In the realm of technological advancements, the exploration of artificial intelligence (AI) use cases in various industries is ongoing. However, a recent research report from Coinbase suggests that AI-related tokens may be experiencing an excessive amount of hype at the moment, particularly in the short and medium term.
The growing popularity of generative AI has led to the emergence of niche crypto sub-ecosystems in recent years. Nevertheless, Coinbase research analyst David Han expresses caution regarding the long-term sustainability of most AI tokens due to the rapid changes occurring in the field of AI.
One of the major challenges faced by crypto AI projects lies at the core of both technologies. While crypto projects strive for decentralization, the current AI landscape heavily relies on centralized components and data sources, as stated by Han.
Moreover, the majority of projects within this niche have struggled to attract investors, resulting in a lack of adequate capital allocation.
The research report identifies two opportunities for the crypto AI ecosystem. Firstly, there is a need for improvement in blockchain data to facilitate the creation of human-readable transactions and analysis. Secondly, efforts should be made to decentralize the predominantly centralized AI infrastructure. However, Han emphasizes that achieving these goals is not sufficient for driving “meaningful adoption.”
Despite the negative outlook, many AI tokens have recently outperformed Bitcoin (BTC) as well as major stocks like Nvidia and Microsoft. Coinbase attributes this trend to market sentiment influenced by the broader crypto market and supported by AI-related news headlines.
The crypto AI narrative is expected to gain further momentum due to the continuously constructive crypto market and the outperformance of the AI sector. However, Coinbase suggests that achieving “meaningful adoption” will require more than just decentralizing AI components.
It is important to recognize that the AI ecosystem is still in its early stages and must eventually provide a comparable alternative to current crypto assets by understanding the underlying trading narrative.
In addition to Coinbase’s suggestions for significant developments in the crypto AI sphere, Ethereum co-founder Vitalik Buterin recently expressed optimism about the potential of AI in addressing deep-rooted bugs within the Ethereum network’s code.
Buterin highlighted the importance of AI-powered auditing to identify and rectify faulty code in the Ethereum network, considering it to be the “biggest technical risk” to the network.
As of March 8, AI tokens collectively hold a market capitalization of $51.18 billion, serving various AI-based projects, applications, and services. These include decentralized AI marketplaces, AI-powered trading algorithms, and AI-driven decentralized autonomous organizations, among others.
In conclusion, while the hype surrounding AI-related tokens may be excessive in the short and medium term, the crypto AI ecosystem has the potential to grow stronger with the continued progress of the crypto market and the AI sector. However, achieving meaningful adoption will require more than just decentralization, and the AI ecosystem must mature to provide a viable alternative to existing crypto assets.