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A Pivotal Week in Web3 and AI

A Pivotal Week in Web3 and AI
Image generated using OpenAI's DALL-E 3

Hello again, everyone, and welcome to all new subscribers!

This is the Web3 + AI newsletter, where we explore the intersection of blockchain and artificial intelligence. It has been quite an eventful and rough week, both in crypto and in AI! A week whose aftermath will define the space for months, even years to come. In that situation the Web3 + AI startup news got a bit overshadowed, though I still have a couple of major announcements to share with you. However, if regulatory updates are what you are looking for, I have plenty of those.

Thank you for being here! Let's dive in!

What's New in the Web3 + AI Startup World?

Dfinity Partners with SingularityNET to Build AI-Powered Dapps

DFINITY Foundation, a blockchain Research & Development non-profit, and SingularityNET, a decentralized AI marketplace, joined forces to build AI models that run on smart contracts. The collaboration aims at delivering trustworthy, decentralized, and tamper-proof Large Language Models (LLMs) on chain.

In practical terms, the deal consists in the integration of DFINITY's Internet Computer (ICP) blockchain into SingularityNET's AI tools marketplace. ICP delivers impressive scalability, as it is capable of executing up to 11,500 transactions per second, whereas SingularityNET's reputation system tracks the performance and quality of AI services. “Integrating these mechanisms will ensure that DeAI (Decentralized AI) models running on the Internet Computer are held accountable while also remaining ethical and aligned with the values and interests of the users and stakeholders,” DFINITY founder Dominic Williams said.

Link to the original tweet

Williams also added:

“The future of decentralized AI will be a collaborative, creative, and conscious network of AI agents and services. These agents and services will be able to communicate, cooperate, and coordinate with each other and with humans to solve complex problems and achieve common goals. DFINITY and SingularityNET will play a key role in this future by providing the infrastructure and the ecosystem for decentralized AI to flourish and evolve.”

DFINITY launched a $5M DeAI grant back in July 2023 to attract projects leveraging AI to build on ICP.

Delysium Allies with Microsoft to Mainstream On-Chain AI

Seems like Microsoft has stepped into the Web3 world with the aim of making on-chain AI mainstream. Through partnering with Delysium and leveraging its AI Agent Network, the tech behemoth targets to streamline the user experience of interacting with the blockchain.

Link to the original tweet

Delysium's AI Twins can securely share data and exponentially increase their collective intelligence over time. The company plans to employ Microsoft's Azure cloud infrastructure, as well as OpenAI's leading-edge AI research, to scale and grow further.

Challenges and Opportunities of Combining Blockchain and AI

Blockchain solutions provider Casper Labs published a report on the growing convergence between blockchain and AI, based on surveys of business organizations and entrepreneurs located all around the world. It showcases that the combination of the two technologies is poised to bring tremendous growth.

[Report] Exploring the Growing Convergence Between Blockchain and AI
Casper Labs is setting the standard for responsible AI to unlock the benefits of AI for businesses. Download our report - Blockchain Meets AI.

The report delivers quite interesting insights:

  • 71% of the surveyed organizations view blockchain and AI as complementary technologies;
  • When asked whether their organization has already invested in AI, 90% of US respondents and 89% of Chinese answered affirmatively, though the adoption rate in Europe is disproportionately low - only 27%.
  • China leads the way in understanding how to creatively deploy blockchain to solve business problems. Globally, 77% of respondents declare they “fully understand blockchain and can explain its value to their team”. Though, the portion of those who do not understand the technology at all is largest in Europe. It is obvious we Europeans have a problem with the state of blockchain education and understanding, and we have a lot of work to do in that direction.
  • AI is now the single-most popular business application for blockchain: 51% of businesses use blockchain to work more efficiently with AI.
  • When asked how the integration of AI and blockchain will impact the future, 48% of IT leaders say it will have a revolutionary impact on their respective industries and organizations. An additional 35% have identified significant opportunities in integrating AI and blockchain to improve decision-making processes, automate tasks, and streamline operations.
Image generated using OpenAI's DALL-E 3

Noteworthy Podcasts, Articles, Events

The OpenAI vs. Sam Altman Debacle

Over the last 5-6 days, the whole tech world has been literally living in a soap opera. Last week, OpenAI, the creator of ChatGPT and current world leader in closed-source AI research, removed its CEO Sam Altman without giving any explanation of the reasons behind that decision. In a matter of hours, Altman was hired by Microsoft to head their newly created AI research team. Though, right after that, OpenAI's staff threatened to quit, if Altman was not reinstated, thus creating a completely new crisis. It later became clear that Altman had continued communicating with OpenAI's team even after he was fired. Today, OpenAI announced that Sam Altman will return as CEO, whereas the board of directors that fired him in the first place will be changed. I would recommend you listen to The AI Breakdown podcast to get a really detailed overview of the whole drama:

However, several important questions remained unanswered. First and foremost, how did Sam Altman suddenly become unfit for the job? There were rumors that OpenAI's board worried that Altman was primarily interested in the commercialization of their AI models, and did not care so much about AI safety. Those rumors were eventually refuted, but if it wasn't about safety, what was it about? The official statement read that Altman regularly withheld information from and even lied to board members, but it is still not clear what information that was. One thing is clear though - OpenAI got its former CEO back, but it is now a company where no one will ever dare to disagree with Altman's views and methods again.

US Authorities vs. Crypto, Again

The US Securities and Exchange Commission (SEC) initiated legal actions against another one of the largest centralized crypto exchanges (CEXs) in the world - Kraken. These proceedings follow a series of similar campaigns against other crypto firms.

Kraken, just like Coinbase and Binance before it, was accused of operating without properly registering as securities businesses in the US. According to SEC, the US-based exchange Kraken is also guilty of commingling customer and corporate funds. The agency is pursuing the ban of Kraken's business on the US territory, as well as a significant fine.

Kraken Accused by SEC of Operating Unregistered Platform, Improperly Mixing Customer Funds
The U.S. crypto exchange is the latest targeted by the Securities and Exchange Commission in a series of similar actions being fought in court by other companies.

Meanwhile, Binance was accused of violating Anti-Money Laundering laws and US sanctions because it had not prevented a Hamas transaction. The company will pay a fine of $4.3B in order to settle and be allowed to continue operating. Binance's Changpeng Zhao (CZ) is also fined $50M and forced to step down from his role. Here is their official statement:

Binance Announcement: Reaching Resolution With U.S. Regulators | Binance Blog
Binance has reached resolutions with the U.S. Department of Justice, Commodity Futures Trading Commission, the Office of Foreign Assets Control, and the Financial Crimes Enforcement Network.

Instead of commenting on the situation, I will leave here the words of crypto podcaster Ryan Sean Adams. They say it all!

Link to the original tweet
Link to the original tweet
Link to the original tweet

The EU AI Act Negotiations Continue

Last week, the so-called trilogue - negotiations between EU's Commission, Parliament, and Council, concerning the bloc's AI legislation got stuck. The reason was that Germany, France, and Italy, striving to safeguard their local entrepreneurs, refused to regulate high-impact foundation models, whereas the EP renounced any regulation without them:

Link to the original tweet

However, this past Sunday the EU Commission, taking into account the French-German-Italian position, tried to break the deadlock by shifting the wording from “foundation models” to “General Purpose AI (GPAI)”:

At the core, there is now a distinction between General Purpose AI (GPAI) models and systems. “‘General-purpose AI model’ means an AI model, including when trained with a large amount of data using self-supervision at scale, that is capable to [competently] perform a wide range of distinctive tasks regardless of the way the model is released on the market,” reads the new definition. By contrast, a GPAI system would be “based on an AI model that has the capability to serve a variety of purposes, both for direct use as well as for integration in other AI systems.”
The idea is that GPAI models can entail systemic risks related to ‘frontier capabilities’ based on ‘appropriate’ technical tools and methodology. In the notes, the co-rapporteurs question the terminology and vagueness of the text.

You may ask what makes that new definition better, but I am afraid, I won't be able to answer. It all seems like unnecessary bureaucracy to me.

Yesterday, another roadblock to the bill's passing emerged: the EP wants the ban of remote biometric identification and facial recognition applications with the aim of preserving citizens' privacy, whereas nation-states fight for an exemption to employ these technologies in law enforcement:

Link to the original post

It remains to be seen whether a consensus will be reached. In all cases, though, if approved, the EU AI Act won't be the “world-leading” legislation the bloc leaders hope it would be, but rather a demonstration to the rest of the world of what not to do.

Web3 + AI Events Page

Let's conclude with something positive - following my objective to turn my website into the main reference point for all things related to Web3 + AI, I set up a page dedicated to Web3 and AI Events. I will make sure to list all relevant conferences, summits, hackathons, or social gatherings exploring the convergence of blockchain and artificial intelligence. I would be grateful if you help and spread the word! Thank you in advance!

Web3 and AI Events
Conferences, summits, hackathons, or side events dedicated to the convergence of blockchain and artificial intelligence.

Disclaimer: None of this should or could be considered financial advice. You should not take my words for granted, rather, do your own research (DYOR) and share your thoughts to create a fruitful discussion.