What are AI Tokens? A Guide For Beginners

Artificial intelligence is rapidly sprawling and now, its applications have stretched out to blockchain technology as well. AI tokens are the convergence of artificial intelligence and cryptocurrency.

These AI tokens help drive scalability, user experience, security, and other factors, using artificial intelligence. Moreover, AI can be trained further to automate everything, from identifying growth opportunities to detecting illicit activities.

AI tokens are getting great buzz in the crypto market and the latest trends are setting off a buying frenzy for these digital tokens. Is this new crypto trend a great opportunity for growth or just hype with no future? For this, you need to know its working, market scope, and several use cases to evaluate its performance in the long run.

Understanding How AI Tokens Work

AI is a rapidly growing field and has the potential to change the way we work or interact with each other. It has provided a tremendous platform for developers to build and design AI applications in ways that increase efficiency and create a transparent system.

These AI benefits have served many industries as it’s not limited to crypto. AI based tokens are digital assets that help users get access to AI technology. You use these tokens as currencies on blockchain to pay for AI services and Artificial generation projects. In a way, Sensorium's native token SENSO falls under this category. While the AI engine behind the digital beings of the Sensorium Galaxy metaverse is currently free for users, advanced AI features will eventually be paid with our ecosystem's token.

They may include AI-based investment protocols, image generation or text generation services, decentralized marketplaces or exchanges, etc. However, AI crypto is a broad term that can cater to a multitude of services.

Some AI tokens help create a virtual platform to buy and sell AI algorithms while others perform particular applications like making predictions and parsing big data on the blockchain. We can also expect AI metaverse crypto projects to create a more dynamic virtual space.

The high flexibility in AI cryptocurrency can enable a myriad of potential use cases. For instance, Fetch.ai offers an autonomous economic agent that can cater to anything, ranging from booking a hotel room to trading crypto.

Main Drivers Behind AI Tokens’ Popularity

AI tokens are surging because of interesting trends that grab the attention of people. AI tokens were the hot topic of discussion in the crypto world and it was not sure if this was just a sensation or a great once-in-a-lifetime investment.

However, the successful public launch of a chatbot ChatGPT has given a tremendous surge to AI cryptocurrency. This reflects that AI cryptocurrency is not going anywhere soon. This language model chatbot, launched in November 2022 is developed by OpenAI.

It has exceptional interactive conversation dialogue and has a multitude of language-related AI crypto projects, such as information processing, answering queries, and more. The responses are surprising humans, which has sparked interest in people about this new chatbot. Since the launch of ChatGPT, everyone is talking about it and has taken the internet by storm.

OpenAI is also famous for developing DALL.E, which is a deep learning model that creates images from text instructions, referred to as prompts. This is also a contributing factor to the popularity of AI based tokens.

Perhaps, the popularity of ChatGPT is going to influence cryptocurrency as Tron blockchain has announced its integration with ChatGPT for a decentralized payment framework.

Moreover, this sudden popularity of ChatGPT has convinced crypto investors as well as outsiders to invest in these rapidly flourishing AI cryptocurrencies. Microsoft has recently invested $10 billion in the developer of ChatGPT, OpenAI at a $29 billion valuation.

Market Size of AI Crypto

AI tokens are in the nascent stage and the utility of these AI tokens is still to be tested properly. The market value of AI tokens was $1.6 billion in early days of February, 2023.

According to Forbes, AI cryptos have reached a $4.27 billion market cap. Although this is only 0.4% of the total crypto market which is $1.07 trillion, the major spike in AI tokens and many AI based projects has called attention to the functions of AI in crypto platforms.

The end of 2022 and the start of the new year has seen a major increase in AI-related cryptos. Fetch.ai, which has rewarded people with autonomous agents, has gained almost 200% since the beginning of 2023. Cryptocurrency investors are piling into AI cryptocurrency in response to these compelling statistics.

Distinguishable Features of AI crypto Tokens

AI crypto tokens improve the scalability, security, and user experience in crypto space. They contain in-built decentralization and security as well as the potential to add new features and use cases in the future. AI tokens boast the following features:

Use-case Specific

AI tokens are use case specific, for instance, Artificial Liquid Intelligence (ALI) token is used to generate and upgrade AI character NFTs. Similarly, the Numeraire (NMR) token helps in making predictions as well as managing investments.

Threat Detection

Artificial intelligence helps detect fraud. Therefore, if any buggy project-specific smart contract is associated with token spending, it can be addressed beforehand. Moreover, AI’s threat detection feature makes the associated ecosystem less susceptible to hacks.

Fewer manipulations

AI cryptos, released to the project and founders, use effective training data to develop a platform or system.

Low Risk of Market Bearishiness

They are less susceptible to broader market bearishness as the popular sentiments of top artificial intelligence keep pushing these downfalls away.

Some AI tokens have highly exclusive and network-specific features while others are quite relatable.

Use Cases of Some AI projects

Artificial intelligence has automated many aspects of our life, from improving scalability to providing security. It is not about robots that we often see in SciFi flicks, rather it spans content creation, artwork, fraud detection, pattern identification, and more.

These use cases make AI an exceptional blockchain compatriot. Where blockchain is an immutable ledger technology in a virtual platform focused on transparency, AI equips this transparency with security, automation, and ease of mind.

AI crypto projects drive specific use cases to help people utilize artificial intelligence in their systems, such as:

Numerai: AI-Focused Portfolio Management

This AI token uses AI algorithms and techniques to optimize and manage investment portfolios. Numerai is a decentralized AI-driven hedge fund that utilized machine learning algorithms to make investment decisions.

It incentivizes data scientists by rewarding them with its native token “NMR” that helps them to submit accurate predictions. Afterward, Numerai uses these predictions to power its own trading algorithms.

Fetch: AI-Powered Economic Infrastructure

Fetch helps create an AI-powered economy that connects people, services, and devices on the blockchain platform through its native token FET. This ensures an AI infrastructure that helps data sharing and communication.

It deploys autonomous software agents that perform specific tasks for individuals, businesses, government, etc., such as supply chain management, decentralized finance, and logistics.

Ocean: Secure Private Data for AI Models

Private data does drive business outcomes, but its access is highly under question because of privacy concerns. The Compute-to-Data feature of the Ocean Protocol ensures specific access to private data and monetize Artificial intelligence services through its native token, eliminating the need to share data directly.

Oraichain: Oracle Solution for AI data

world is required, it has to rely on Oracle to retrieve data from the real world.

However, Oraichain, a convergence of blockchain and AI, provides Oracle AI solutions for APIs. Its architecture is mostly concentrated on AI data sources, allowing AI data and Artificial intelligence services to integrate with smart contracts.

This, in turn, will enable the development of decentralized applications (dApps) as well as a vast range of AI services, such as computer vision, natural language processing, and predictive analytics.

Hera: AI-Driven Pathfinder

services to identify the most profitable and effective trade path. Hera is an AI pathfinder algorithm that guides users toward the most lucrative option.

It uses machine learning algorithms to evaluate trade volume, liquidity, and prices to locate the best route for trading. Moreover, it also helps users identify the optimal amount to trade and reduce the difference between the expected trade price and the actual executed trade price, known as slippage.

Alethea AI: AI Characters Generator

Alethea image generator helps generate images based on user data. These interactive AI based characters can be used in digital marketing, digital art, gaming products, and other digital platforms.

Basically, Alethea uses a multimodal AI system “CharacterGPT” that is equipped with a Text-to-Character feature. These AI characters generated by CharacterGTP exist on the blockchain as NFTs and their owner can upgrade them or enhance their specialization domain.

Common Challenges to AI Crypto

Nonetheless, AI has given tremendous success to the crypto digital platform. However, it has to face a few challenges in the early stage of development that can impact its growth and adoption. These challenges are:

Uncertain Regulations

Just like other cryptocurrencies, crypto coins have no clear and concise regulation framework that may influence their usability in the future and crypto investors and AI developers may deter these tokens due to regulatory speculations in this domain.

Lack of Awareness

No doubt, the emergence of ChatGPT and Microsoft's recent investment in OpenAI has grabbed the attention of many people.

However, this is still in the early stage and many people do not properly understand the integration of AI in crypto space which may prevent people from investing in these AI projects, reducing the growth potential of AI tokens.

High Competition

Both blockchain networks and artificial intelligence face severe competition as separate domains. On combining both of them, they may face competition from each side, where many AI based projects will be vying for investment and attention.

This might make it harder for an individual project to get requisite traffic and subsequent investment.

Are AI cryptocurrencies safe?

By looking at the current market worth of these AI cryptocurrencies as well as possible challenges, it is difficult to say how they will behave in the future. AI may push these challenges away or may capitulate in the future.

Moreover, no crypto coin can guarantee market stability. Bitcoin experienced a 56% devaluation in 2022. AI coin is no different; GRT fell from £0.44 to £0.06 (-86%) between January 2022 to December 2022.

However, ChatGPT has achieved tremendous success which has positively influenced some AI tokens. We can expect other big tech innovations in AI projects and AI tokens that may ensure the sustainability of such coins or AI tokens for crypto investors.

Key Takeaways

AI and cryptocurrency can work side by side in a virtual platform to improve transparency, scalability, and user experience in blockchain networks. With the introduction of ChatGPT and the best AI tokens, people can expect further growth of AI technology.

Ambiguity in regulations and lack of awareness can influence the performance of these crypto tokens as they are in the early stage of development. For investing in AI crypto, you don’t need to be an expert in machine learning, but getting a basic understanding of AI-cryptocurrency convergence can help you make a lucrative decision making.

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