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Blockchain and AI: The battle for your data

Over the past few months, I have been watching the live convergence of blockchain, crypto, AI and IoT with a fascination unique to those of us who have long been vocal on the matter. The proliferation of data and the importance of leveraging this data using “interpretive intelligence” has always been central to the investment thesis of Future\Perfect Ventures. When I first put together this thesis a decade ago, I wrote the following about the role that networks and analytics would play in an increasingly interconnected world:

“We are only at the very beginning of massive data collection from all of these devices... Data on its own is meaningless, and can create more challenges than benefits, unless it can be quickly parsed, analyzed and distributed to relevant entities. The challenge of the future is doing this in a real-time, networked way instead of a linear method.” (The Barefoot VC December 6, 2013 Interpretative Intelligence).

The future moment I spoke of has now arrived. Spurred by mobile connectivity and advances in data processing and storage, inordinate amounts of data are being produced and stored faster than ever before. We are facing an inflection point: are we going to continue on the path of greater centralization, or are we going to recognize this moment for what it is, an impetus to change how we store and interact with our data? I believe that combined, AI, edge computing and blockchain technology offer a compelling alternative to centralization in the battle for our data. But first, a few definitions.

Artificial intelligence is the development of computer systems that can perform tasks that typically require human intelligence. It is often used to analyze vast amounts of data and identify patterns that humans may not be able to detect. AI has been in use for decades – as the recommendation engine behind Amazon and Netflix as well as programmatic ad buying and trading algorithms.

LLMs (large language models) are AI that use large data sets and deep learning algorithms to understand, generate and predict content. The recent commercialization of ChatGPT (built on LLMs) has brought focus to the potential of LLMs to generate new content.

Bitcoin is the first decentralized cryptocurrency and relies on blockchain software to create a secure and transparent ledger of transactions without the need for intermediaries. Ethereum is a blockchain-based platform that allows for the creation of decentralized applications and smart contracts, which enable secure agreements between parties without intermediaries.

Today, most of our data is stored in centralized locations. This data is used to track our online activities, monitor our behavior, reveal our personal preferences, and much more. Centralized data is vulnerable to all sorts of dangers, from data breaches to data manipulation and control by powerful entities - why providing an alternative is so important. There are several pieces of technology that can play a role in this alternative, including AI, blockchain and edge computing.

I explored the significance of edge computing on The Barefoot VC back in 2020. It refers to the collection and processing of data closer to the source, rather than sending all the data to a centralized cloud or data center. In AI, edge computing can help reduce latency and enable real-time processing of data, which is especially important for IoT applications like self-driving cars, industrial automation, and healthcare. In blockchain, edge computing can help improve network performance and reduce the risk of network congestion or failure. Emphasizing the importance of individual, distributed “nodes” and edge computing is essential for the future of efficient technologies and models that process, and transact, large amounts of data.

“Blockchain and AI are frequently combined through sharing AI algorithm outputs on blockchain systems, using AI-enabled oracles to supply blockchain with data, and using asset optimization and prediction algorithms based on AI on various DeFi platforms.” - The Barefoot VC 2020 World on Edge: How Edge Computing Can Make Us More Resilient in Times of Crisis

The battle for our data is only just beginning, and in many ways it is a battle that was inevitable. I first became interested in how we can leverage personal data with AI when Apple launched Siri over a decade ago, particularly “realizing the promise of personalized data that works FOR individuals, ie, all of us who are creating massive databases in the cloud with each click” (The Barefoot VC 2010 Siri: Apple of My Eye). Siri’s successful launch showed the world that optimized user interfaces could make AI technology accessible to the average user, and that this technology was here to stay. Greater adoption of AI technology will result in further increases in data sets. For example, our interactions with Siri benefit us but also create data for Apple. This is where the value proposition of blockchain comes into play - it offers the ability to potentially control how data is permissioned, and ensure its immutability and provenance. Much of this infrastructure is being built now and will one day become as ubiquitous as Siri is today.

After all, personalized data is only meaningful if it is secure and can’t be tampered with. The emergence of the Bitcoin blockchain provided a mechanism for computer verification of transactions without intermediaries. In the world of connectivity, this was key to transacting – while Bitcoin is associated with currency, the underlying blockchain technology can be used for any data transactions. The emergence of smart contracts with Ethereum added an additional layer of intelligence and complexity to what was possible on blockchains, as have the plethora of layer 2 and 3 technologies emerging that could enable further scalability and differentiated applications to emerge.

Leveraging blockchain with AI can increase trust in data integrity and recommendations. The digital record of blockchain can provide transparency into the data behind the output of AI and also provide “credit” to those contributing authentic data (now, how we get to that point will require better identity layers, authentication and encryption – all areas we as a fund are actively investing in). Authenticating data will be key to preventing the proliferation of “deepfakes” (media that has been convincingly altered and manipulated to misrepresent someone as doing something that is false). Recently, deepfake content of Donald Trump circulated and went viral. A few days later, a video of the Pentagon on fire, also a deep fake, resulted in a brief stock market crash.

The technological and societal structures that exist as a result of our technology usage prove the continued need for moving towards decentralization. Mobile networks have enabled individuals to connect with each other in real time, and emerging peer-to-peer networks have balanced the power of individuals with traditional gatekeepers. We all have the infrastructure to contribute to decentralized networks, via our smartphones, data networks, smart homes, and more; participating with authentic data becomes merely a matter of incentives. Each individual node should be optimized to have the highest functioning network, and smart data applications that utilize AI and blockchain will develop to create more intelligence at these nodes.

At the technology layer, peers make a portion of their resources available to other network participants without the need for central coordination. Peers are both suppliers and consumers of resources (in contrast to the traditional client/server model that emerged in the distributed age, in which the consumption and supply of resources is divided).

“Smart data applications will develop to create more intelligence at these nodes so all of us will function better – whether it is making decisions about our health (and that of the collective network’s), personalized learning platforms, or financial solutions that take into account individual or community needs. A recent IDC report predicted that by 2018 half of all consumers will interact with services based on cognitive computing on a regular basis.

This new collective intelligence will allow each node to contribute in a highly personal way. Technology will empower these nodes, automating much of what we spend energy doing and I’d argue, enable us to become MORE human, and contribute more to the world’s emerging decentralized mesh, to solve even greater problems, all the while optimizing our own environments. What’s key here? The participation of EVERYONE, of all genders, of all races, in all corners of the world, for the most optimal and efficient global network. It’s not only about the algorithm, it’s about what the algorithm collectively allows us, and our hearts and minds, to do.” (Smart Data, DIversity and Our Decentralized Future, The Barefoot VC, July 2015)

By enabling more efficient data processing, personalized data-enabled experiences, a ledger to verify our claims and content, AI and blockchain can work synergistically to create a new form of collective intelligence. This collective intelligence allows for each individual node in the network to contribute in a highly personalized way, thus empowering individuals and optimizing their environments. The battle for our data is only just beginning, but with the right incentives we can leverage blockchain with AI to make this collective intelligence beneficial for all, whether an individual or an enterprise.

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