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Why AI is Becoming the Biggest Trend in Blockchain

12 May, 2023
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Artificial intelligence, or AI, is becoming the dominant buzzword in today's technology discourse, especially as applied to other cutting-edge tech sectors, such as blockchain and cryptocurrencies. These new AI tools leverage machine learning, a type of development in which a computer programme becomes better at making decisions based on input and feedback from human programmers until it can organise data autonomously. They also use natural language processing, in which the AI models are trained on the words, phrasing and questioning that humans use in normal speech and writing.

In the last few months, certain tools that are based on these models, such as ChatGPT and Midjourney, have been released to the public. Early adopters have already demonstrated how these tools can be used to generate striking pieces of text or new images from simple prompts. AI has the potential to revolutionise many industries by automating processes that previously needed human intervention. When it comes to blockchain and crypto, it could be a key element in taking decentralised digital asset technology mainstream. Let's take a look at how AI is making blockchain smarter, safer and simpler.

Faster transactions, better scaling

Blockchains are decentralised so that no single entity is able to control or break the network. This makes blockchain operations secure and fosters the kind of peer-to-peer community that Bitcoin (BTC) was designed to empower. However, blockchains built on this classic model tend to face issues of scalability and energy efficiency as the validation mechanisms involved require a huge amount of data processing and storage.

AI could massively boost the scalability of blockchain networks by using predictive algorithms to make transactions and block validations much faster, making cryptocurrencies more competitive with traditional electronic payment systems. AI can also monitor and respond to signs of network congestion, allowing the blockchain to adapt in real time to ensure high performance.

Stronger security

Security should be a priority for any blockchain, as users need to trust it to handle important and potentially very valuable transactions and accounts. AI can be trained to detect fraud by analysing huge data sets for suspicious activity and flagging potential bad actors. Cybercriminals often rely on security specialists taking time to catch up with their newest techniques in an ever-escalating arms race, but an AI can not only catch up much faster than humans can, but it can also predict new forms of attack based on what it has previously encountered. This results in a more robust level of security that will boost customer trust in the blockchain network and its tokens.

Improved smart contracts

Smart contracts are self-executing programmes on the blockchain that activate when certain predetermined conditions are met. Because the details on the contract are on the blockchain, they are both transparent and immune to tampering once created. Smart contracts eliminate the possibility that a party will not fulfil their obligation to the other, such as what happens when someone skips payment for a service owed. They are also cost-effective, cutting out intermediaries such as lawyers or verifiers.

Smart contracts do have some limitations, however. They are inflexible and cannot adapt to changing circumstances in a working relationship. Smart contracts also have to be quite simple in their structure and cannot accommodate complex agreements with a range of variables. By integrating an AI into a smart contract, the programme can update contract terms based on things like market conditions, hours worked on a project or any desired context-sensitive variables that might not be known to the contracted parties at the start. AI can also be used to resolve queries or disputes regarding the smart contract by performing an impartial evaluation of the issue.

Predictive analytics

Businesses and organisations of all kinds are very excited about this application of AI. A modern AI model is capable of scanning and analysing vast amounts of complex data to spot patterns, trends, potential risks and opportunities. The insights gained from these analytics can help predict the performance of a certain blockchain project, suggest the best terms for a smart contract or inform decisions with the best chance of success in current and future market conditions. This can be used by developers to build better blockchain platforms, by traders to gain more profit and by crypto organisations to create sustainable business models.

Acceleration of the Web3 metaverse

The related concepts Web3 and the metaverse present a decentralised internet on the blockchain in which users interact through virtual worlds, own digital real estate and trade digital items. But creating such worlds on a scale that they could be used by a significant number of people is a painstaking and costly endeavour, even for the biggest developers.

Generative AI, as seen in platforms like ChatGPT and Midjourney, can step in to fill in the gaps, quickly creating the virtual objects and landscapes needed to make these worlds come alive and using ChatGPT-style language models to make them communicate intelligently with human users. Of course, human intervention will still be needed for many elements of a metaverse, but AI can greatly boost the development and functionality of virtual worlds and speed up the advent of Web3.

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AI looks set to take blockchain technology to the next level, making cryptocurrencies an attractive investment as digital assets become more mainstream. If you're looking for a way to buy, hold or trade Bitcoin, Ethereum or any of the top cryptocurrencies, StormGain has you covered.

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