Oct 31, 2023

The Coinbase Institute has published its white paper on blockchain and artificial intelligence (AI).

Video transcript

The show is all about crypto, but there has been a convergence between A I and crypto lately. Separately, the White House rolled out an executive order on Monday that aims to monitor and regulate the risks of A I while also harnessing its potential. This while the Coinbase Institute releases its white paper on Blockchain and A I this morning joining us to discuss is the head of Coinbase Institute and Chief of staff to the Chief Policy Officer Chris Edwards. Welcome to the show, Chris. Good morning. Thank you both for having me. All right, congratulations on the launch of the paper this morning. It explores how Blockchain and A I can work together to reach maximum economic and social potential, potential. Talk to us about your hypothesis here. That's right. The hypothesis is that right now A I and Blockchain are two of the most exciting technologies being worked on today. And certainly in the digital realm, the hypothesis is that these two technologies actually work together to make each other better in ways that a lot of people necessarily appreciate and that can really expand the internet starting with A IA I has the ability to perform cognitive tasks that historically required human intelligence. This makes a I perfect for diving into and analyzing large troves of information. And of course, as you all and your viewers know, Blockchain is perfect for a number of use cases. It allows folks to transmit value without an intermediary to really own and manage their own data and to decentralize data. So what we talk about in the is how these two different use cases can really converge together to improve upon one another. And we kind of divide that up into three sections that we refer to as authentication, automation and analysis. So stepping back a little bit here, what is the incentive we can understand why Blockchain would want to use A I? But what is the incentive for A I to use Blockchain? I think the incentive is to take the standardized and good data that exists on the Blockchain and use that data to make eye operations better. Let me give you one example from our automation section. You know, right now, in order to automate services, what you really do is remove the manual component from things in order to effectuate real automation in the real world. A I is great at doing that in the digital realm. Take something like digital marketing, for example, and you'll see that A I is really able to transform that realm and that industry. But where Blockchain and crypto come in is interacting in real life, think about all the different real world use cases where automating something with manufacturing. So supply chains or e commerce as a great example, needs to happen and needs real currency in order to transact A I has a limitation in that it can't necessarily engage in transactions that are necessary for something like an E commerce supply chain. But if you bring in Blockchain and crypto, those transactions become much more seamless and effective and even more, you can program smart contracts onto the Blockchain to make sure that these transactions are taking place the way they're supposed to. So I guess the question I have here is, will A I use Blockchain? In other words, will they uh is there an incentive, is there an actual economic incentive to see uh people who develop an A I and, and use A I in all sorts of processes to then all of a sudden say, you know, we need to use Blockchain because you, you describe this uh the, the supply chain uh and, and different aspects in, in industry, but we haven't seen the sort of adoption that we thought we would in, in, we've seen, we've actually seen people turn away from it or, or at least give up on it in some major corporations. So what would then incentivize or incent the uh people who do stuff in A I to say yes, we need to do it in Blockchain. I think so and answering more precisely I think that A I and Blockchain should work together because of the tremendous power of these use cases. And if I can, let me tell you a little bit more about where we are coming from with this at the institute, the mission of the institute is really to be forward thinking in terms of where crypto technology is today and where it can potentially intersect when it comes to public policy. Right now, a lot of the public policy conversation is focused on a relatively narrow number of items. And while those items are incredibly important, there is an entire field for policymakers to pay attention to. So our argument that we are making in the paper is that policymakers should understand and appreciate this tremendous value that can be gathered by these two technologies working together. And I believe that that value is so strong. We will start to see that intersection between the two technologies. More and more I mentioned at the top of the segment that Biden's executive order is looking at how to mitigate risks in A I. One of the requirements in that order is for developers of A I systems to share the results of safety tests with the federal government before they are released to the public. This among other conditions, what do you make of the requirements that have been outlined by the federal government? I think the Biden Eo is a little bit of a mixed bag on one hand, there are sections and language that talk about the innovative potential of A I. And that's really nice to see. But you're right with your question that when you read the EO and the fact sheet in their entirety, it can read a little bit like a list of risks. And we saw that last year with the crypto eo, I worry a little bit that while the government absolutely has the job of managing risk, their job is a little bit broader than that. They have to manage risk and also recognize reward. And I worry a little bit that just by listing risks, they are not necessarily fully appreciating or maybe focusing on the innovative potential of A I. You bring up the crypto eo two technologies, two industries that really have murky regulation right now. Uh What do you think that policymakers should consider as they look at regulating both industries especially now that the industries are starting to merge? And like this white paper is saying, should work together in your eyes. I think what the crypto industry has been asking for for a long time is regulatory clarity. And we're seeing that with pieces of legislation like the financial innovation and technology for the 21st century Act or 21 that members of Congress are really starting to get serious about creating that regulatory clarity fit 21 passed out of committee this summer and that was the first time that market regulation for crypto pass out of a congressional committee and it passed with a bipartisan vote. That's incredibly powerful. It's exciting and I think it really gives credence to something that the industry has been saying for a long time, which is this regulatory clarity is important and it's needed and it should happen sooner rather than later. Chris, I'm not sure if you can speak to this being at the institute but is Coinbase using A I in any of their processes or are they looking to use A I? Um in some of the examples that have been outlined in the white paper, I'm going to be sure to not talk about Coinbase too much because we are in a bit of a blackout period with earnings coming up soon. But one example that I can cite too of A I being used in advocacy is very recently, the same with Alliance rolled out an A I tool that allowed individuals to write a comment letter to the IRS regarding the proposed rules for crypto reporting. Those rules are overly broad and something that the industry has a number of concerns about. And what same with crypto was able to do A I tool was really allow individuals to have their voice heard in a way that would be effective and impactful. And I think that speaks to how A I can be used in a number of different realms, advocacy being one of them, Chris, thank you very much for joining the show this morning. Thank you. That was Coin Based Institute Head Chris Edwards.

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