The integration of AI and crypto is the next powerful combination that communities are discussing. Ethereum co-founder Vitalik Buterin sees the benefits of using AI to enhance crypto technologies, but there are limits to its application.

Meanwhile, AI on its own has been expected to witness a CAGR of around 40% in the next year.

Integrating AI with crypto has benefits

Crypto commentator Goodalexander believes that open-source AI that doesn’t use proof-of-work consensus like Bitcoin is not resistant enough to censorship. He noted on X that governments will likely censor powerful AI even more than they’ve tried with Bitcoin.

Goodalexander says that using AI to enhance crypto could have equal or even greater value compared to using crypto to distribute AI. Crypto philosopher Millie suggests that the second point is important, adding that integrating AI into crypto has immense potential. So much so that it can unlock more value than merely using crypto to improve AI, the influencer adds. As she predicts that the crypto sector will gain the most utility from AI, Ethereum co-founder Vitalik Buterin points to the existing interaction in DEXs.

Buterin notes, “A lot of fruitful avenues in extending this to prediction markets, and then to adjudication games in DAOs.” However, earlier this year, Buterin had cautioned against ‘superintelligent AI’. Suggesting that we are not ready for massive AI development, he said it can be risky. Additionally, he believed in risks that emerge from centralized development in the AI space.

As I said in my post earlier this year… there’s been a crypto/AI intersection use case in plain sight for a decade, it’s bots market-making DEXes.

A lot of fruitful avenues in extending this to prediction markets, and then to adjudication games in DAOs. pic.twitter.com/xGOj9Oo65s

— vitalik.eth (@VitalikButerin) September 27, 2024

AI imposes limits on zero-knowledge proofs

In a blog post from January this year, Buterin explained the concept of “info defense.” He explained that the terms involve using AI to help users separate true and false information and detect scams. He also forwarded the idea of eliminating centralized authorities for this detection. He also suggested that AI can enhance user-facing software in crypto wallets. Which will help users understand complex operations and protect them from errors. Despite the benefits, Buterin saw challenges in integrating AI with crypto in areas like zero-knowledge proofs. But said, “AI is a very specific type of computation, which makes it amenable to all kinds of optimizations that more “unstructured” types of computation like ZK-EVMs cannot benefit from.”

According to Aim Research, AI and machine learning algorithms help with market data and identify patterns for traders. This is applicable in the cryptocurrency market as well and AI-powered algorithms can reduce human error, automate processes, and improve efficiency. Research also finds that generative AI can optimize data size for blockchain scalability. With DEXs, AI is useful in adjusting the liquidity pool size based on the market conditions. And in some cases, detect errors or frauds within smart contracts.

Notably, market predictions expect the global AI market to surpass $190 billion by 2025, growing at a compound annual growth rate of 36.62%. Which means AI on its own will be an industry worth billions. And its combined value with crypto can benefit both the markets.