Bankless: Why VCs are betting big on Crypto x AI

Author: Arjun Chand, Bankless; Translator: Felix, PANews

Venture capital institutions' interest in Crypto x AI is unquestionable. Just last week, Sentient announced that it had received $85 million in seed round financing. This round of investment came from heavyweight institutions such as Peter Thiel's Founders Fund, Pantera Capital and Framework Ventures.

While both AI and crypto technologies have attracted great attention, some people may think that their combination is a fleeting narrative. But as more and more projects attract the attention of top investors, these projects are increasingly likely to achieve certain results.

Here is an analysis of why venture capital institutions are betting heavily on Crypto and AI.

First Principles

Crypto x AI provides a unique opportunity: to build a new financial and AI ecosystem with Crypto as the first principle.

The world does not need another Instagram or a slightly delayed Nasdaq, but a completely new way to interact, collaborate and exchange value. Crypto x AI has the potential to build entirely new systems from scratch to solve this problem.

This creates a ton of new opportunities for startups and investors. VCs are always looking for the next big thing, and Crypto x AI is an exciting investment opportunity.

Everyone is eager to succeed, or is keen on memecoin, or is keen on funding startups

The inevitable rise

The impact of AI is undeniable, and it is rapidly infiltrating every aspect of life. From chatbots to advanced tools, AI is becoming an integral part of work and daily life. People's reliance on AI will only increase, forming a powerful network effect: the more you use it, the more valuable it becomes.

VCs have noticed this, too. As Pantera's Cosmo Jiang said, "In 15 or 20 years, everyone will use artificial intelligence," so saying you invested in an AI company "is as stupid as saying, 'I invested in a company with a website.'"

This is not just speculation, but a clear trend. Just like the Internet, AI is becoming a mainstream application.

The funny thing is: AI and Crypto are becoming a powerful combination. Remember those talks about attracting a billion new crypto users? Forget human users, the main users of Crypto in the future may be AI robots.

Experts believe that by 2030, AI and Crypto will add trillions of dollars to the global economy. By getting in early and backing the right players, VCs hope to capture a large share of the huge value created in this emerging field.

The harsh reality is that for most VCs, the AI ​​train may have already left the station. Companies like OpenAI (valued at $80 billion), xAI (valued at $24 billion), and Anthropic (valued at more than $18 billion) are trading at ridiculous valuations. With the exception of a few companies, no one else can participate in the big AI tech deals.

Crypto offers a compelling alternative: to participate in the AI ​​future without spending billions of dollars.

In addition, VCs are buying Crypto x AI tokens from the open market. For example, Polychain, Digital Currency Group and dao5 bought hundreds of millions of dollars worth of TAO (Bittensor) tokens.

Perhaps the best case scenario is that retail investors also have the opportunity to participate in the context of Crypto x AI.

Trust Gap

Current AI is like a high-stakes poker game with hidden cards. Companies like OpenAI have developed solutions worth billions of dollars in a "closed-door" research approach.

This approach to R&D may be good for them, but it creates a huge trust gap between VCs and the public. Especially when their own board of directors staged a public farce, how can you trust a company like OpenAI?

(Related reading: Why was Altman removed? Detailed explanation of the ins and outs of the internal strife at OpenAI)

On the other hand, Crypto x AI is open source development driven by tokens to align incentives. In this way, artificial intelligence can be built to serve all those involved, rather than serving companies or countries.

VCs believe that an open source approach will lead to faster innovation, a wider range of talents, and ultimately greater benefits for all participants.

Fear of missing out?

The tech industry is no stranger to hype cycles, and the current craze around Crypto and AI is no exception. This is an opportunity that could deliver big returns, which sometimes creates a sense of urgency and perhaps even FOMO.

Even if the specifics are still a little fuzzy, Crypto x AI is a compelling narrative. However, it’s important to acknowledge the inherent uncertainty. VCs are still making educated guesses, and professionals are learning as they go.

Will Crypto x AI be the best narrative of this cycle, or just another over-hyped gimmick? Only time will tell.

It’s still early days for this frontier, and VCs are betting with optimism, caution, and a dash of speculative enthusiasm.

The question is, are you betting too?