AI-Powered Cryptocurrencies: Enhancing Efficiency, Security, and Risk Management

Since the beginning of the year, the two ubiquitous buzzwords have been cryptocurrency and artificial intelligence (AI).
Cryptocurrencies have revolutionized the way we think about money, financial transactions, and the global economy. The emergence of blockchain technology has created a decentralized financial system that has the potential to disrupt traditional banking and finance.
Artificial intelligence has been making rapid progress following the emergence of ChatGPT in the fields of medicine, robotics, digital economy, and even film making. Joined together, crypto and AI seem to be a match made in heaven.
With the development of AI, cryptocurrencies are poised to enter a new era of efficiency, security, and improved trading. But how are artificial intelligence and cryptocurrencies related?

Reading Time: 6 minutes

Artificially intelligent cryptocurrencies

Illustration: Milica M.

Cryptocurrencies are virtual money that can be spent, saved, staked, or traded. They are decentralized, which means that they are not issued, stored, and controlled by centralized banks and traditional financial institutions. Rather, they are verified by so-called miners and stakers – crypto holders who use their crypto coins and tokens to monitor transactions using specialized software.

Artificial intelligence (AI) is a field in computer science and engineering that relies on myriads of data and algorithms to enable machines to make decisions and predictions according to myriads of collected data. In the way it works, AI mimics human intelligence.

Rule-based systems, machine learning (ML), and deep learning are just a few examples of the many diverse types of AI. While rule-based systems use a set of pre-established rules to make decisions, machine learning systems learn from data and can improve over time.

Artificial intelligence use cases have been growing recently, so it was only a matter of time the technology finds its way in the crypto realm.

What is AI crypto

AI cryptocurrency, also referred to as artificial intelligence tokens, is a unique form of crypto that integrates artificial intelligence technology into their functionality. These coins utilize advanced algorithms and machine learning capabilities to perform efficient and accurate transactions.

At the same time, they also enable users to benefit from the many advantages of artificial intelligence. This innovative combination of cryptocurrency and AI technology has the potential to revolutionize the way we think about digital currencies and their role in our daily lives.

AI cryptocurrencies may serve as specialized platforms for artificial intelligence and machine learning research and development. As such, they offer decentralized and open settings for researchers and developers to create and test novel models, applications, and algorithms.

As opposed to their traditional counterpart, AI cryptocurrencies analyze market patterns, make forecasts and perform automated trades by employing machine learning (ML) algorithms and natural language processing (NLP). Owing to their capacity to learn and adapt to market trends and development, traders and investors consider them as more dynamic and reactive investment alternatives.

Some AI cryptocurrencies implement artificial intelligence technology to improve network security. There are coins which employ facial recognition to verify transactions and bypass fraud.

Top five AI cryptocurrencies

Here’s the list of top five AI crypto projects according to CryptoSlate.

The Graph (GRT)

The Graph protocol is designed to facilitate the indexing and querying of data from blockchains, much like Google indexes and queries data from websites. While indexing blockchain data can be a complex and difficult task, The Graph aims to simplify this process by breaking down the data into smaller, more manageable components known as “subgraphs”.

By doing so, The Graph streamlines the process of organizing and accessing blockchain data, making it easier for developers and users alike to interact with this emerging technology.

With the market cap of more than $1.3 billion, GRT, The Graph native token amounts to $0.15 at the time of writing.

SingularityNET (AGIX)

SingularityNET is a revolutionary blockchain platform that enables individuals to create, share, and monetize their own AI services. The platform boasts an internal marketplace, which utilizes the native cryptocurrency AGIX, where users can conveniently browse and purchase AI services.

With SingularityNET, developers have the opportunity to earn money from their AI solutions and models without needing to create fully-fledged applications for end-users. In the same vein, developers can purchase high-quality AI solutions and models to integrate into their own applications, enhancing their overall functionality and capabilities.

The value of AGIXis $0.38 as of April 20, 2023, while the market cap amounts to somewhat over $460 million.

AI crypto

Source: BeInCrypto (FET) is a blockchain-based AI and machine learning platform that focuses on automating various business tasks, including data processing and trading. The platform utilizes cutting-edge technology to make business processes more efficient and streamlined.

One of the key features of Fetch is its native cryptocurrency, FET, which is used as the payment mechanism for transactions on the network. This enables users to conduct transactions quickly and securely, without the need for intermediaries.

The price of FET is $0.37, and its market cap is a bit less than $306 million at the time of writing.

Ocean Protocol (OCEAN)

Ocean Protocol is an Ethereum-based blockchain created to facilitate the exchange and monetization of data and data-based services. The project enables both companies and individuals to share their data without losing ownership over it.

This way, data holders have an opportunity to monetize their data and keep control over who can access it. Data buyers, on the other hand, can access a vast variety of high quality data, making this a win-win situation for all paries involved.

As of April 20, 2023, the value of OCEAN amounts to $0.39, wherease its market cap is a little bit over $238 million.

iExec RLC (RLC)

iExec is a blockchain-based platform that enables users to monetize their computational skills by fusing the power of AI and computing resources. Users can get on-demand cloud computing services and take advantage of iExec’s flexible features by using it.

RLC, the iExec’s native cryptocurrency, acts as the main method of payment for using the platform’s different services. RLC is used to streamline transactions between customers and service providers and is a crucial part of the iExec ecosystem.

The value of RLC at the time of writing is $1.66, and its market cap is about $135 million.

Other AI-powered cryptocurrencies worth keeping an eye on are:

  • Alethea Liquid Intelligence (ALI)
  • Numeraire (NMR)
  • DKargo (DKA)
  • Covalent (CQT)
  • Phala.Network (PHA)

How AI crypto work

Artificial intelligence-based cryptocurrencies make use of AI technology to improve trading decisions and maximize the transactional effectiveness of a blockchain network. These digital currencies are able to make more intelligent and strategic trades by utilizing the power of AI, which enhances performance and boosts profitability.

Additionally, AI can speed up transaction processing, requiring less time and resources to complete complex tasks on the blockchain network.

AI crypto

 Source: Cointelegraph

Artificial intelligence-powered cryptocurrencies “mine,” i.e., collect data from a variety of sources, including news articles, social media, and market trends. This data is further analyzed using machine learning algorithms to spot trends and predict market activity. As a result, these cryptocurrencies are able to make more intelligent decisions based on data-driven insights.

The automated trading system employs AI to create a comprehensive strategy for buying, selling, or holding cryptocurrency. Through advanced analysis, artificial intelligence determines the optimal timing for each action, without requiring any human intervention. This way the decision-making process is fully automated, with the AI executing the trading strategy automatically.

Having selected a trading strategy, AI implements smart contracts to execute trades on the blockchain. When specified criteria are fulfilled, these automated agreements self-execute and operate independently.

AI cryptocurrencies rely on machine learning algorithms to continually learn and improve their performance. By reviewing the outcomes of past transactions, the system can adjust its tactics as needed to optimize success in the future. The ongoing process of learning and development enables AI crypto tokens to strive for efficiency.

The benefits of AI in the crypto market

The implementation of artificial intelligence in the cryptocurrency market can be beneficial in terms of better risk management, security, and decision-making, among other things.

By evaluating data and spotting potential dangers, AI can assist traders in improving their risk management techniques. Using this knowledge, traders can choose which assets and how much money to invest in more intelligently. This may result in improved risk management and increased investment returns.

The implementation of artificial intelligence in the cryptocurrency market can bolster security measures by identifying potential security breaches and taking prompt action to prevent them. This can effectively mitigate the risk of hacking and other security threats.

Artificial intelligence is also capable of analyzing high volumes of data, revealing patterns and trends that human analysts may miss. With this information, traders can make more informed decisions about when to buy, sell, or hold cryptocurrencies. This further leads to improved decision-making and potentially higher returns on investments.

AI can automate various functions in the cryptocurrency market, such as data analysis, monitoring market trends, and executing transactions. By doing so, it has the potential to accelerate transactions on the blockchain network and free up traders’ time.

Potential risks of AI cryptocurrencies

While there are many advantages to using artificial intelligence in the bitcoin market, there are also several concerns to take into account. Those involve regulatory obstacles, ethical concerns, technical problems, and volatility.

Since AI-powered cryptocurrencies, and cryptocurrency in general, are relatively new technology, there is currently an absence of regulatory oversight in the market. This may create an environment where scams and fraudulent activities are more likely to occur.

AI cryptocurrencies may give rise to ethical issues, such as the possibility of biased decision-making or the effects on employment in the financial sector. The ethical ramifications of deploying AI in the cryptocurrency market must be taken into account, and efforts must be made to ensure that the technology is applied responsibly and ethically.

Furthermore, the accuracy of the data analyzed will determine how well AI is used in the crypto market. The AI system could decide incorrectly if the data is faulty or lacking. Technical problems that could result in money loss or security breaches, such as mistakes in the smart contract code, are also a possibility.

Last but not least, AI cryptocurrencies are highly volatile, much like all other cryptocurrencies. Government rules, hacking, and investor sentiment are just a few variables that might have an impact on the market. Investors may suffer big losses because of this volatility.

"Ever tried. Ever failed. Never mind. Try again. Fail better."