As the intersection of artificial intelligence (AI) and cryptocurrency gains momentum, a recent research report from Coinbase suggests caution regarding the sustainability of AI-related tokens in the short and medium term.
While some crypto-AI tokens have demonstrated profitability, the report points out challenges that could impact their long-term viability.
AI Tokens’ Over-Hyped Status
Coinbase’s research analyst, David Han, acknowledges the rising popularity of generative AI, leading to the emergence of niche crypto sub-ecosystems. However, he expresses caution about the current sustainability of AI tokens due to the rapid changes in AI and potential over-hyping.
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![AI tokens](https://i0.wp.com/nosisnews.com/wp-content/uploads/2024/03/image-35.png?resize=1000%2C752&ssl=1)
One of the central challenges identified in the report is the contradiction between the decentralization goals of crypto projects and the centralized nature of existing AI infrastructure.
Many crypto AI projects heavily rely on centralized components and data sources, posing a hurdle to achieving true decentralization.
The report notes that most projects in the crypto AI niche struggle to attract investors, resulting in under-indexed capital allocation. Despite the recent outperformance of some AI tokens compared to Bitcoin and major stocks, the sustainability of the ecosystem remains uncertain.
List of Top 10 AI Tokens by Market Capitalization:
- NEAR Protocol $NEAR: $6.070 billion
- Bittensor $TAO: $4.58 billion
- Render $RNDR: $3.5 billion
- The Graph $GRT: $3.05 billion
- Theta Network $THETA: $2.90 billion
- Fetch.ai $FET: $2.05 billion
- SingularityNET $AGIX: $1.37 billion
- Akash Network $AKT: $1.21 billion
- Oasis Network $ROSE: $1.10 billion
- Ocean Protocol $OCEAN: $660 million
Two Opportunities for Crypto AI
While highlighting the challenges, the report suggests two opportunities for the crypto AI ecosystem. First, improving blockchain data to create human-readable transactions and analysis.
Second, addressing the centralization in AI infrastructure by decentralizing components. However, Han emphasizes that the envisioned decentralized AI future is not guaranteed, and the overall future of the AI industry remains undetermined.
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![Are AI tokens more of hype than value? image 34](https://i0.wp.com/nosisnews.com/wp-content/uploads/2024/03/image-34.png?resize=812%2C605&ssl=1)
The report acknowledges the positive impact of market sentiment, driven by broader crypto market trends and favorable AI-related news headlines. Despite concerns about long-term sustainability, the crypto AI narrative could gain strength amid the constructive market environment.
Driving Meaningful Adoption
Coinbase suggests that achieving meaningful adoption for crypto AI tokens requires more than just decentralizing AI components. The report emphasizes the need for substantial developments in the crypto AI sphere to provide a compelling alternative to traditional crypto assets.
Coinciding with Coinbase’s caution, Ethereum co-founder Vitalik Buterin recently highlighted the importance of AI in eradicating bugs in Ethereum’s code.
Buterin expressed excitement about AI-powered auditing to identify and fix buggy code, considering it a significant technical risk to the Ethereum network.
One application of AI that I am excited about is AI-assisted formal verification of code and bug finding.
— vitalik.eth (@VitalikButerin) February 19, 2024
Right now ethereum's biggest technical risk probably is bugs in code, and anything that could significantly change the game on that would be amazing.
As of March 8, AI tokens collectively hold a market capitalization of $51.18 billion, serving various AI-based projects and applications, including decentralized AI marketplaces, AI-powered trading algorithms, and AI-driven decentralized autonomous organizations.
In conclusion, while the crypto AI sector demonstrates potential and market momentum, Coinbase’s report underscores the need for careful consideration and meaningful developments to ensure long-term sustainability in this evolving intersection of AI and cryptocurrency.