The Future of Web3 and Decentralized AI

When future generations look back on the Web3 landscape, 2024 will mark several evolutionary tipping points. As an industry insider and futurist actively engaged with various projects and events like Consensus 2024, I have a broad perspective on this evolution. My observations and predictions for the future highlight a critical trend: the growing recognition of the intersection of crypto and AI, the importance of this intersection for the future of humanity and the gap that exists between the promise of this technological intersection and the current state of implantation. Closing this gap will significantly advance decentralized AI technology and its adoption. Though still in its infancy, the decentralized AI market is poised for substantial growth and impact on society.

Decentralized AI: Progress and Challenges

Decentralized AI is still in the early adoption phase. The teams working in this area are defining the markets, problems and solutions. We are paving the roads as we travel. The ecosystem is growing and more AI teams are considering decentralized open-source approaches to developing AI products and services. Various coalitions are developing throughout the community, which is a positive sign for the alignment of the community toward common goals, standards and interoperable products. The next step for decentralized AI is to attract more AI talent to the decentralized AI movement. We can now see early signs of this happening, which should continue for some years.

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Early products with usable potential for consumers are launching and there is clearer language around these products for the consumer. A great example is Venice, founded by Erik Voorhees. Venice has some way to go before challenging ChatGPT but the progression curve is visible and Venice marks a clear sign that the decentralized and open-source versions of dominant centralized AI platforms are possible. 6079 showcased an LLM at Consensus that plays competitive games in teams. They're running a bracketed tournament that could have mass consumer interest and is an example of a creative way to solve security problems in decentralized AI. This is an example of a project with cross-market appeal – the gaming, crypto and AI communities can all participate.

AI has historically been a very centralized space – the computational power needed for AI training is large and highly optimized around Web2 technology. This has been refined for this task over 20 years to be highly efficient. Even though advanced techniques will eventually be developed to do decentralized training, this technology will never compete with centralized training, especially on big training runs. It's physics: vastly divergent computing power, separated by distance, will always be less efficient compared with a highly centralized and concentrated computing model.

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However, where decentralization can aid efficiency is in inference, when AI models are used by an end user. Moving this process closer to the user's device – the edge – is faster and provides a better user experience. Using people's existing hardware, which is often idle, for processing is arguably cheaper and more environmentally conscious than building new data centers for that purpose. Utilizing the hardware people already have can reduce the need for new, resource-intensive infrastructure.

Legislation and the Impact on US Decentralized Innovation

Legislation and the advancement of blockchain technologies will always be closely linked. Recent legislative efforts have raised consumer awareness, particularly concerning fraud and misuse of the technology. At the same time, within the decentralized AI (DeAI) community, there's a strong sentiment that legislation has been ineffective for so long that this technology must operate outside any government framework. There is a strong sense that current laws are criminalizing the technology's beneficial impacts and this is viewed as a form of corporate capture, where the government, influenced by the large tech companies, is thwarting competition and innovation.

U.S. legislation is why so many decentralized companies and their founders are exiting the U.S. for countries with less corporate influence and control, such as Puerto Rico, the U.K., France, the UAE, Singapore and the Caymans. This exodus represents a significant economic loss for the U.S. and a substantial gain for other countries. Places with robust educational and industrial systems, like England and France, will likely benefit the most, as they can capture a lot of the incoming business and money locally. The U.S. will likely fall behind in technological innovation as the Web3 and AI industries evolve beyond poorly legislated restrictions.

Growth in Business Acumen and Investment Interest

There is a notable and positive shift in the web3 industry, with firms now having a higher level of business acumen and technological and engineering expertise than in previous years. This should correlate with an acceleration in industry progression, also boosted by the influx of finance experts and venture capitalists (VCs) who will internally regulate and structure the industry for further growth.

After substantial losses in the previous economic downturn, VCs are eager to find profitable opportunities to cover fund losses, which explains their heightened interest in AI and decentralized technologies. However, many VCs also face a skills gap, lacking the technical knowledge to accurately assess AI and decentralized projects, making them vulnerable to missing the windows for profitable investment or investing inappropriately.

Crypto VCs are especially prominent in the AI space because of the sluggish market recovery, mainly due to regulatory challenges in the US, which have dampened the industry globally. The crypto industry also needs to stay relevant and survive in a challenging environment. Crypto VCs are now seeking profitable opportunities in AI as well as crypto. They are gravitating towards AI projects with a crypto intersection, blending their experience in crypto with the emerging potential of AI.

The Intersection between AI and Crypto

The focus of VC interest in the intersection of AI and Crypto is one clear sign that the intersection of these two technology sectors is now gaining recognition. When I began speaking about this 14 years ago, there was very little interest or understanding within either sector. Three years ago, I began speaking about this in earnest and still nothing. Today, this has become a major topic of interest and discussion, highlighting a significant shift in awareness and acceptance within the industry.

The recent focus on the intersection of crypto and AI is also driven by deeper issues within the crypto industry. Crypto VCs and projects are struggling to find new opportunities for growth and engagement due to a saturated market and regulatory challenges. As traditional use cases for crypto have plateaued, this shift towards AI is seen as a necessary evolution.

While economic freedom is crucial, it is ultimately subordinate to freedom of thought. As AI technology advances, there is a growing fear that it could compromise all of our fundamental freedoms. Consequently, the convergence of crypto and AI is a crucial battleground for maintaining individual autonomy in the face of powerful AI systems. Decentralization is our best defense against the abuses of centralized power.

The primary argument for decentralized AI is about alignment and control. As AI increasingly replaces human thought and becomes the primary source of information, control over these AI systems becomes crucial. If a few corporations control these AIs, they can manipulate the data according to their interests rather than providing unbiased or accurate AI systems.

Despite the challenges, the growing ecosystem and innovative projects, I predict a promising future for decentralized AI. As the Web3 community navigates legislative hurdles and seeks sustainable growth, collaborative innovation and business acumen point towards a dynamic and resilient future for the technology industry. If we can promote unbiased and diverse information sources as a counterbalance to centralized, autocratic AI systems, we can look forward to a future of human flourishing.