The world’s largest crypto asset manager, Grayscale Investments, has announced the launch of a new fund focusing on decentralized artificial intelligence projects.
Over the past couple of years, AI popularity has exploded, and as a result, the global AI market size has grown past $184 billion in 2024. It is further projected to surpass $826bln by the end of this decade.
The AI craze is what led chipmaker Nvidia to briefly become the world’s most valuable public company with a market cap of $3.34 trillion. However, AI hype is not limited to driving the tech giant’s stock prices but is also helping the company report record revenue. In 2Q24, Nvidia reported $26 billion in total revenue, more than double the company’s full-year revenue in the 2020 fiscal year, driven by rising AI-related demand.
The company’s sales first began increasing in the fiscal quarter ending April 2023. Today, Nvidia’s business continues to boom, with its biggest customers, like Microsoft, planning to spend even more on computing hardware in the coming quarters. This shows that the AI hype could even surpass that of the 1990s dot-com boom.
However, AI faces the problem of centralization, with only a select few driving the technology’s development and mainstream adoption. To address the limitations and risks associated with centralization, decentralized AI projects are emerging.
By leveraging blockchain technology, decentralized AI protocols are distributing ownership and governance over AI services and increasing AI’s transparency, security, and data integrity. These projects further enable permissionless access to use or build AI technology.
According to Polygon co-founder Sandeep Nailwal, who’s a core contributor of Sentient, a project developing an open-source AI platform that raised $85 million last month in a funding round led by Peter Thiel’s Founders Fund:
“The rapid advancement of AI has the potential to transform every aspect of our lives, but the concentration of power in the hands of a few centralized entities poses significant risks.”
The growing focus and development of decentralized AI in the crypto space has now captured the attention of Grayscale, which has already launched several publicly traded crypto funds. This includes Grayscale Decentralized Finance (DeFi) Fund (DEFG) and Grayscale Digital Large Cap Fund (GDLC) in addition to single-crypto-focused funds covering Ethereum (ETHE), Solana (GSOL), Zcash (ZCSH), Basic Attention Token (GBAT), Chainlink (GLINK), and others.
Just earlier this year, Grayscale finally converted its Bitcoin Trust (GBTC) into a Spot Bitcoin exchange-traded fund (ETF) after the US Securities and Exchange Commission (SEC) gave the launch of these products a green light.
Now, as AI mania takes over the world, Grayscale is using this as an opportunity to offer investors a chance to deploy their capital in crypto projects that aim to give users control over their data and offer improved privacy and security.
“The blockchain-based AI protocols embody the principles of decentralization, accessibility, and transparency, and the Grayscale team feels strongly that these protocols can help mitigate the fundamental risks emerging alongside the proliferation of AI technology.”
– Rayhaneh Sharif-Askary, the Head of Product & Research at Grayscale
AI has also been one of the crypto industry’s most lucrative segments, with a Coingecko report stating that the AI industry saw a 222% increase in 1Q24.
So, the Grayscale Decentralized AI Fund will provide investors with exposure to protocols in the burgeoning AI sector within the crypto ecosystem. Moreover, as per the official announcement, the Fund will be rebalanced quarterly.
Grayscale’s decentralized AI fund covers three primary categories of protocols:
- Building decentralized AI services such as chatbots and image-generation services
- Building solutions to the problem of centralized AI, including checking the authenticity of information and people
- Being involved in the infrastructure and resources critical to AI technology development, like decentralized marketplaces for streaming services, 3D rendering, GPU computation, and data storage
The Fund currently comprises five projects, with Near (NEAR) having the most weightage at 32.99%. As of July 16, it is followed by Filecoin (FIL) at 30.59%, Render (RNDR) at 24.86%, Livepeer (LPT) at 8.64%, and Bittensor (TAO) at 2.92%. The Fund is only available for eligible accredited investors so that the general public won’t have access to it. According to Sharif-Askary:
“The rise of disruptive technologies has created compelling opportunities for Grayscale’s investors since our 2013 inception, and we believe the launch of the Grayscale Decentralized AI Fund provides an opportunity to invest in Decentralized AI at its earliest phase.”
Now, let’s take a deeper look into the AI crypto projects that will be part of Grayscale’s Fund.
Bittensor (TAO)
An open-source protocol, Bittensor utilizes blockchain tech to create a decentralized network for machine learning (ML). To facilitate collaborative training of ML models, the project rewards TAO tokens.
The Bittensor network has two types of nodes:
Their contributions are evaluated based on their value to the network. Those who enhance Bittensor’s value receive increased stakes in TAO, and those who provide lesser value are gradually weakened before being removed.
With a market cap of $2.37 billion, TAO is among the top 50 crypto assets. As of writing, it is trading at $334.82, up more than 300% in the past year. While the token’s price is up 988% from its all-time low (ATL) of $30.83 from May last year, it is currently down 55.7% from its all-time high (ATH) of $757.60, which was hit about five months ago.
Besides Grayscale, the project has also gained the interest of Digital Currency Group, Polychain, and Dao5, which have bought hundreds of millions of dollars worth of TAO. In an interview with Fortune, Bittensor founder Jacob Steeves said he began working on his project in 2015, but the rise of centralized tools out of Meta, Google, and OpenAI has now validated it.
The project basically aims to create a marketplace for AI where both AI users and creators can interact seamlessly and trustslessly in a transparent environment.
Earlier this month, the Bittensor blockchain was temporarily halted after the team detected an attack on several user wallets. With at least one wallet drained of $8mln worth of the project’s TAO tokens, its value subsequently dropped 15%, only to recover soon after as network members took steps to mitigate further mishaps.
The steps involved putting the chain on “safe mode” by “fully” halting transactions on-chain. A couple of months ago, the token also gained a listing on leading crypto exchange Binance as well as Crypto.com, which expanded its reach and opened it to large-scale trading.
Click here to learn all about buying Bittensor (TAO).
Filecoin (FIL)
A decentralized storage system, Filecoin records commitments made by the network’s participants to tackle the issue of inefficient file storage and retrieval. The platform is based on the Interplanetary File System (IPFS), where all data is stored on a peer-to-peer blockchain.
The network can store personal files, videos, app data, company files, private data, public datasets, and more. Users can also sell data on the network. Filecoin can further be utilized to store large amounts of data for long periods of time.
The Filecoin ecosystem involves clients who place orders for storing or retrieving data, storage miners who store the client’s data and are compensated for that, and retrieval miners who extract data at a client’s request. The project raised $205 million in an ICO in 2017 but wasn’t launched until late 2020.
Filecoin’s native token, FIL, powers the entire ecosystem by being used to exchange transactions, pay miners, and put as collateral by miners to guarantee their services. With a market cap of $2.65 billion, FIL is among the top 40 crypto assets, and as of writing, it is trading at $4.66, up only 3.3% in the past year. While the token’s price is up 76.2% from its ATL of $2.64 hit in Dec. 2022, it is currently down 98% from ATH of $236.84 hit over three years ago in April, during the last bull market.
This month, the Filecoin Foundation partnered with AI developer SingularityNET. As part of this collaboration, SingularityNET will use Filecoin to manage its Knowledge Graphs and Lighthouse SDK for metadata storage and integrate Filecoin’s tech stack to support the infrastructure of AI-generated data storage.
Last month, CryptoEternalAI also incorporated Filecoin’s decentralized storage to bolster its AI capabilities. Before that, in February, Filecoin integrated with Solana to host the latter’s block history and bolster Solana’s decentralization, allowing the popular L1 to achieve data redundancy, scalability, and enhanced security.
Click here to learn all about investing in Filecoin (FIL).
Livepeer (LPT)
A decentralized video platform, Livepeer network utilizes a modified version of a delegated DPoS consensus mechanism. Producers submit their work on Livepeer, which then reformats and distributes the content to users and streaming platforms.
The project aims to use blockchain tech to offer opportunities for video-enabled dApps, auto-scaling social video services, and pay-as-you-go content consumption. Platform users are incentivized with crypto-economic rewards to participate and take advantage of decentralized computing power.
LPT is the native token used to transcode and distribute video on the network, as well as to incentivize peers to ensure the network’s security.
With a market cap of $548 million, LPT is among the top 150 crypto assets. As of writing, it is trading at $16.39, up over 303% in the past year. While the token’s price is up 4525% from its ATL of $0.354 hit in Oct. 2019, it is currently down 83.5% from its ATH just above $99 hit close to three years ago in November 2021.
In Q2 2024, the platform’s video transcoding usage saw a decrease of 22% QoQ despite the transcoding price per minute paid by users also dropping by 21% QoQ. In 1Q of this year, the cost was $0.0021/min, which reduced to $0.0017/min last quarter. As a result of this, the project’s demand-side revenue from transcoding dropped 38% QoQ, as per a Messari report. Staking rewards meanwhile increased 64% from the previous quarter as the LPT issuance grew 12% QoQ and reached its highest level since the Arbitrum migration in Q1 ’22.
During the quarter, the team launched an AI subnet for text-to-image, text-to-video, and image-to-video capabilities. Liverpeer also joined the Coalition for Content Provenance and Authenticity (C2PA) to address video deepfakes by helping trace the provenance of video content.
Click here to learn all about investing in Livepeer (LPT).
Near (NEAR)
Near is an L1 blockchain that addresses the challenges of slow transaction speeds, low throughput, and limited interoperability. It functions as a community-run cloud computing platform. To advance the crypto sector, NEAR Protocol has introduced solutions like its own consensus mechanism called ‘Doomslug’ and utilizes human-readable account names. The protocol also uses Nightshade, a variant of sharding, to enhance transaction throughput.
Its native token, NEAR, is meanwhile used to pay network fees and can be staked to enhance network security. With a market cap of $6.84 billion, NEAR is among the top 20 crypto assets, and as of this writing, it is trading at $6.24, which is up over 322% in the past year. While the token’s price is up 1076% from its ATL of $0.5268 hit in Nov. 2020, it is currently down 69.7% from ATH of $20.44 hit two years ago in Jan. 2022.
This positive momentum has drawn the attention of VC firm Pantera Capital, whose Managing Partner Paul Veradittakit recently shared his bullish thesis on the token, saying that while Bitcoin and Ethereum have been at the forefront of the crypto “revolution,” there are still challenges in terms of transaction scalability. This is where NEAR Protocol can play a key role by offering a scalable and user-centric blockchain solution.
With Near’s TVL gradually rising, currently above $360 mln, the L1 has been gaining traction this year after the downtrend in 2023. Besides TVL, other metrics on NEAR, including daily active addresses, number of transactions, and monthly active users, have also been on the rise. The NEAR team has also been focusing on AI integration through an open and decentralized framework to give users control over data and assets.
Amidst this, crypto fund issuer Valour has launched an ETP for Near, which will trade on Sweden’s Spotlight Stock Market.
Click here to learn all about investing in Near Protocol (NEAR).
Render (RENDER)
Render Network is a distributed graphics processing (GPU) rendering network where those looking to render images and videos are connected with mining partners who are willing to rent out their idle GPU. The network uses a combination of manual and automatic PoW systems to verify that art has been successfully rendered. Besides basic rendering, Render also provides a platform for artificial intelligence.
The token is used as the medium of exchange on the network. From artists, architects, and animators to designers and engineers, RNDR tokens are used to pay for GPU computing power from GPU providers on the network.
With a market cap of $2.7 billion, RENDER is among the top 40 crypto assets. As of writing, it is trading at $6.90, up over 268% in the past year. While the token’s price is up 18,723% from its ATL of $0.03666 hit in June 2020, it is currently down 49% from its ATH of $13.53 hit just four months ago in March this year.
The token is currently undergoing a migration from RNDR to a new ticker, “RENDER,” which led to active addresses on the network hitting a new high last week. After the community voted, the Render Network decided to expand onto the Solana Blockchain. This move has been taken in “anticipation of future network growth,” which calls for a high throughput, low-latency blockchain for network settlement and node operation.
Click here to learn all about investing in Render token (RENDER).
Final Thoughts
Artificial intelligence is leading the stock market and emerging as one of the hottest narratives in the crypto space. So, with crypto projects offering a decentralized alternative to the AI solutions, the likes of Bittensor, Fileoin, Livepeer, Near, and Render are bound to see traction, especially with Grayscale making it easy for mainstream investors to gain exposure to these decentralized AI protocols aiming to distribute governance while increasing AI’s transparency.