Artificial Intelligence, regardless of public opinion, has become a major part of virtually every industry worldwide. It’s no surprise, then, that the crypto sector has embraced it, with a myriad of applications taking root. In the last few years, we’ve explored the different ways AI can improve processes, increase efficiency, and more.
But how exactly is AI being used in the crypto sector? After all, crypto, blockchain, and AI share the similarity of being relatively novel technological concepts that have seen mixed reactions from the public. But so far, crypto entrepreneurs have fully embraced AI in the following ways:
Automated Trading
If you ask the average crypto user how they might apply AI, automated trading might be one of the first answers. Automated trading essentially means giving an AI model the power to make trading decisions on behalf of customers or to execute predetermined decisions. This ultimately depends on the specific model being used and its capabilities. Some people use AI trading bots by telling them to buy or sell certain assets at specific times. This includes telling the AI to sell an asset once it reaches a certain price point, when it dips below a certain price point, or to swap at certain points.
This means that customers can take advantage of market movements even while they sleep or are away from their devices. Some AI bots go a step further. While it is not widespread just yet, some automated trading bots can make entire trading decisions for customers without pre-set instructions. This means you could give an AI trading bot money and tell it to maximize your investment as much as possible. Then, analyzing market movements, the bot decides what to buy, when to sell and so on to reach this goal. While this is generally in the early stages, many expect this to be the next frontier of crypto trading.
Risk Management and Fraud Detection
As with any industry that deals with money, strong risk management and fraud detection are essential. This has become one of the biggest applications of AI both within and outside of the crypto sector. AI models are built into financial systems and can detect fraud faster by flagging suspicious activity.
The banking sector has fully embraced this, and so has cryptocurrency. Crypto exchanges, wallet providers, trading platforms, and more often flag suspicious user behaviour to protect users. AI can also analyze tokens, investment opportunities, and entire business deals and come up with risk management and analysis. For users unsure whether to proceed with certain opportunities, AI can help.
Resource Division
Blockchains, by definition, rely on dividing computing power and network responsibility among users. Typically, users do this by mining or staking tokens to support the network. However, several blockchain projects have experimented with using AI to divide resources. In this sense, the AI can analyze what users or what devices can take on the most computing responsibility at any given time and divide it as such. This, combined with the human intuition of network managers and miners manning the grid, efficiency can be achieved for stop
Prediction
Perhaps one of the biggest issues cryptocurrency users face is deciding whether to invest in a particular token at a certain time, sell, and so on. In fact, most discussions on any crypto forum are about whether a particular token is going up or down, whether to sell, whether Bitcoin will hit a million dollars, and so on. While it is obviously not perfect, AI has found a place in prediction, with users turning to models like Claude and ChatGPT for recommendations on which token to invest in, the pros and cons of a particular token, and so on.
This still requires some development, as current generative AI models rely on preexisting human-created datasets and, when it comes to predictions, can be quite flawed.
DeFi-Based Insurance
Decentralized Finance (DeFi) has been a favorite of users for years because of the access to services it provides. Beyond token swapping, many turn to DeFi platforms for insurance and loans. Often, this bypasses the traditional financial system and gives underserved entrepreneurs and individuals access. Thanks to AI, many of these decisions can be made faster and more easily. Just as AI is used to determine insurance claims in traditional finance, many DeFi-based insurance and loan services now incorporate AI to assess the likelihood of a customer repaying a loan or whether to approve an insurance application. Over time, AI applications in the sector are expected to grow both within and outside crypto.
Smart Contract Auditing
Smart contracts are a major pillar of the blockchain sector, but as we’ve seen from previous incidents, they are far from perfect. Smart contracts typically need audits for potential flaws, loopholes, technical issues, and more. After all, we’ve seen millions of dollars lost to smart contract exploitation, and with AI, this could maybe become a thing of the past. Smart contracts can be audited within seconds by AI models, and vulnerabilities are immediately flagged. Developers, bug bounty hunters, and concerned users can use this. Ultimately, this moves towards creating a blockchain ecosystem that is safer and more conducive for all.
Creating Assets
It’s no secret that artificial intelligence can generate everything from images to videos to digital assets. Unsurprisingly, many crypto entrepreneurs have been leveraging AI to create assets for their projects. Some generate websites with AI, create promotional materials, and even generate entire tokens with AI. Like generative AI in general, this has not been without controversy. Still, AI crypto projects continue to find their audience, and in the next few years, we can expect even more.
Conclusion
As many scientists believe, we are at the beginning of AI development, and it will continue to expand its capabilities across different industries. The crypto sector has already proven that it can maximize AI use, and with time, we will see more of these applications, from making blockchain networks safer to improving trading to even creating assets; we are only scratching the surface. If you wish to incorporate AI into your crypto project, reach out to us here at Proleo to get started.
