AI+Crypto: Trouble

Recently, crypto AI tokens rode the coattails of AI chip maker Nvidia’s blockbuster earnings report. As Nvidia’s stock sailed north, so too did tokens like Worldcoin’s WLD (40% in seven days), SingularityNET’s AGIX (43%), and FetchAI's FET (18%), according to a February 22 CoinDesk article.

This isn’t the first-time enthusiasm for traditional AI companies, like OpenAI, has invigorated crypto AI markets. Following exuberance over OpenAI’s ChatGPT 3 early last year, Crypto AI’s had a moment. By at least one calculation, their collective value exceeded $4 billion. Fetch.ai’s token, FET, for example, rocketed from around 6 cents last December to a height of 54 cents on February 7.

But there’s a difference between traditional AI companies and crypto AI companies. We know what ChatGPT or Google’s Gemini do. Consumers can use them. Nvidia manufactures microchips that power the most sophisticated computers. What do the technologies behind crypto AI tokens do?

Fetch.ai, for example, has esoterically described itself as “a decentralized connectivity platform that enables devices to connect directly with digital agents delivering autonomous solutions to complex tasks.” It purports to connect users to AI-powered digital “agents” (basically, AI assistants) that might help users make restaurant reservations, plan travel, or book a house cleaning by interfacing with AI agents for the restaurants, airlines, or cleaning services.

How little-known Fetch plans to best the likes of Google, Microsoft, Amazon, and Apple, who dominate the digital assistant space (and, in the case of Google and Microsoft, AI as well) is unclear. Less clear is what role their FET token plays in the business other than to raise money for the company and, presumably, earn returns when the token price rockets up. Fetch says that FET is “the utility token and the key medium of exchange on the Fetch.ai network,” explaining that “FET can be used to pay for services in the Fetch ecosystem and network transaction fees.” Why not use USD, BTC, or a stablecoin?

Also worth consideration is Fetch’s announcement on March 29 last year of a $40 million “investment” from DWF labs. Less than three weeks later, CoinDesk published an article titled, “Crypto Market Maker DWF Labs’ More Than $200M in Deals Blur What ‘Investing’ Means.” The article questioned whether DWF’s investments were little more than over-the-counter trades fraught with the peril/promise of DWF manipulating the price of the token to its benefit and the issuer’s.

Worldcoin’s business model is similarly confusing. Worldcoin says it “aims to provide universal access to the global economy no matter your country or background, establishing a place for every human to benefit in the age of AI.” How does it aim to achieve this lofty goal? By scanning everyone’s irises with a dystopian orb, of course. The purpose is supposedly to allow people to verify their identities online (for example, when voting online or claiming certain government benefits through a digital system). But the company has faced some significant regulatory headwinds over the obvious privacy concerns that, most recently, caused Worldcoin to exit markets in India, France and Brazil.

Do investors really believe that Worldcoin will be the company to protect our digital “personhood” in the AI age to which its co-founder has helped give birth? And, as with Fetch, why do they need a token?

Several commentators (see here, here, and here) have suggested that Worldcoin may follow a pump-and-dump pattern familiar in crypto, where promoters pump a coin in the early days of trading, insiders and sophisticated traders exit quickly, and the price drops leaving almost everyone else with losses. In the first few days of trading, in July, WLD jumped from $1.91 to $2.72. Then it slid to $1.01 in September. As of this writing, it has hit an all-time high of $7.64.

FET has also hit an all-time high. From about $.06 in November, it’s now at $1.77.

I’m not a trader, but I have my doubts that these prices are sustainable. A rise and fall in price does not necessarily signal a pump and dump. Nonetheless, investors would do well to consider Sam Altman’s own words. “For any new system,” he said while discussing Worldcoin, “you will face some initial fraud.” With Worldcoin, as with other crypto AI projects, caveat emptor.