Why Web3 VCs Are Embracing the Crypto + AI Revolution?

Imagine yourself sitting on a park bench, enjoying the sun’s warmth while sipping coffee and flipping through the pages of a physical book. Your phone stays tucked away in your pocket, out of sight. Meanwhile, in the background, your AI agent is hard at work: booking your flights, paying rent, coordinating plans with friends, disputing charges, managing fantasy football winnings, and even rebalancing your crypto portfolio all seamlessly.

This futuristic scenario represents a snapshot of what Crypto + AI aims to deliver. It’s no wonder that Web3 venture capitalists (VCs) are rapidly embracing this vision, realizing that the merger of cryptocurrency and artificial intelligence can create a game-changing technological wave. What was once quiet chatter at tech conferences is now a loud declaration. The shift is unmistakable: AI is taking centre stage alongside crypto.

One major player making waves is Coinbase Ventures, which just released an official thesis highlighting its focus on Crypto + AI. According to Hoolie Tejwani, head of Coinbase Ventures, these two technologies are “like a DNA double-helix,” intertwining to shape the future of our digital lives. With over 500 Web3 investments, Coinbase Ventures’ new direction signals a massive inflow of capital, talent, and innovation into this emerging space.

But Coinbase Ventures isn’t alone. Other prominent VCs, including CoinFund, Delphi, Paradigm, and a16z, have also jumped on the Crypto + AI bandwagon. A Messari report reveals that in Q3 2024 alone, crypto VCs poured $213 million into AI projects. The potential for AI to become a top value creator in this next wave is undeniable, according to experts like Jesus Rodriguez, CEO of Into the Block. Some, like Lex Sokolin, founder of Generative Ventures, even draw parallels to the early days of DeFi in 2019, just before it exploded.

The Crypto + AI Landscape: Three Core Buckets

Coinbase Ventures has divided the Crypto + AI space into three distinct but interconnected areas, providing a clearer framework for understanding this rapidly expanding field:

• AI Agents Spending Crypto:

The first bucket envisions a future where AI agents handle tasks autonomously, including spending money on your behalf—using cryptocurrency. From paying for services to executing trades, AI-powered systems will eventually drive a significant portion of the global economy. Crypto, with its permissionless nature and international accessibility, is the ideal medium for these transactions.

Take Skyfire and Payman, for example. These projects aim to build the financial infrastructure that will enable AI agents to interact with both humans and other AI agents. Payman’s founder, Tyllen Bicakcic, even imagines a future where AI agents will handle most tasks, like managing a marketing campaign, but still need human input for final touches. And yes, soon an AI agent might even buy you a beer at a conference.

• Dispersed AI Systems:

This second bucket is vast, covering decentralized AI training, governance, and physical infrastructure (DePIN). In a future where data is a key differentiator, blockchain could be crucial in securing and managing data streams to train AI systems.

One such project, Vana, incentivizes users to share their data to train AI models while allowing them to retain control. As traditional sources of data dry up, decentralized systems like these could provide a treasure trove of untapped information, including personal medical and financial data. Vana’s Reddit DAO already has 140,000 users, and the potential for decentralized AI systems is just beginning to unfold.

• On-chain AI:

This is where things get exciting. The third bucket envisions AI not just assisting with tasks but also becoming a key player in writing smart contracts and creating decentralized applications on the fly. With AI generating the majority of software code, we could see a new era of on-chain applications that combine AI’s creative power with the trust and security of blockchain.

Imagine an AI agent instantly building a user-friendly front-end app, while seamlessly integrating smart contracts on the back end. This fusion of AI-generated code and blockchain could revolutionize the way we interact with digital platforms, blurring the lines between the physical and digital worlds.

Is Crypto + AI Hype or Reality?

As more and more Crypto + AI projects emerge, it’s fair to question how much of this trend is substantive versus hype. While there’s excitement around the potential, there’s also scepticism about whether AI really needs blockchain, or if it’s simply riding the wave of AI enthusiasm. Some in the AI world don’t even mention crypto, raising concerns that this might be a one-sided affair.

However, supporters argue that decentralized AI could be the key to preventing monopolistic control of AI systems. Without blockchain, they warn, centralized AI models could end up controlling the very fabric of truth and reality. The promise of Crypto + AI is that we, as users, will own and control these systems rather than leaving them in the hands of tech giants.

Conclusion

The merger of Crypto + AI offers an exciting glimpse into the future, with venture capitalists leading the charge. Whether through crypto AI agents managing our finances, decentralized data systems, or AI-written smart contracts, the possibilities are vast. As the space continues to evolve, it’s clear that Crypto + AI is not just a fleeting trend but the next frontier in Web3 innovation.

Will AI and crypto shape the future together? Venture capital is betting big on it. And if the momentum continues, we’re on the brink of a digital revolution like no other.