How We Got Here
Artificial intelligence has altered the future of the world’s most well-known cryptocurrency — bitcoin — and will continue to do so for other similar technologies. This is mainly due to the huge leaps forward in big data that made AI more dynamic than ever. Bitcoin, of course, is the poster child of the cryptocurrency movement. It’s also responsible for blockchain technology. So when it hit an all-time high of over $19,000 per coin in 2017, it created excitement and frenzy in the crypto world. But just as its meteoric rise brought many other alt coins like EOS and Ripple along with it (bringing the market cap of cryptocurrencies to almost $800 billion), its subsequent crash also hurled many of them into a downward spiral.
Cryptocurrency is Still Getting Big Investments
Despite the crash of bitcoin, many investors are still entering the market holding onto their currencies in anticipation of an upward price correction. In fact, experts estimate that investments in blockchain products and services will top $19 billion by the year 2023. Even institutional investors, like JP Morgan’s CEO — Jamie Dimon — have hopped on the bandwagon by creating blockchain tech of their own. Dimon is a particularly notable example given his smug dismissal of bitcoin early on. Because of this, crypto and blockchain tech have shown no signs of slowing down. But blockchain needs improvements. And that’s where AI and big data come into play.
AI to the Rescue
AI and big data are bringing efficiency to blockchain’s big problem. Bitcoin and other cryptos have had issues overcoming this problem, which has three prongs: decentralization, scalability, and security. Here is how AI is promising to change the industry’s approach to solving each of those three challenges:
Speed and Scalability
Take EOS, for example, which boasts one of the best infrastructures of any coin. Thanks to being a blockchain system, it has greater flexibility and transaction speed. Most blockchain systems get bottlenecked due to the network resources being exhausted. By using AI, EOS is able to perform its authentication separately from the process that executes other functions. The coin can also thank data science for enabling its innovative approach to role-based permission, proof of stake, ownership structure that allow faster real-time decisions to be made at a deeper level. There is even talk of it being applied to high frequency trading algorithms. Of course, EOS does give up a lot of decentralization due to its model. But researchers are already emulating its scalability as a way to innovate high volume blockchain solutions going forward.
Decentralization
One of the primary issues with blockchain as compared to traditional financial institutions is that it lacks a centralized “authority” to approve and evaluate transactions. However, with the proper application of AI, blockchain’s weakness becomes its biggest strength. Projects like SingularityNET use AI to help automate real-time transactions by leveraging a built-in marketplace. Instead of a human auditor, there is an advisor consisting solely of AI technology that uses machine learning and historical analysis to streamline investments. Because there is no centralized authority, pieces of this network are stored on each user’s device. They must perform certain protocols in order to transfer these blocks of data. But with that comes the need for enhanced security:
Security
One of the main challenges of cryptocurrency is validating a transaction and ensuring that both parties get what they are due. But AI is making that achievable. Take Peculium, for instance. Their “smart contract” AI technology (as detailed in their whitepaper) determines a set time period and a portion of investment gains automatically. Another key concept in cryptocurrency security is that of “proof of work.” This is a way for two systems to prove they are verified to conduct the transaction, in order to prevent a DDoS (Distributed Denial Of Service) attack. AI can effectively automate and predict potential violations from different sources to prevent this type of attack going forward, which helps currencies scale while keeping user transactions secure.
The Future of Cryptocurrency is AI
Fueled by big data, more complex AI algorithms will lead to better scalability, decentralization, and security for cryptocurrencies and the blockchain. Going forward, every cryptocurrency will need to leverage AI if they want to compete with traditional fiat currencies backed by financial institutions. If they can, our standard of living as a species stands to improve greatly. That is, of course, until our robot overlords take over.
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