Although projects that combine cryptocurrencies and artificial intelligence have attracted massive investment from both retail and venture capital institutions due to their potential, two prominent venture capitalists expressed skepticism about whether these projects can disrupt major AI players in this cycle, and called on builders to consider incentive mechanisms.
"Cryptocurrencies have a problem of taking things that work really well in the off-chain world and making them worse by putting them on-chain and then selling them to the people who are already using on-chain technology," said Rob Hadick, general partner at cryptocurrency venture firm Dragonfly. "We see this phenomenon across all asset classes and narratives... and a lot of what's happening in the intersection of AI and crypto is basically that."
At The Block's inaugural Emergence conference held in Prague on Friday, experts initially believed that the most likely value that AI could bring to cryptocurrencies is to help developers improve coding efficiency, as software development remains a core element in the cryptocurrency field.
"AI is a massive software, technological revolution. We're building a lot of software in Web3, and we should be able to leverage AI technology to benefit in many different decentralized applications, whether it's in infrastructure and security, or in the way user applications operate," said David Pakman, managing director at CoinFund.
However, when it comes to challenging the few centralized players in the AI field, including AI technology companies from OpenAI to Anthropic and tech giants from Microsoft to Facebook, the two venture capitalists generally believe that decentralized AI systems are unlikely to surpass these centralized institutions in this cycle.
"We (Dragonfly) want to see a little bit of product-market fit... We're very skeptical about applications that are built around on-chain models or on-chain machine learning," Hadick said.
While agreeing with this point, CoinFund's Pakman praised the builders who are trying to develop alternative systems.
"If we want a highly centralized AI future, we should just keep going down the path we're on," Pakman said. "But if we want a different future, where the compute resources required to train large AI models are more decentralized, and potentially democratized in their access, then we should be exploring the advantages of Web3 in the technology stack or hardware decentralization access."
Are AI agents being overhyped?
At the Emergence conference, other venture capitalists expressed enthusiasm for AI agents, but Hadick held a particularly skeptical attitude towards such projects.
Hadick said, "We've made an investment in AI agents... This is likely to be a winner-take-all or winner-dominant market. I think there will be tens of millions, if not hundreds of millions of dollars of crypto venture capital that goes into this space, and almost everyone will lose a lot of money." He also compared the hype around AI agents to the frenzy surrounding crypto gaming projects in 2021.
Pakman disagreed slightly, outlining how a future based on AI agents could realize synergies between AI and cryptocurrencies.
"One of the things we're good at in crypto is pointing to the next big thing... rather than celebrating the things that are already working," Pakman said. "We finally have payments, and the applications of crypto in payments and money movement, so in the intersection of crypto and AI, I think one direction that's actually helpful today is the agent-based future... These agents will need to interact with money, they'll need to make payments on your behalf, or you'll need to pay to use them... Crypto is an ideal substrate to enable payments between agents and between people and agents."
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