Deepfakes are quickly becoming indistinguishable to the human eye if they are real or fake.

This presents extreme problems for society as we are just beginning to see the problems that arise from impersonators, hackers and social media manipulation.

The only ways to authenticate content online will be to use public blockchains as the source of truth using either:

1. Proof of provenance from a verified social media account
2. On-chain verified identity (Intuition) and/or
3. Proof of humanity platform (Worldcoin).

We still don’t yet have an open crypto social graph. With the emergence of deep fakes and AI avatars pretending to be real versions of their IRL counterparts, we need on-chain verified identity now more than ever.

AI Needs Crypto For Verification was originally published in Stateless Ventures on Medium, where people are continuing the conversation by highlighting and responding to this story.

At Stateless we enjoy thinking about the future. While most of these ideas might be wrong, it is a useful exercise to think through future use cases in technology as ideas often sprout from a seed, evolve and grow into a widely adopted new use case.

After-all, all new technologies start out as somebody’s (often crazy) idea.

• Tokenized AI Models. Tokenized Ownership and Governance of Open Source LLM Models. Open source LLM’s like Llama2 and Mistral are quickly becoming as powerful as their closed source rivals such as Anthropic and OpenAI. However, they currently capture no value. The model is free to use and deploy. Governance is currently run by a company or foundation actively building and determining the future roadmap of the model. What if the model could be owned and governed by token holders. Open source contributors could receive tokens for their contributions.
• Token or Points Incentivized RLHF. Currently, models like Midjourney use RLHF (Reinforcement Learning from Human Feedback) to improve their model in real time from their userbase, mostly via discord. Users are actively contributing to the improvement of midjourney’s models without receiving any compensation. Could you build the largest RLHF AI feedback network in the world using token incentives?
• Decentralized LLM’s with Proprietary Encrypted Weights. Many AI LLM developers want to build and invest in new models but don’t want to give away the weights. Using zk or other privacy preserving technologies, developers can allow users to run their proprietary model locally using encrypted weights.
• Decentralized Search Engine. Part of what makes Perplexity AI so good is they built their own internal search engine. When a user makes a prompt request, Perplexity first runs a search and then runs a model based on that search result, combining two steps into one for the user (search and inference). Open source models will never be able to compete with Perplexity until an open source search engine can be run in combination with an open source LLM. Elastic, Opensearch and Searx are some examples of open source search engines that could be run on a decentralized web stack as a primitive with a decentralized LLM.
• Decentralized Perplexity. Once the decentralized search engine and LLM primitives exist, a decentralized version of Perplexity could be built by combining the two.
• Verified Compute. Verified compute is a new category of computation that allows one to verify a computation has been done correctly off chain and verify it on-chain. Often via a ZK proof, this allows for almost infinite scaling of applications on chain. The ability to use the speed and compute power of off-chain computers/GPUs and have the output be a trusted verified output enables all existing web applications to be run “on chain.” This means you can run an AI model such as Llama 2 or even chatGPT and trust that the network running the model ran the correct LLM to generate your answer.
• On-chain Inference. In AI, inference is the act of asking an LLM a question and receiving an answer. Using ChatGPT you are generating an inference, asking it questions and receiving the inference as an answer. Unlike with model training, these LLM’s have already been built.
• Embedded LLM’s inside NFTs. NFT’s are not yet in their final form. As new NFT standards get built and shipped into the core layer 1 protocols, new NFT mechanisms and use cases will emerge. For example, Dynamic NFT. NFT’s that can store data either on chain or verifiably off-chain could host an LLM inside them. They could move/jump around different wallet addresses as they see fit based on user interactions with them on-chain. They could even accrue value using the new EIP 6551 token standard.
• AR DeGINs: (Decentralized Gamified Incentive Networks): As AR gets traction with the Apple Vision Pro, meta games can be built that overlay incentive prizes and rewards for doing things in the IRL world. As people play the game, the AI can update the rules or difficulty.
• Social Networks for AI’s: As people train their own AI agents to become extensions of themself, they will interact and engage with each other on AI social networks. Chirper AI is attempting this and I expect more to come.
• AI Agent Focused Business Models: On AI Social networks, there are no “eyeballs” for advertisers to target to pay per click or impression. Thus a new business model must be created.
• AI Celebrities: We will see the first AI celebrities to gain attention and followings. Think Lil Miquela but with the ability to interact via a proprietary, custom trained LLM and crypto wallet.
• AI Website logins: With AI Agents crawling the internet, it makes no sense for an AI Agent to login to websites using a username and password. Just like how we use a crypto wallet address to connect to a web3 website today, an AI Agent would do the same. Web2 websites would now have the incentive to add wallet connect to allow AI agents to sign in natively.
• GPU Futures: In the digital world, GPUs are the new oil. AI is creating massive demand for GPUs and as cloud GPU providers standardize, GPU units become fungible and thus the market can create a price for them. GPU futures would be a natural by product as buyers and sellers of GPU will want to buy and sell their future GPU needs. Crypto exchanges and DEX’s are actually extremely well positioned to create this product.

These are just some of the ideas that have been percolating. Like in past technology breakthroughs, most of the 0 to 1 ideas come out of nowhere and are only obvious in hindsight. It will be exciting to see what gets invented over the next 12–24 months.

AI x Crypto Future Use Cases was originally published in Stateless Ventures on Medium, where people are continuing the conversation by highlighting and responding to this story.

For the first time, these two technologies are intersecting and creating an exponential tornado of new experimentation, use cases, addressable markets and new technologies. The OpenAI coup last year made it clear that control and monopoly centralization over AI is a huge deal. Others like Balaji are taking a stand that AI must be decentralized

We have just begun to scratch the surface of what is possible and how these two technologies will interact. The following are some categories of overlap we are excited about at Stateless Ventures.

CRYPTO x AI USE CASES:

• Open Source Models
• Decentralized Resource Sharing
• Verified Compute/On-chain Inference
• Decentralized AI Agents
• AI Blockspace (Ex: Bittensor)
• Decentralized Tech Stack (Ex: file storage, decentralized GPU networks, decentralized RPCs, and AI social graphs)

First: Underestimating the Total Addressable Market for Crypto

Crypto is often cited as having 100m users in total — underwhelming for the hype and market caps attributed to the top blockchain protocols. However, unlike social apps, online marketplaces (Uber, Airbnb), crypto networks can onboard and service AI/agent users. If we begin to calculate the total daily active users (DAUs) and total addressable market (TAM) to include AI and AI agents, the figures start to look massive. At an average of 10 agents for every human, thats 80 billion potential users. Combined with the speed of distribution and these applications can grow exceptionally fast. (For example, OpenAI reached 100m users within two months after launch).

OUR CORE FOCUS AREAS OF DECENTRALIZED AI

1. OPEN SOURCE MODELS

Decentralized AI would not be possible without the creation of open source large language model (LLM) AI models. Much like Bitcoin could not exist without open source codebase running on multiple open source technologies such as SHA 256, consensus layer, Merkle root trees, etc, Decentralized AI cannot run without open source AI models such as Llama 2 (Meta), Mistral, and Falcon.

We expect many more new models to be made open source or even leaked from top AI companies in the interest of advancing humanity.

2. DECENTRALIZED HOSTING & RESOURCE SHARING

Decentralized GPU networks such as Render, Akash, and Nosana. These networks onboard the long tail of idle GPUs and CPUs around the world and harness it into a usable GPU compute as a service network for AI inference, models and applications to run on.

Three benefits:

1. Cheaper cost of compute: by leveraged a decentralized incentive based network, the cost of traditional compute can be reduced significantly.
2. Unstoppable, un-censorable hosting for AI models and uptime (the antithesis to OpenAI on AWS servers).
3. Balancing the load of the centralized GPU infrastructure.

3. VERIFIED COMPUTE

Verified compute is a new category of computation that allows one to verify a computation has been done correctly off chain and verify it on-chain. Often via a ZK proof, this allows for almost infinite scaling of applications on chain. The ability to use the speed and compute power of off-chain computers/GPUs and have the output be a trusted verified output enables all existing web applications to be run “on chain.” This means you can run an AI model such as Llama 2 or even chatGPT and trust that the network running the model ran the correct LLM to generate your answer.

4. ON-CHAIN INFERENCE

In AI, inference is the act of asking an LLM a question and receiving an answer. Using ChatGPT you are generating an inference, asking it questions and receiving the inference as an answer. Unlike with model training, these LLM’s have already been built.

Corcel, a clone of ChatGPT running on the Bittensor network is one of the best examples of a decentralized AI inference application at the moment.

5. DECENTRALIZED AI AGENTS

As AI and AI agents proliferate, there will be a deep need to track and audit how AI agents are acting on our (humans) behalf. In the not-too-distant future, there will be multiples more AI agents than human beings in the world. We estimate there will be at minimum 10 active AI agents at any given time for every human. With many AI agents being spun up and shut down repeatedly resulting in a never ending supply of AI agents.

AI agents need crypto to transact and interact on chain. AI’s will need a way to hold money and transact online. The crypto industry has been building decentralized financial and legal (contracts) infrastructure for oover a decade. Crypto assets will be the preferred method of conducting business online for Agents.

AI agents are extremely early in their development. There are projects (such as ChainML) that are building AI agents to help humans in a number of use cases.

Today, DeFi apps are already primitive versions of autonomous AI agents. — on chain smart contracts that perform financial services without the need for humans. (Ex. Aave, Uniswap, Link etc). This is a very primitive form of an agent. You ask Aave to lend out your money, it sets the interest rate variably based on demand, liquidates users who over-leverage and accrues fees to Aave token holders.

Future AI agents include projects like Autonolas who are building on chain agents to go out and read, analyze real world data and perform actions on the web and on chain for its owners.

There have also been exciting experiments in AI agents as social profiles/artists and we see future AI agents as in-game NFTs or non-player characters (NPCs).

6. AI BLOCKSPACE

AI blockspace is a new concept that is an evolution of the blockchain based virtual machine.

First we had bitcoin miners creating a very simplistic decentralized triple entry accounting ledger. Maintaining account balances by providing hashing compute to secure the bitcoin network.

Second, Ethereum created the Ethereum Virtual Machine (EVM) where developers could build Turing complete applications comprised of a series of interconnected smart contracts.

Third, we argue, Bittensor has created a generalized AI blockchain creating a new type of block-space resource that allows anybody to build and contribute to the proliferation of AI. This includes AI inference, apps, train new models, prediction (subnet 8), 3D rendering, machine to machine translation and audio generation. All of the use cases above can be built out in a subnet on the Bittensor network. The native token of Bittensor (TAO) is used to manage and create a market for the resources on the Bittensor Network.

Subnet owners pay TAO in rent/fees to register and operate their subnet. Miners receive block rewards in TAO for providing the best output for the requested subnet task. Validators determine the best output for each subnet task and allocate the miner reward. Validators receive a % fee for providing the validation.

For more on Bittensor read the messari report:

7. OTHER DECENTRALIZED AI INFRASTRUCTURE (SOVEREIGN DIGITAL INFRASTRUCTURE)

These are the different layers of the tech stack needed to power the decentralized AI. Creating a decentralized tech stack is important because it reduces the power (and potential harm) any centralized party has over the system, while aligning incentives across a broad base of contributors in a democratic fashion.

Examples include file storage (Filecoin, Arweave, and Shadow), decentralized RPCs (Pocket Network), web hosting, and AI social graphs.

BONUS: Where do we go from here?

The intersection of Crypto and AI has just begun. We can’t imagine the things that will be built over the next decade. Some ideas I think will likely get built:

• GPU Futures
• AI Owned Crypto Games and NPCs
• AR DeGINs: (Decentralized Gamified Incentive Networks):
• Social Networks for AI’s
• AI Celebrities
• AI Agent Website logins

More on the list above in a future post. The reality is most of the best break out use cases we can’t imagine in January of 2024. We will have to watch this space closely to see what ignites.

We are so excited to be able to participate and play a part in bringing about this future.

— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —

Resources:

https://a16z.com/what-builders-talk-about-when-they-talk-about-ai/

https://a16z.com/the-economic-case-for-generative-ai-and-foundation-models/

https://www.plaintextcapital.com/blog/aiandsolana/

https://taostats.io/

https://app.corcel.io/chat

Sequoia: https://www.sequoiacap.com/article/generative-ai-a-creative-new-world/

https://arxiv.org/abs/1706.03762

https://messari.io/report/decentralizing-machine-learning

________________________________________________________________

The information herein was prepared by Stateless Ventures LLC (“Stateless”) and is believed by Stateless to be reliable and has been obtained from public sources believed to be reliable. Stateless makes no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this presentation constitute the current judgment of Stateless and are subject to change without notice. This is not an offering or the solicitation of an offer to purchase an interest in any fund managed by Stateless (collectively, the “Fund”). Any such offer or solicitation will only be made to qualified investors by means of a confidential private placement memorandum and only in those jurisdictions where permitted by law. The identified investment does not represent or approximate all of the investments purchased, sold, or recommended for the Fund. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the identified investment. An investment in the Fund is speculative and involves a high degree of risk. Opportunities for withdrawal, redemption, and transferability of interests are restricted, so investors may not have access to capital when it is needed. There is no secondary market for the interests, and none is expected to develop. The fees and expenses charged in connection with this investment may be higher than the fees and expenses of other investment alternatives and may offset profits. No assurance can be given that the investment objective will be achieved or that an investor will receive a return of all or part of his or her investment. Investment results may vary substantially over any given time period.

The Case For Decentralized AI: Blockchain Based AI Infrastructure & Applications was originally published in Stateless Ventures on Medium, where people are continuing the conversation by highlighting and responding to this story.

However, there’s one major difference. From what I’ve seen, it’s a phenomenon that is unique to crypto assets. I call it the magnification effect.

Here’s an example. Let’s say Ether (ETH) is trading at $500 (to make numbers easy). And 0x Project (ZRX) is trading at .001 Ether or .50 USD. Many of these smaller market cap coins trade on substantially smaller volume compared to the top coins such as Bitcoin and Ethereum. ZRX does not have a ZRX/USD trading pair on any exchange. ZRX trades on a ZRX/BTC or ZRX/ETH trading pair.

Now let’s say the price of ETH doubles to $1000 but the ZRX price in ether remains the same at .001 ETH (assume no trading volume to illustrate the example). The USD market cap of Ether will have doubled from ~$50B to ~$100B and interestingly, the ZRX market cap will double as well. ZRX at a price of .001 ETH has increased from .50 USD to $1.00 USD and from ~$250M in market cap to ~$500M. With no trading volume, the market cap of ZRX has doubled in USD terms. This is an interesting phenomenon because the USD value of the ZRX token has increased without any trading volume on the ZRX order books. The ZRX price appreciation come solely from the underlying trading pair ETH.

A similar effect happens in the equity markets but we don’t take notice or feel it. For example, if the dollar (USD) rises in value against the euro (EUR), all US companies are now worth more in terms of Euros even though their USD market caps remain constant.

This effect is exacerbated in the crypto markets because of the nature of crypto to crypto exchanges. For context, this would be like buying Snapchat stock with Apple stock on the ticker SNAP/APPL. There are no cross-trading pairs in the equity markets — all public stocks in the US trade against the dollar. If you own Apple stock and you want to buy Snapchat, you must first sell your Apple shares to USD and then buy Snap shares with that USD. Whereas, in the cryptocurrency markets, you can buy Bitcoin, then Ether then ZRX without ever coming back to USD. In fact, most altcoins only have ALTCOIN/BTC or ALTCOIN/ETH trading pairs.

So, Matt, what does this mean?

What this means is that for every $1 of USD that enters the bitcoin or ether order book on an exchange, a multiple of market cap is also added to every token pair that trades against bitcoin or ether. Now, in theory the market should reprice the ZRX pair to maintain its $0.50 USD price point by trading down the order book until 1 ZRX equals .0005 ETH ($0.50). However, in practice I am not seeing that happen— primarily because of the low liquidity on the exchanges where these tokens trade.

In sum, this effect causes asset prices to rise many times faster than in traditional markets and helps to explain the rapid ascent of crypto assets in 2017. On the same token, this equally magnifies the effect in a downturn.

Further, because crypto to crypto trading pairs now make up the majority of the trading volume across exchanges (if you include USDT as a crypto to crypto pair), this effect will only continue to grow.

This makes it significantly harder to determine the net inflow and outflow of capital to specific crypto assets. It will certainly be interesting to see how this phenomenon plays out going forward.

If you have any insights or comments on the above please leave a comment or find me on twitter: @mattslater

How bitcoin birthed a new internet and why it matters

“You can’t connect the dots looking forward; you can only connect them looking backwards.” — Steve Jobs

The rise of ethereum and broader blockchain ecosystem share many attributes with the early days of the internet.

In 1995, the World Wide Web was a vast, bare and open platform. It was weird, of little utility and used for illicit things. In fact, very smart people were very convinced it would fail.

Fast forward twenty years, it has fundamentally changed our lives in unimaginable ways. The same pattern is unfolding with blockchain assets and the decentralized web with one major difference.

HTTP, SMTP, TCP/IP, SSL, MySQL

Most people can’t tell you what these acronyms stand for nor what they are used for. Yet, all of us use them every day, multiple times a day. We rely on them to keep our bank info private and work remotely. They allow us to facetime our loved ones, get us home when we’re lost and read this post on our phones. These open source internet protocols are critical pieces of our internet lives and yet we don’t even realize they exist. Why? Because we don’t need to understand them, in order to use them.

The internet we know and love today — Facebook, Gmail, WhatsApp, online banking, Airbnb and Uber are built on top of these protocols. The modern web is made up of a stack of technologies that work together to support the applications we use every day. We call this the modern web stack. It looks like this:

As consumers we only interact with the top layer. Yet, we use the entire stack. The invention of Blockchain technology underlying bitcoin and ethereum has created a new type of internet and with it, a new web stack:

The best investments during the early internet were technology companies that used the internet to (1) create new business models (Adwords/Google), (2) dis-intermediate incumbent service providers (Netflix & Uber), (3) enable new applications (Facebook), and (4) drastically lower cost through mass scale & centralization (Amazon).

Facebook, Google, Amazon, Netflix and Uber were some of the best investments of the internet era. Ironically, the HTTP, TCP/IP & SMTP protocols that these businesses were built on captured none of the value that was created. These web infrastructure protocols resulted in a 0% ROI for the developers, stakeholders and investors that worked on them while the founders of the applications built on top became multi billionaires. However, I would argue if the HTTP, TCP/IP & SMTP protocols had issued a crypto token via an Initial Coin Offering at the onset of their development, they would have been the best technology investments from the internet era, outperforming even Amazon, Facebook and Google.

Fast forward to 2017 and we have a new class of HTTP, SMTP and TCP/IP like protocols being developed but with one major difference. They can be bought and sold like stock in Amazon, Facebook or Google.

These new protocols take the form of open-source blockchain networks. The leading blockchains today are Bitcoin and Ethereum. They have, for the first time, created a way to monetize open source networks and software. This is a really really big deal.

Personally, I am most excited about Ethereum and the token networks being built on top of ethereum.

Like the early internet companies, blockchain assets and token based networks are (1) creating entirely new business models, (2) enabling new applications, (3) dis-intermediating current service providers and (4) lowering the cost of existing products and services.

This is the next stage of the internet — the decentralized web

Why it Matters — The Stock Market of the Decentralized Web.

Ethereum birthed the Initial Coin Offering also known as the ICO. An ICO is a way for startups to raise money and align incentives between investors, developers and users in an open-source network. The startup issues a coin or token in exchange for an investment in ether or bitcoin. It’s easiest to compare this to buying a share of Apple stock on the Nasdaq. However, unlike Apple stock, these tokens have utility beyond their financial value. The tokens are used for many different things, each with their own use cases, game theory, economic incentives and features. (More on tokens here).

In addition to unprecedented technological development, we are witnessing a new type of capital market forming. A token market with no borders, trustless exchanges and instant settlement times. If one were to build a stock market from the ground up using first principles, it would look a lot like an Ethereum ERC20 token. (although with clear regulations).

The market is already showing there is massive demand for a token instrument. The total market cap for digital assets & tokens excluding bitcoin is currently around $50 billion.

Unlike a traditional capital raise through a venture firm or the public markets, tokens open up a new type of fundraising mechanism.

To get an allocation in Uber’s seed round, one had to be a tech insider, likely living in San Francisco and have mutual friends with Travis Kalanick. To get an allocation in 95% of new tokens, you need an internet connection and a computer.

Naval Ravikant on Twitter

The best venture investment of the last three years wasn't a venture deal. Ethereum - 750x, liquid, and open to all.

Conclusion

With all the excitement around crypto assets, it is critically important we maintain s0me perspective. We are clearly in the first layer of the decentralized web stack — core infrastructure & underlying protocols. Like the early internet, the most interesting applications are likely to emerge in unpredictable ways. Although we may not be able to predict which projects will become the Facebook, Google and Amazon of the decentralized web, the infrastructure layers that power these future applications will end up capturing more of the value in the long run.

Unlike the early web, the financial rewards will not be concentrated in the hands of large corporations. It will be shared by the early users, developers and investors that build these protocols from the ground up.

Credit to Olaf Carlson-Wee, Fred Wilson, Joel Monegro, Balaji S. Srinivasan, Naval Ravikant, Michael Dunworth, Nick Tomaino, Max Mersch, William Mougayar, Joey Krug, Nathan Doctor, Brayton Williams, Stefano Bernardi and Adam J Kerpelman who’s ideas, tweets and writings inspired this post.

Thanks for reading! If you enjoyed this post,

Say Hello On Twitter or shoot me an email at matt@mattslater.co

Imagine a world where 2.5 billion people don’t have bank accounts, credit card fraud amounts to $190 billion per year, and global remittance services take $50 billion in fees. Sadly, this world is not fictional. This is the current state of the global financial system.

If you are anything like me, you immediately ask why? How is it that I can Facetime somebody in seconds anywhere in the world for free while it takes days and substantial fees to send money the same distance? Why was my credit card information hacked at Target, why is Netflix only available in 40 countries and why are 5 trillion spam messages sent per year? These are all problems that deserve an answer or better yet, a solution.

Enter Bitcoin.

“The most important invention in the history of the world since the Internet.” — Roger Ver, Bitcoin Angel Investor

While the media loves to poke fun, Bitcoin is bringing an entirely new frontier to the global financial industry. Just like the web democratized communication and information, bitcoin will democratize the financial industry. Bitcoin is a

HUGE HUGE HUGE DEAL

Credit card payments, money remittance and online purchases are stuck in the 90's compared to mobile phones and the internet.

Bitcoin will do to money what the internet did to information.

Let’s think back to what life was like pre-internet.

COMMUNICATION
Before there was email, cell phones and texting, communication was a drag. Calling family on the other side of the country, have fun paying $3 per minute. Need a contract sent from New York to London, try fedex. Need to get a hold of your doctor who’s on vacation, try her pager.

INFORMATION
It’s hard to imagine life without google, wikipedia or facebook. Doing research for a class paper, grab an encylopedia (if you can find one). Making dinner plans for saturday night, pick up a 2lb phone book and call a restaurant. (Seriously, this was reality)

The internet made our lives easier, cheaper, faster and more productive. We are better off because of it.

Now let’s look at the state of the global financial system today.

• Every monetary system is based on centralized, government backed and issued fiat currency with no commodity backing.
• Governments print money at will and use creative techniques to keep inflation under control. Sometimes it can’t be stopped. (Venezuela)
• Credit card transactions pass through half a dozen middle parties resulting in unnecessary fees and overhead.
• International money transfers are slow, costly and take days for the majority of the world’s population (not to mention corruption).
• Credit Card fraud amounts to $190 Billion per year in the US and
• 2.5 Million people around the world don’t have bank accounts.

These are serious, systemic problems that need to be addressed. It’s about time money caught up with the internet. Bitcoin is the first practical solution with real promise to solve these problems. We are living through the most revolutionary time in modern finance…and we’ve only touched the tip of the iceberg.

To learn more about Bitcoin see the relevant links below:

Marc Andreessen
http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/

Fred Wilson
http://www.usv.com/posts/bitcoin-as-protoco

Chris Dixon
http://cdixon.org/2013/12/31/why-im-interested-in-bitcoin/

Naval Ravikant
http://startupboy.com/2013/11/07/bitcoin-the-internet-of-money/

If you found value in this article, it would mean a lot to me if you hit the recommend button!