Over the past 3 years, Blockchain and AI have undergone major upheavals. Besides support from stimulus packages in 2021, venture capital (VC) firms invested $33 billion in crypto and blockchain startups.
Panorama of Crypto
The Federal Reserve has triggered a string of crypto bankruptcies with its interest rate hike cycle. Starting with the fall of Terra (LUNA) and ending with the fall of FTX.
The promise of DeFi lost its luster. The market is also not improved by more than 3 billion USD lost to hacks in 2023. Bitcoin's current breakout shows a lack of trust in altcoins.
In June 2023, BlackRock's director of strategic partnerships Joseph Chalom noted that institutional-level adoption of DeFi is "many, many, many years away." However, there is an argument to be made that AI can be combined with blockchain technology.
Blockchain and AI Revolution: Merging Technology
It can be said that "DeFi" has been taken over by companies on tokenized layers. Celsius Network or BlockFi turns DeFi into CeFi. These companies have been successful in driving crypto adoption. However, they ended up tarnishing the word "crypto".
A reimagined DeFi v2 should focus on better user experience without the need for central companies to make this happen. Most importantly, DeFi safety must be strengthened. The most promising solution is zero-knowledge Ethereum Virtual Machine – zkEVM.
AI helps bring in large volumes of data. This creates a potential obstacle for blockchain networks.
Leveraging AI: Increasing Efficiency in Finance
When thinking about artificial intelligence (AI), the main feature that comes to mind is superhuman processing capabilities. Financial markets have become too complex for the human mind. Instead, humans rely on algorithms for prediction, automation, and personalization.
With $42.5 billion across 2,500 equity funding rounds in 2023, AI investment has surpassed crypto in 2021. But which AI-crypto projects are showing this trend?
Since OpenAI's ChatGPT was launched in November 2022, AI has been in the spotlight. Attention previously devoted to memecoins has been redirected toward AI in reasoning, art creation, programming, and most recently, video generation from text through Sora.
The Future and Challenges: What Awaits?
In the face of AI integration, blockchain platforms face the same problem - institutional adoption. Do smaller protocols have a chance to break into the mainstream market, or is this just for institutions?
AI is poised to make data more understandable, actionable, and relevant to each specific user. On the other hand, blockchain technology has formalized and decentralized the logic of human actions into self-enforcing contracts.
When Blockchain and AI meet, we get AI with a new purpose. A new generation of tokenized robo-advisors takes full advantage of the flexibility of DeFi. And as AIs explore new possibilities, new markets will emerge.
