Blockchain and AI – The Cutting Edge of Finance

It has started to become widely accepted that the true value in the crypto boom was not necessarily the tokens themselves, but the blockchain technologies that underpin them. As we reported here recently, there are a very wide range of disruptive projects either already in progress, or set to launch soon that bring things such as medical and educational records, patents and copyrights, contracts, traditional financial transactions; any and all things that need to be permanently and immutably recorded, to the blockchain.

What is only now coming to light is the way in which blockchain technology will benefit Artificial Intelligence (AI). These two technologies, when merged, could take data and knowledge mining to levels not previously possible.

First you need to understand the key benefits of the blockchain.

• It is decentralized: The transactions or information placed in a block are verified by a number of people, not simply placed there by a single authority who can falsify information.
• It is transparent: All stakeholders in a transaction or a piece of information/data have access to it at all times.
• It is immutable: Once placed in a block, transactions and information/data cannot be changed.

So blockchain provides a construct containing huge amounts of data that are factual and can never be changed. This is exactly the kind of desirable “fuel” that AI technology loves to work with. When AI is let loose into those blockchains of data to mine for information, to recognize patterns, and make predictions based upon those patterns, exciting possibilities emerge.

To begin with, those patterns and predictions are even more accurate than the knowledge mining that AI conducts today which often uses incorrect, incomplete, or missing information/data. Between blockchain and AI, the fallible human elements are removed. What is also interesting to consider is the role that cryptocurrencies such as Bitcoin and Ethereum may play in the blockchain and AI marriage.

There are costs involved in performing the computational work AI requires, and it makes a lot of sense for cryptocurrencies to be the payment method for this work when everything is unfolding within the blockchain environment. Cryptos such as Bitcoin and Ethereum already have the massive infrastructure in place to support this kind of use case. Scenarios where AI is funded with crypto and then manages its own budget to purchase the data and resources it needs are being actively pursued by several start-ups already. If these models prove to be successful we may be looking in the wrong place for “mainstream adoption”. Ultimately AI applications may end up being the biggest adopters and most active users of crypto, not people.

Another interesting angle to consider is the direct application of AI to the blockchain and cryptocurrencies by allowing smarter financial products and transactions to be developed. The future of finance is becoming progressively dependent on data and quantitative analysis techniques to predict patterns and trends. The leading institutions in the sector have begun rapidly acquiring computer scientists and data experts as they realise that AI can identify patterns within data at a rate and depth which human analysts simply can’t match. Traders will find it increasingly difficult to gain investment insights manually when competing with AI and Machine Learning driven solutions. The speed and accuracy of algorithm-driven investment decisions may become impossible to beat with traditional methods.

In summary, blockchain technologies provide the most reliable source of information and knowledge that can be used by AI to make the most informed decisions. This could have important implications for the future of cryptocurrencies and their adoption, as well as setting the stage for smarter financial products and transactions where human traders using traditional methods may struggle to compete with AI in gaining a market edge. There is a lot to consider, but it is worth continuing to watch this space closely to see how things evolve.