In recent times, the crypto market has seen an influx of AI projects, some of which have boasted incredible gains. However, not everything is as it seems. I am Garry Walker, Co-founder of TAGDesk a web3 and gaming news platform. Whilst we are very enthusiastic about Crypto and AI we are also aware of false hype, industry flaws, and general scams.
In this blog post, we’ll discuss the various aspects of AI crypto projects, including scams, projects that aren’t really AI, and the fundamental disconnect between AI and blockchain technology. We’ll also explore strategies for investing in these projects and the possible future for AI crypto projects.
AI Crypto Projects: Scams and Ponzi Schemes
A significant portion of AI crypto projects is nothing more than scams or Ponzi schemes, cleverly designed to prey on the optimism and enthusiasm of unsuspecting retail investors. As the hype around AI and blockchain technology continues to grow, an increasing number of scammers are spinning up fraudulent tokens to capitalize on this wave of interest. These malicious actors create projects that are either outright scams or have no real substance, with the sole purpose of enticing investors to buy in, only to dump the tokens later on and leave investors holding the bag.
One particularly insidious technique used by scammers in the AI crypto space is the creation of non-sellable tokens. These tokens are coded in such a way that they can be bought but not sold by investors, essentially trapping their funds within the project. This leaves only the scamming token creator with the ability to profit, while retail investors find themselves victims of a rug pull, losing their entire investment as the token value plummets.
These scams and Ponzi schemes are often cleverly disguised, leveraging the allure of cutting-edge AI technology to entice investors. Scammers may create elaborate whitepapers, websites, and marketing materials to make their projects appear legitimate, preying on the widespread excitement surrounding AI and blockchain. Additionally, they may exploit the relative complexity of these technologies, taking advantage of the fact that many retail investors may not have the technical background to discern between legitimate AI projects and scams.
To make matters worse, the lack of regulation and oversight in the crypto space allows these fraudulent projects to flourish, as scammers can operate with relative impunity. While some regulatory bodies have started cracking down on such activities, it remains an ongoing challenge, as the decentralized nature of the crypto market makes it difficult to enforce strict regulations and hold bad actors accountable.
For investors looking to participate in the AI crypto space, it is essential to exercise extreme caution and conduct thorough due diligence before investing in any project. This includes researching the team behind the project, analysing the project’s whitepaper and technical details, and seeking opinions from experts in both AI and blockchain technologies.
Additionally, investors should be wary of projects that promise astronomical returns or make grandiose claims about their technology, as these could be red flags indicating potential scams. It is also advisable to diversify investments and avoid allocating a significant portion of one’s portfolio to any single AI crypto project, in order to mitigate the risks associated with potential scams or market volatility.
Projects That Aren’t Really AI
Many projects that fall under the AI umbrella are barely related to AI or are only AI-adjacent, creating a false impression of their technological capabilities and potential. A number of these projects capitalise on the hype surrounding AI to attract investors, even though their core functionalities and services have little to do with AI itself. Examples of such projects include Fetch Network, Ocean Protocol, The Graph, and Numerai, which are all related to data exchange, marketplaces, and trading, but not directly to AI.
Fetch Network, for instance, primarily focuses on a decentralised data exchange protocol, allowing various actors within the ecosystem to share and monetize data. Ocean Protocol, on the other hand, is a data marketplace and data economy platform that facilitates the sharing and selling of data sets. While AI researchers and developers may utilise the data provided by these platforms, the projects themselves do not directly involve AI technologies or implementations.
Similarly, The Graph is a project that aims to help other blockchain projects access on-chain data, serving as an indexing protocol for querying data from various blockchains. While this service is undoubtedly valuable, it is not inherently related to AI. Numerai, another example, operates as a hedge fund that uses data science to make informed trading decisions. Although data science and AI are closely related, the focus of Numerai is not on AI itself, but rather on leveraging data science techniques for financial gain.
These projects are often labelled as AI by those looking to pump up their own investments, creating a distorted picture of the AI landscape in the crypto space. Investors who may not have a deep understanding of AI and its applications can be easily misled by such claims, which can lead to poor investment decisions and potential losses.
To navigate this landscape, investors should be diligent in researching projects and identifying whether they truly involve AI or are simply using the term to attract attention and funding. Understanding the nuances between data exchange, data science, and AI can be crucial in distinguishing legitimate AI projects from those that are merely AI-adjacent.
In addition to conducting thorough research, investors should also seek out expert opinions and analyses to gain a better understanding of a project’s technological underpinnings and potential. Engaging in discussions with AI and blockchain experts, participating in online forums, and attending webinars or conferences can provide valuable insights into the true nature of a project and its relevance to AI.
The Fundamental Disconnect Between AI and Crypto
The idea of decentralising AI and putting it on the blockchain may sound appealing, especially as it aligns with the broader ethos of decentralisation and democratisation in the blockchain and cryptocurrency space. However, when examined more closely, the concept doesn’t hold up as a practical or logical solution. As Andre Cronje, a well-known DeFi developer, explains, the fundamental characteristics of blockchain and AI are quite different, making their integration challenging and potentially ineffective.
Blockchain technology is slow, transparent, and secure. It is designed to provide a trustless, tamper-proof, and public record of transactions and data. The distributed nature of blockchains ensures that no single entity can control or manipulate the system, and its consensus mechanisms provide security and reliability.
On the other hand, AI is fast, opaque, and a black box. AI algorithms, particularly those based on deep learning and neural networks, can process vast amounts of data quickly and efficiently to make predictions, recognize patterns, and optimise complex systems. However, the inner workings of these algorithms are often difficult to understand, even for their creators. This opacity can make it challenging to ensure that AI systems are fair, unbiased, and trustworthy.
Given these fundamental differences, combining AI and blockchain technologies presents a myriad of challenges. Even if blockchains could be developed to support AI on-chain, there would be no inherent benefit for either technology. Integrating AI into a slow and transparent system like blockchain would likely reduce its efficiency and effectiveness, while incorporating AI’s opaque nature into blockchain could compromise its transparency and trustlessness.
Furthermore, it is worth considering the specific use cases and problems that the integration of AI and blockchain would aim to address. While there are undoubtedly synergies between these technologies in specific contexts, such as using AI to optimise blockchain network performance or detect fraudulent transactions, the wholesale merging of AI and blockchain may not provide meaningful benefits beyond these isolated applications.
In essence, the integration of AI and blockchain is not a simple or obvious solution to any particular problem. Instead, it is essential to focus on the unique strengths and capabilities of each technology and explore how they can be harnessed to address specific challenges and opportunities in a targeted and effective manner.
AI Projects with Unnecessary Tokens
There are indeed some legitimate AI startups that have chosen to incorporate crypto tokens into their business models without any clear rationale or justification. While the incorporation of tokens might seem like an innovative way to raise funds or boost the profile of these startups, it often appears to be a misguided attempt to capitalise on the hype surrounding cryptocurrencies and blockchain technology. This approach can be seen as an effort to milk money from investors, often resulting in unjustifiably high valuations for these companies, which can lead to unsustainable growth and potential issues down the line.
In some cases, AI startups may introduce crypto tokens as a means to generate additional funding through Initial Coin Offerings (ICOs) or Token Generation Events (TGEs). These fundraising methods can be attractive because they often allow companies to bypass traditional venture capital funding, enabling them to access significant amounts of capital quickly and with fewer regulatory hurdles. While this may seem advantageous, it can also result in overfunded startups with unclear roadmaps or unsustainable business models, which may eventually harm investors who have put their trust and money into these projects.
Moreover, the introduction of crypto tokens can sometimes lead to an excessive focus on token value, overshadowing the core product or service offered by the AI startup. This can result in the company spending more time and resources on promoting the token and its potential value, rather than developing and refining the AI technology itself. Consequently, this may lead to a decrease in the overall quality of the product or service and a diminished likelihood of achieving long-term success.
Additionally, incorporating crypto tokens without any good reason can result in a misalignment of incentives between the startup and its token holders. Token holders may be more interested in short-term gains through speculation, while the AI startup should ideally be focused on building a robust and sustainable business. This misalignment can lead to friction between stakeholders and hinder the growth and development of the startup.
Furthermore, the integration of crypto tokens into AI startups without a clear purpose can also create unnecessary complexity and confusion for both the company and its users. It may require additional resources and expertise to manage and maintain the token ecosystem, detracting from the core mission of the startup. Moreover, users may be confused about the role and function of the token within the system, potentially leading to scepticism and reduced adoption of the product or service.
The Good Eggs (Projects That Are Really AI)
Artificial General Intelligence (AGI) has been the holy grail of AI research since its inception. It represents a highly autonomous system capable of outperforming humans in most economically valuable work. While there have been numerous advancements in narrow AI (specialised AI that excels in a single domain), the development of AGI remains an ongoing quest. One promising initiative that stands out in this field is SingularityNET’s AGIX token, which aims to create a decentralised marketplace for AI services, powered by blockchain technology.
Let’s delve into AGIX, exploring its goals, potential applications, and the impact it could have on the future of AGI development.
AGIX: A Brief Overview
AGIX is the native utility token of SingularityNET, a decentralised, open-source platform that aims to foster the growth and development of AGI. By creating a marketplace where developers can share and monetize their AI algorithms, SingularityNET seeks to democratise access to cutting-edge AI technologies and facilitate collaboration between developers worldwide.
The AGIX token is at the core of this ecosystem, serving as the primary means of exchange for AI services within the platform. This token enables users to purchase AI services, developers to be compensated for their contributions, and stakeholders to participate in the platform’s governance.
The Vision Behind AGIX
SingularityNET’s vision is to create a global brain powered by AGI, where AI algorithms can communicate, cooperate, and learn from one another. This collaborative ecosystem aims to:
- Accelerate the development of AGI by fostering cooperation between AI developers and researchers.
- Democratise access to AI services, making them available to a wider range of users and industries.
- Ensure that the benefits of AGI are distributed fairly and ethically across the global community.
Potential Applications of AGIX
AGIX tokens can be utilised across various sectors, including healthcare, finance, and transportation. Some potential applications include:
- Healthcare: AGIX can facilitate access to AI-powered medical services, such as diagnostics, personalised treatment plans, and drug discovery.
- Finance: In the financial sector, AGIX can be used to purchase AI-driven services like automated trading algorithms, risk assessment, and fraud detection.
- Transportation: AGIX tokens can enable access to AI systems that optimise logistics, improve traffic management, and contribute to the development of autonomous vehicles.
The Impact of AGIX on AGI Development
By fostering a collaborative ecosystem and democratising access to AI services, AGIX could play a pivotal role in the development of AGI. Some potential impacts include:
- Accelerated innovation: By enabling AI developers to share, collaborate, and build upon each other’s work, AGIX can help to drive the development of AGI at a faster pace than traditional, siloed approaches.
- Greater access to AI resources: With AGIX, small businesses and individuals can access AI services that would typically be reserved for large corporations, leading to a more equitable distribution of AI-driven benefits.
- Ethical development of AGI: The decentralised and open-source nature of SingularityNET ensures that the development of AGI is guided by a diverse range of stakeholders, which can help to promote the ethical use of AI technologies.
AI In Gaming
Another Industry that will be forever changed by AI and crypto is the gaming industry. Whilst developments currently are mostly AI-Adjacent the gaming sector potentially lends itself well to the intersection of AI and Web3. At TAGDesk we fully expect AI to dominate the gaming industry in both the near and long term.
The gaming industry has always been a hotbed for innovation, pushing the boundaries of technology and storytelling. With the advent of artificial intelligence (AI) and the increasing popularity of cryptocurrencies, the landscape of gaming is set to undergo yet another revolution. Let’s explore how AI and crypto technologies are transforming gaming experiences, enabling new gameplay mechanics, and fostering the growth of decentralised gaming platforms.
Artificial intelligence is rapidly changing the way games are developed and played. Here are some key areas where AI is making a significant impact:
- Procedural content generation: AI-driven algorithms can create vast, immersive game worlds with unique environments, characters, and quests. This means that each player’s experience can be entirely different, providing limitless replayability and exploration possibilities.
- Realistic non-player characters (NPCs): AI-powered NPCs can exhibit human-like behaviour, adapting their actions based on the player’s choices and the evolving game world. This results in more engaging interactions and believable game experiences. Old games can even be brought back from the dead with botted AI characters. Some early research has shown that players actually enjoy playing alongside AI bots.
- Personalised experiences: AI can tailor gameplay based on individual player preferences, adjusting difficulty levels, in-game events, and storylines to create a more satisfying experience for each user.
Cryptocurrencies and blockchain technology are redefining the gaming industry’s economic landscape, enabling:
- In-game asset ownership: Crypto-based gaming platforms allow players to truly own in-game assets such as skins, weapons, and characters, and trade them on decentralised marketplaces. This gives players more control over their in-game experience and fosters a thriving secondary market for virtual goods.
- Play-to-earn mechanics: By rewarding players with cryptocurrencies for their in-game achievements and participation, games can adopt play-to-earn models that incentivize engagement and foster a sense of investment in the gaming world.
- Decentralised game development: Blockchain technology enables decentralised gaming platforms, where developers can collaborate and share revenue in a transparent and secure manner. This can lead to a more diverse range of games and experiences, as developers are no longer constrained by traditional publishing models.
As AI and crypto continue to evolve, their impact on gaming is poised to grow even further. Here are some potential developments to watch for:
- AI-driven game development: As AI technology advances, it could take on a more significant role in game development, automating aspects of design, programming, and testing. This would enable developers to focus on creativity and storytelling, ultimately leading to more innovative and immersive games.
- Cross-platform asset interoperability: The integration of crypto and blockchain technology in gaming could result in players having the ability to use their in-game assets across multiple games and platforms. This would create a more cohesive and interconnected gaming ecosystem.
- Democratisation of game development: With AI-driven game development tools and decentralised platforms, aspiring game creators will have easier access to the resources needed to bring their ideas to life. This will lead to a broader range of games and experiences, catering to a diverse audience of players.
Despite the immense potential of crypto games, the sector has not been immune to the darker side of technology. A wave of scams and poorly designed in-game economies has marred the experience for many players, casting a shadow over the industry’s reputation. These issues have raised valid concerns among gamers and investors alike, highlighting the need for increased scrutiny and regulation in the space.
Crypto game scams often involve fraudulent Initial Coin Offerings (ICOs) or token sales, where developers raise funds for a game that never materialized, leaving investors empty-handed. Other times, dishonest actors might create clones of popular games, promising high returns to lure unsuspecting players. Furthermore, the nature of the decentralized gaming platforms can make it difficult to distinguish between legitimate projects and scams, exacerbating the problem.
In addition to scams, many crypto games suffer from poorly designed in-game economies. Unbalanced token distribution, inflationary reward structures, and a lack of sustainable gameplay mechanics can lead to market crashes, rendering in-game assets worthless and discouraging player participation. This, in turn, can create a vicious cycle where the game’s economy spirals downward, leaving players with no incentive to continue playing or investing in the game.
To mitigate these issues and safeguard the industry’s growth, developers and platform operators must prioritise transparency, security, and sound economic design. Regulatory bodies also have a role to play in overseeing the space, establishing best practices, and cracking down on fraudulent activities. By addressing these challenges head-on, the crypto gaming industry can fulfill its potential, offering players engaging experiences and unlocking new opportunities in the world of interactive entertainment.
In summary, AI crypto projects can generally be classified into four categories: scams, projects that aren’t really AI, solutions in search of a problem, and projects with unnecessary tokens. None of these have a compelling reason to exist, and they may ultimately be headed for failure in the long run.
However, this doesn’t mean that short to mid-term speculation on these projects is impossible. Treating them like meme coins, taking aggressive profits, and not getting emotionally attached can be a viable strategy. It’s essential to remember that trends come and go, and there’s no guarantee that AI crypto projects will continue to thrive in the future.
That said, there are potential scenarios in which AI crypto projects could see a resurgence, such as an increase in risk appetite driven by monetary policy changes or the emergence of another groundbreaking AI invention. In any case, it’s crucial to remain cautious and informed when investing in this space.
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