AI and cryptocurrency. It’s fair to say they are two of the hottest topics in fintech and finance today. But what happens when they intersect? Today’s DisruptionBanking article looks at AI tokens – a form of digital currency that uses artificial intelligence.
“The world of digital currencies is rapidly changing, and a major driving force behind this evolution is the integration of intelligent systems into blockchain infrastructures,” says the Chain in a recent overview of AI tokens.
“With this convergence of blockchain and AI, we’re seeing the rise of unique digital assets,” adds Coindesk. It namechecked Injective (INJ), which had a healthy market capitalization of $1.48 billion in April 2024, as its favorite. That valuation has since risen to top $1.6 billion at the time of writing, and INJ isn’t even the most prosperous AI token.
A layer-2 based decentralized exchange and derivatives platform, it uses AI to execute orders, test strategy, and run predictive analytics. To date this kind of hybrid model appears to be working well for INJ and its fellows.
INJ began to see major breakthroughs in 2023 when its token value hit record highs of $32 after its market cap more than tripled in two months. But since then it has halved in value. The keyword you want to note here is volatility, because it tends to get used a lot around the crypto space.
What do AI Tokens Actually do?
But before we dive more deeply into that, a brief overview of the basics. Put simply, AI tokens are cryptocurrencies designed to support applications and services that use artificial intelligence within the blockchain ecosystem.
They offer this support across three main areas: facilitating transactions, enabling protocol governance to allow users to have a say in the development of an AI platform, and mediating token-based reward systems to incentivize them to do so.
AI-powered tokens differ from non-AI variants in that they are tailored to interact specifically with machine learning applications. An obvious example of a non-AI token would be Bitcoin, which serves a much broader purpose and was not specifically designed with artificial intelligence in mind.
Rising Trend
AI tokens are certainly growing in popularity as a concept. A glance at Cryptoslate reveals more than 200 listed at the time of writing. The most highly prized is Bittensor (TAO), valued at just shy of $425.
Bittensor has lofty goals. Its self-proclaimed “overarching vision” is to steer “the power of digital markets towards society’s most important digital commodity – artificial intelligence.”
It adds: “Not only to build the most powerful intelligence network, but also to ensure that the benefits and the ownership of machine intelligence are in the hands of mere mortals. Bottom up, rather than top down.”
Nice Words, How About Some Numbers?
It’s easy to be cynical about that kind of altruistic claim. All well and good to talk a fair game, but how do the numbers stack up?
At the time of writing, TAO market capitalization is north of $4 billion, with around 9.5 million tokens in circulation (the maximum supply is set at 21 million). The largest single token holder is thought to be publicly traded firm TAO Synergies, which recently spent $10 million on nearly 30,000 tokens, about 0.27% of the total stock in circulation.
Of course, crypto companies tend not to disclose things like how many users hold how many wallets, so it’s hard to say if Synergies is holding a far higher proportion of TAO tokens than other users. But given that most retail investors do not have $10 million to spare on AI tokens, it’s reasonable to suppose so.
Binance Feeling the AI Heat
At the time of writing there is evidence to suggest that AI-driven tokens are even challenging the bigger players in the crypto space. Binance is under attack, say analysts, from a new player Ruvi AI, which is enjoying presale values of $2.5 million thanks to more than 200 million RUVI tokens being snapped up.
Describing Ruvi as a “formidable entrant”, AI Invest says: “Binance Coin (BNB) remains a cornerstone of the cryptocurrency market, serving as a utility token within the Binance ecosystem. However, analysts are increasingly spotlighting Ruvi AI (RUVI), a new token project, as a potential high-growth alternative.”
RUVI is also safe and clean. “A third-party audit by blockchain security firm CyberScope validated its smart contracts as free from vulnerabilities, a critical factor for risk-averse investors,” says AI Invest.
AI Tokens Gaining Strength
Another potential winner is Ozak AI, which has raised more than $1.41 million in presales of some 42 million tokens.
“Data suggests a fresh wave of capital is flowing into smart, real-time platforms like Ozak AI that combine blockchain with artificial intelligence,” says CoinCentral. “That shift isn’t random. It’s calculated. The platform offers a blend of tech appeal, token accessibility, and actual utility that resonates with both retail speculators and pro-level traders looking for the next smart move.”
Once again, Ozak scores highly for being safe to use and scalable. “With zero single points of failure and blockchain-backed smart contracts, it offers secure, real-time data delivery for industries that can’t afford guesswork,” says CoinCentral.
It Gets Better
And if fresh analysis by the Chain is anything to go by, AI tokens are only going to get better.
“Expect breakthroughs such as zero-knowledge proofs for private intelligent transactions, quantum-resistant algorithms, and real-time cross-chain communication,” it says. “These developments will further enhance security, performance, and interoperability.”
At the time of writing, Cryptoslate pegs NEAR Protocol (NEAR), Internet Computer (ICP), Render (RENDER), and Artificial Superintelligence Alliance (FET) as sharing the top five space by market capitalization with TAO. Also worth bearing in mind that the ten richest AI tokens all have valuations north of a billion dollars, as things stand.
Some Bumps but a Good Road Overall
AI tokens are here to say, and the prospects do look bright for the offspring of machine learning and cryptocurrency. However, there will be bumps along the road. In early July, the overall market capitalization of the AI token sector dropped by 4.85% to around $4.5 billion.
But then, AI-driven or not, cryptocurrency markets have always been – and probably always will be – volatile. The general outlook remains bullish. AI tokens surged 5% later that same months, as Google announced a $25 billion spending plan on data centers and AI infrastructure and Meta pledged to do something similar.
Bubble Fears Persist
However, some have blamed precisely that kind of consolidation of data power for the recent dip in AI token valuation.
Coin Edition cited Armen Panossian of Oaktree Capital Management as likening the surge in AI investments “to previous market bubbles, including the 1990s fiber optic boom.”
It adds: “[Panossian] noted excessive capital is flowing into AI data centers without sufficient user demand or long-term contracts, a pattern that historically leads to overcapacity and valuation corrections.”
The fibre optic bubble subsequently burst and contributed to the NASDAQ crash in the early 2000s. AI tokens may be looking buoyant right now, but investors should always exercise caution lest history repeat itself.
#AI #tokens #cryptocurrency
Author: Damien Black
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
See Also:
The Rise of AI in Trading: Buy Side Keen but Cautious | Disruption Banking
Machine Learning and the Stock Market | Disruption Banking
The AI5: The New Powerhouse Redefining the AI Era | Disruption Banking
