Crypto + AI v1

TLDR;

• Crypto & AI are interchangeably useful + needed for each other

• 1 BTC = 1 TAO

• PRIME = AI + gaming meta

Howdy frens! It’s been a minute since our last chat about modular money v2. Since then, we've seen the Dymension airdrop, the rise of the 404 narrative, and Open AI's announcement of Sora, among other developments. I feel as if now is a perfect time to dive into the AI + Crypto narrative and talk briefly on a few projects / coins that should be safe bets riding into the second half of Q1. The more I research into Crypto and AI, it becomes very clear that each have a lot to offer one another; AI needs crypto for decentralized processing and transparent models while Crypto needs AI for automation, optimization, security and scalability. In other words crypto + AI are a match made in heaven —Bonnie and Cycle, E-girl and CT trader, Barbie and Ken… you get what I’m trying to say. While I don’t plan on this article being an AI deep dive, I do want to at least address a question or two.

Can we truly decentralize AI?

Firstly, true decentralization of AI requires coordination across all layers of the AI stack, from computing power and data to model training, fine-tuning, and inference. Are all of those likely to happen? Hopefully so, otherwise we’re bound to be living inside of a black mirror episode if we aren't already. Finding the right balance between regulation, freedom and privacy is crucial in adopting AI's benefits while mitigating its risks. Can we shape a future where AI serves as a force for good while being accessible to everyone without fear of exploitation? I think crypto helps offer a bit of safeguard against misuse of AI in that sense. Now that we have that out of the way, let’s talk about numbers.

AI coins have a total market cap of $13.3B right now, Gold is at 13T and Sam Altman wants $7T just for his AI company. So, which of these is mispriced?

Prime

Parallel comprises two main offerings: a Trading Card Game (TCG) and Colony, a multiplayer game powered by AI agents. At first glance, these might not seem as exciting or as shiny as a new L1. However, there’s a few things to be weighed in. Hate it or love it, successful trading card games have proven to be highly profitable. Take for instance giants like Magic: The Gathering, Yu-Gi-Oh!, and Pokémon — PRIME examples of this success, and yes, that pun was intended. Notably, these industry leaders achieved their financial success without relying on any crypto-economic incentives or speculative mechanisms for revenue.

On the AI front, a good comparison might be to massive online multiplayer games, such as World of Warcraft (WoW), which attract millions of daily active users and generate significant revenues for their developers, like Activision. Colony, Parallel's AI-enhanced game, aims to adopt a similar model, with the added twist of enabling players to engage in the game through AI agents during their absence, potentially widening the game's appeal.

Despite PRIME already being up gorillions this year alone, it still has yet to reach the valuation of many crypto gaming projects (AXIE, IMX, etc.)

TAO

TAO serves as the native token within the Bittensor network, a decentralized ecosystem dedicated to fostering AI development. Bittensor employs a consensus mechanism known as Yuma, which integrates Proof of Stake for validators with Proof of Model for miners, rewarding them with TAO emissions based on their contributions and performance in enhancing the network's collective intelligence. Central to Bittensor is its array of specialized subnets, each designed for specific AI-related tasks such as data analysis and model training, creating a rich environment for AI innovation.

Bittensor's marketplace model is designed to drive continuous advancements in AI technologies, enabling developers to monetize their innovations and propel the open-source AI movement forward. The network's evolution towards a multi-token framework, introducing individual tokens for each subnet, marks a pivotal shift in its dynamics. This change prompts validators to adopt an investor-like strategic approach, selecting subnets with high demand potential to maximize rewards. Drawing parallels to "Bitcoin for Machine Intelligence," Bittensor expands on Numerai's foundational concepts by offering economic incentives for the creation and refinement of AI/ML models. Within this ecosystem, miners develop AI models, while validators assess their quality, ensuring a competitive environment for model performance. The allocation of TAO rewards is based on model efficacy and subnet contribution, with both miners and validators required to stake TAO to participate, fostering a merit-based reward system.

As of January 2024, Bittensor holds 32 unique subnets, each dedicated to a specific AI or machine learning domain, ranging from text-prompting LLMs reminiscent of ChatGPT to financial forecasting and beyond. The open model for subnet creation allows anyone with 200 TAO to establish a new subnet, with each subnet responsible for its own evaluation and reward mechanisms. This model has led to a diverse array of subnets, each contributing uniquely to the AI landscape.

The initial reliance on inflationary TAO rewards is designed to transition towards sustainability through external revenue, necessitating innovative tooling by subnet operators and validators to facilitate access to their services. Bittensor is a pioneering force in leveraging blockchain to democratize and monetize AI development which is why it will continue to emerge as a winner in the market.

Predictions moving forward:

• PRIME flips AXIE + IMX, becomes top 3 AI coin

• TAO continues to lead, $50B+ EOC (end of cycle)

till next time!