interact, collaborate, and exchange value. Crypto x AI has the potential to build entirely new systems from the ground up to solve this problem.
This creates a ton of new opportunities for startups and investors. VCs are always looking for the next big thing, and Crypto x AI is an investment opportunity worth getting excited about.
Everyone is eager to succeed, or is keen on memecoin, or is keen on funding startups
The inevitable rise
The impact of AI is undeniable, and it is rapidly permeating every aspect of life. From chatbots to advanced tools, AI has become an indispensable part of work and daily life. People's dependence on AI will only grow, forming a powerful network effect: the more it is used, the more valuable it becomes.
VCs are taking notice, too. As Pantera’s Cosmo Jiang puts it, “In 15 or 20 years, everyone will be using AI,” so saying you’re investing in an AI company “is as silly as saying, ‘I’m investing in a company that has a website.’ ”
This is not just speculation, but a clear trend. Just like the Internet, AI is becoming a mainstream application.
Interesting fact: AI and Crypto are becoming a powerful combination. Remember those talks about attracting 1 billion new crypto users? Forget human users, the main users of Crypto in the future may be AI robots.
Experts believe that AI and Crypto will add trillions of dollars to the global economy by 2030. By getting in early and backing the right players, VCs hope to capture a large share of the enormous value created in this emerging field.
The harsh reality is that for most VCs, the AI train may have already left the station. Valuations of companies like OpenAI ($80 billion), xAI ($24 billion), and Anthropic ($18 billion+) are ridiculously high. With the exception of a few firms, other firms are unable to participate in the large AI technology company transactions.
Crypto offers a compelling alternative: a way to participate in the AI future without spending billions of dollars.
In addition, venture capital firms are purchasing Crypto x AI tokens from the open market. For example, Polychain, Digital Currency Group, and dao5 purchased hundreds of millions of dollars worth of TAO (Bittensor) tokens.
Perhaps the best-case scenario is that in the context of Crypto x AI, retail investors also have the opportunity to participate.
Trust Gap
Today’s AI is like a high-stakes poker game with hidden cards, with companies like OpenAI developing billion-dollar solutions behind closed doors.
This approach to R&D may be good for them, but it creates a huge trust gap with venture capitalists and the public. Especially when their own board of directors staged a public farce, how can you trust a company like OpenAI?
(Related reading: Why was Altman dismissed? A detailed explanation of the ins and outs of the internal turmoil at OpenAI)
Cryptox AI, on the other hand, is open source development driven by tokens to align incentives. In this way, artificial intelligence can be built to serve all those involved, rather than serving companies or countries.
VCs believe that an open source approach will lead to faster innovation, broader access to talent, and ultimately greater benefits for all involved.
Fear of missing out?
The tech industry is no stranger to hype cycles, and the current craze around Crypto and AI is no exception. This is an opportunity to realize huge returns, which sometimes creates a sense of urgency and even FOMO.
Even if the specifics remain a little fuzzy, Crypto x AI is a compelling narrative. However, it’s important to acknowledge the inherent uncertainty. VCs are still making educated guesses, and professionals are learning as they go.
Will Crypto x AI be the best narrative of this cycle or just another over-hyped gimmick? Only time will tell.
It’s still early days for this frontier, and venture capitalists are placing bets with a mix of optimism, caution, and a dash of speculative enthusiasm.
The question is, have you placed your bets on that, too?
Related reading: A review of 64 "Web3+AI" projects that completed financing in the first half of 2024, more than half of which focused on infrastructure and gaming entertainment
Related reading: IOSG: Illustrated illustration of the integration of AI and Web3
