As the AI revolution barrels forward, fears abound that it will crush everything in its path, including the once-mighty crypto industry. However, this is a misplaced worry. In reality, the rise of AI will only strengthen the very foundations that make blockchain and crypto so valuable: cryptography and decentralization.
The convergence of AI and crypto is already creating a dizzying array of investment opportunities over the last few months and years (and as a result, many, many tweet threads). But with so much hype and noise surrounding these emerging technologies, it’s critical to develop the ability to sift through it all and find gems. Crypto and AI are two legs of the same stool, a complement to one another, making each stronger than ever before.
In an effort to understand both AI and crypto, Metropolis was created. It is a new investment DAO that's composed of a community of experienced founders, investors, and crypto OGs. By spanning both industries, Metropolis fills a crucial gap in the market and is well-positioned to seek out and invest in the most promising AI projects.
After studying the cross-section of AI and crypto, members of Metropolis identified a range of investment categories where they seemingly go hand-in-hand. From security, finance, NFT tooling, synthetic media, gaming, generative art, and DAOs, we are just beginning to see the full picture of how AI will become more ingrained with crypto. Below, we map out what currently exists on the market, and where we see the greatest potential for future investment opportunities–while incomplete, it’s a step in the direction of seeing where the technologies converge.
Unsurprisingly, crypto has been plagued by breaches and attacks since inception, leaving users with a sense of uncertainty. AI presents many solutions on the horizon.
Smart Contract Coding and Auditing
Smart contract code development and auditing are complex tasks that demand a high level of expertise in coding, cryptography, and blockchain technology. But the process of getting code reviewed through firms can create bottlenecks for project development due to the high demand for audits. By automating the process and minimizing human error, AI-powered coding tools have the potential to streamline smart contract development and auditing.
Analyzing Live Data and Detecting Fraud
AI is poised to detect exploitative behavior as well. With its ability to process massive amounts of data and spot subtle patterns, AI can help protect network participants from hacks and scams. AI can also spot malicious bots that are trying to manipulate markets. By instantly flagging large movements within a token-based economy, AI tools can alert developers and investors to seismic changes as soon as they happen.
Crypto never sleeps, and neither should a sound investment strategy–that's where AI comes in. With its potential to improve risk management, treasury management, market making, and investment strategies, AI is a valuable tool for a market that runs 24/7. By crunching massive amounts of data and spotting trends that human analysts might miss, AI can help investors make more informed decisions and stay ahead of the curve.
Oracle-enhanced Trading and Automated Agents
While smart contracts are already self-executing and can automate value exchange, they lack the ability to process complex data sets, make predictions, and learn from new information. Decentralized oracle networks, like Chainlink, have made a huge difference by integrating traditional data sources with smart contract technology. With oracles, smart contracts can access any relevant data sets, from real-time pricing data to online sentiment analysis, and hyper-accurate economic forecasts.
Now, these possibilities go further due to recent developments around AI Agents, specifically automated trading agents. With minimal effort, AI Agents can be given a goal to earn a profit, and autonomously iterate on steps to achieve said goal. As AI systems become more accessible, algorithmic trading will no longer be limited to well-capitalized hedge funds, but will be available to anyone globally. This democratization pairs well with the open and permissionless nature of Ethereum networks.
AI Agents will also be leveraged by their ability to translate natural language. AI Agents can quickly analyze both traditional financial data, and information sources including news articles and social media feeds. Instead of monitoring Twitter and manually setting trades for NFTs, picture an AI Agent that can work to balance or arbitrage the market for a popular NFT collection like CryptoPunks. For example, an AI Agent could translate online market sentiment, autonomously fetch a price prediction from an oracle, and then seamlessly execute trades via smart contracts. The ability to plug-in a wide range of data sources with oracles, will give AI Agents an even greater edge because of the extremely online nature of crypto.
Market Making and Valuation Models
When it comes to traditional finance and decentralized finance (DeFi), market making is the lifeblood of the industry, and AI is giving this critical function a major upgrade. The growing speed and efficiency of trading and market making calls for advanced tools that can develop up-to-date valuation models, providing investors with more comprehensive information on which to base their decisions.
Risk and Treasury Management
As capital flows faster than ever, risk and treasury management are critical. But relying on traditional risk management methods that depend on human input is no longer sufficient. AI can analyze data on cash flows and market trends to optimize current cash holdings and predict future cash flows.
AI's impact on finance is well-underway, but another sector that is in for a tidal wave of change is media. At the risk of sounding draconian, traditional media is in for a cataclysmic event with the rise of synthetic media, and the warp-speed development and progression of avatars across the internet and more. We first began to see the beginnings of how synthetic media would take over when tools like DALL-E and MidJourney made it possible for more people to create generative AI works of art and share them online. In general, how artists are using AI is indicative of broader cultural shifts along the way towards the emergence of even more synthetic media.
Synthetic media—or any form of media created with AI—will proliferate the internet, making it even more impossible to distinguish real from fake. Cryptography, the detection of deepfakes, and authentication of digital media assets, on public blockchains, will help to bring more certainty of creation, ownership, and truth to synthetic media. Through tokenization, creators and media organizations will produce new forms of entertainment, enhance engagement, and capture value along the way from their contributions.
At a time when traditional media and “BigTech” are becoming less trusted and uncertain about their futures, those who are quick to adopt AI-generated on-chain media will take the lead in this transformation. In the past year alone, major traditional and online media publications have shuttered, including Vice, Buzzfeed News, and Paper Magazine, to name a few. As a replacement to the former, ad-dominated media landscape, synthetic media will become a more appealing alternative due to new revenue and subscription models that can be created and baked into it. Not only can synthetic media be monetized through subscription NFTs, but on-chain media also provides even more direct patronization between creators, consumers, and communities.
Another important development in the arena of monetizing synthetic media is the rise of AI Agents who will facilitate media creation, as they will be able to seamlessly create digital assets, while transacting with cryptocurrency. Synthetic media layers on new ways of transacting and monetizing media that have always been inherent to the internet, the proper tools and resources to do so are now here.
Generative AI Art and Artists
One form of synthetic media that caught the attention of the masses early on is generative AI art. Also known as gen art, works created are self-generating, evolving, and currently providing endless possibilities for experimentation. If an underlying blockchain is not used, concerns regarding attribution and the necessity for authentication would arise. Yet, by minting and generating work on-chain, artists and creators can not only secure provenance but also monetize in unprecedented ways. Networked art will undoubtedly influence creativity writ large.
In gen art, there are many exemplary artists who are leading the way for more to follow. Rising stars like artist Claire Silver, who, without formal instruction, has skillfully utilized machine learning algorithms to create works that blur the line between the digital and the physical. Pindar Van Arman, a computer scientist by trade, has achieved recognition in the field of generative AI art for his unique blend of technology and traditional art forms. Meanwhile, Helena Sarin aka Neuralbricolage explores the interconnectedness of technology and humanity through her generative AI art, earning recognition through prominent exhibitions in galleries. With a future-forward eye, generative AI artists are laying the groundwork for a broad range of culturally meaningful works of art to come into being.
Traditional media will not only have to compete with new forms of synthetic media, but also the introduction of more immersive and responsive entertainment via avatars and virtual beings. Though not novel concepts, avatars and virtual beings will be upgraded with even more interactivity through AI and new modes of monetization made possible by blockchain tech. The convergence of AI and crypto in this arena will also lead to more mainstream adoption of AI-enabled NFTs as both media and entertainment.
Avatars and Virtual Beings
Creative studios are also increasingly utilizing AI to craft avatars and virtual beings. The integration of AI can imbue these virtual beings with greater intelligence and realism, with blockchain technology enhancing their ownership authentication, asset transfer, and digital identity establishment. In web3, creatives are coming together under The Culture DAO umbrella, to become the Disney of AI. Collectively, they are developing AI characters and virtual beings, to inhabit new films, comics, games, and worlds. In music, Hume Collective is new kind of record label, piloting the creation of digital metastars who perform and release songs. The integration of AI-driven avatars into the fabric of the internet, and beyond, is just beginning to come into being.
Another example is Anima, which is a gaming and interactive technology studio that is another prime example of how avatars and generative AI are coming to the forefront. Life forms bond with AI companions to create Onlybots, unique characters developed by Anima that are made to interact with natural language inputs. Each Onlybot exists as an NFT that can be collected as digital pets, providing endless entertainment for their owners through augmented reality.
Anima, and similar projects, are ushering in the development of AI-powered NFTs capable of offering one-of-a-kind items governed by smart contracts that regulate their utilization or exchange.They can possess animation, interactivity, and other generative capabilities that are continuously being refined to make them become even more intelligent over time. From digital pets, to gaming, and more, the development and use of AI-enabled NFTs will become widespread across many different verticals.
The explosive growth of digital assets has created a need for new tools in pricing, discovery, search, and curation. While digital assets are on the rise, many recently built platforms are leveraging the emerging tooling and infrastructure to support the navigation of NFTs, while fostering online communities.
Digital Asset Infrastructure
New AI tools are making it easier for buyers and sellers to accurately price digital assets. With machine learning-based aggregators for NFTs, like those being built by Deep NFT Value, buyers can accurately estimate the value of collections including CryptoPunks, Azuki, and across platforms such as Art Blocks. Previously, it was difficult to accurately determine the true value of assets based primarily on factors like floor price and trait price, with limited, additional data. Instead, training neural networks on on-chain data can generate a more precise and reliable estimation of value for this growing market of assets.
As millions of NFTs come on-chain, there is also a growing need for advanced curation tools. Developers can create intelligent curation systems that learn from user behavior to deliver a more personalized user experience.
The need for curation infrastructure and tooling will span the entire crypto ecosystem, beginning with digital art and expanding beyond. Brain Drops is a community and NFT platform that honors artists and innovators who have explored this technology for years. Creating the ideal environment for collectors and artists within the AI-generated art space, Brain Drops has set the path for other platforms to follow.
Media, avatars, and new platforms have not only benefited from the hypergrowth of AI, but we will also witness upcoming upgrades to gaming and the metaverse. Each of these areas has taken crypto by storm and is poised to reach new heights as AI augments entertainment overall. Games will develop faster than ever before, and assets like NFTs and tokens will be more portable and valuable.
AI-Powered Gaming and World Building Studios
As gaming continues to entrench itself as a cornerstone of popular culture, an increasing number of studios are investing in AI. Futureverse stands out for integrating cutting-edge crypto and AI technology into a diverse array of products, immersive worlds, and in-game assets. Immutable and Atlas offer players the ability to create endlessly generative virtual environments, while GEPETTO boldly ventures into the realm of film and entertainment, forging an intriguing connection between narrative-driven experiences and the limitless potential of sandbox gameplay.
DAOs have emerged as a powerful tool for transparent and democratic decision-making, and the integration of AI is set to level up DAOs. AI has the potential to transform the way we approach organizational structures by enhancing efficiency, transparency, security, and user-friendliness.
One of the most promising applications of AI in DAOs is the creation of intelligent reward systems that can recognize and acknowledge the contributions of active members and participants. AI is also automating many of the day-to-day operations of DAOs, reducing the need for human intervention and enabling them to operate independently, making them fully autonomous.
From the perspective of active DAO members, AI will also be introduced to delegate voting and automate decision making. To address the lack of voter participation in DAOs, Governatooorr was developed as an AI-powered delegate to boost productivity and coordination within DAO governance. Now, DAOs can adapt to changing circumstances, and operate in a truly autonomous manner, paving the way for an exciting future of decentralized governance.
While DAO’s enjoy a human component, enhanced tooling also points to the prospect of becoming more autonomous. One example is the decentralized autonomous artist Botto, which creates mesmerizing and groundbreaking artworks by drawing inspiration from collective feedback from the community. With thousands of participants collaborating, Botto represents a new era of distributed, collaborative play in art breaking down traditional boundaries and paving the way for greater autonomy and less human intervention. We are still in the early innings of this promising new era of decentralized decision-making.
Metropolis DAO's focus on AI and crypto represents a dedication to seizing the burgeoning opportunities in these rapidly evolving fields. As a DAO, Metropolis brings together experienced founders, investors, and crypto veterans, and are positioning ourselves to fill a vital niche in the digital asset market while identifying and investing in promising AI projects. The convergence of AI and crypto is undeniably at the forefront of the zeitgeist, and the potential for these two technologies to intersect continues to expand and unravel.
Crypto is laying the infrastructural foundation needed to amplify and validate AI's data prowess. With lightning-fast data processing, AI injects unprecedented intelligence into blockchain-based networks, obliterating complexities and boosting efficiency. This fusion of AI, automation, and blockchain unlocks immense value across diverse industries and will reshape media, gaming, finance, art and so much more as we know it.
Looking ahead, we recognize the pivotal role of innovators, builders, and creatives in shaping the future of AI. Metropolis is well-positioned to navigate and contribute to this exciting frontier.
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