February 20, 2023 Is the Artificial Intelligence Gold Rush the Next Crypto Bubble? Here's What You Need to Know!
By Samuel Ancer
By Sam Ancer
When the United States Federal Reserve announced that it would increase interest rates to fall in line with inflation in 2022, crypto currencies began to suffer massively.
Before the announcement, crypto was running at an all time high. Bitcoin, the most widely known crypto currency, was valued at around $47 000.00 USD per token in March of 2022. By June it had fallen to $20 000.00 USD per token.
While there is still significant interest in blockchain systems and cryptocurrencies, it is clear that the wider public has gone cold on crypto. In the wake of crypto’s bubble popping, people have begun to look to Artificial Intelligence (AI) as the new exciting wave within tech.
Critics have raised concerns that AI could simply be the next bubble. There are some key differences in the way AI and crypto work that would make this simply not the case.
AI has Value while Crypto Doesn’t
For the most part cryptocurrencies are traded as a speculative asset. What this means is that while there is no inherent value to the token, the fact that it could increase in financial value is the reason people trade in crypto.
While there are champions of cryptocurrency who may disagree with this statement, largely based on arguments around financial freedom and removing concentrated wealth in centralised systems, for the average individual crypto is largely seen as a way of making money.
There is nothing wrong with speculative assets, this is a significant difference in the way Artificial Intelligence works in comparison to crypto. Fundamentally, behind almost every AI project, is a product of value.
Essentially, an AI can only be created and funded if it is able to solve a problem. This inherent value is what makes the fundamental difference between the hype around AI and the hype around crypto.
The fact that AI is trying to solve problems, be they medical, financial, logistical, or otherwise, means that there is always going to be a consumer for the AI project. That consumer will be whoever suffers from the problem the AI is trying to solve.
Ethics is inherent to AI
Behind a number of Artificial Intelligence projects is a keen concern around ethics. A lot of this is because of the ethical concerns around artificial intelligence.
We have covered this previously, but a brief summary includes concerns around AI’s impact on the workforce, concerns around data and privacy, as well as issues around AI and institutional bias.
With these concerns being at the forefront of AI projects, it becomes clear that ethical considerations are paramount to the success of AI.
Notable Artificial Intelligence champion Elon Musk has mentioned, on multiple occasions, the necessity for ethics in dealing with AI.
Crypto has also had a number of ethical discussions, mostly around the environmental impact that proof of work models have. But these discussions are rarely at the heart of decisions around crypto. Apart from a few exceptions, the main concern with crypto projects is how to generate a profit.
Now the same can be said for AI, or any business venture. Fundamentally, in a capitalist structure the goal of a business is to generate profit, so a profit motive, for crypto or AI, is not something that should be an indictment.
However, businesses are still required to behave ethically and ethical concerns should be at the forefront of a businesses decision making.
The emphasis on ethics with AI can help us make the deduction that AI related businesses will generally be more stable and have an emphasis on long term growth over short term profits.
AI Being Recognised by Large Companies
One significant difference between crypto and AI is who is championing the charge. The majority of the excitement around crypto was pushed by small startups and emerging techpreneurs.
The majority of AI champions however are established tech companies like Microsoft and Google.
Just because tech giants are pursuing AI products does not mean they are safe from a bubble bursting. But, there is some cause for us to believe that these projects will be run better than crypto projects.
The main reason for this is that while small startups are able to innovate, they often lack industry or technical expertise that can help them manage crises that emerge.
Established businesses are also less likely to sign their name to projects that they do not believe in their long term viability. So if Microsoft is putting 10 billion towards a new AI project, then you know that they believe in the viability of the project.
This in itself does not mean that AI is going to be massively viable. Of course there have been a number of significant players in the tech space that tied themselves to crypto before its bubble popped, but it is an important detail to make note of.
Fundamentally, a larger concern for crypto proponents, that AI does not share, are the number of unsavoury elements involved in crypto.
Firstly there’s the fact that crypto is often tied to illicit trade. One of the benefits of crypto is unregulated and unmonitored movement of money. While this element of financial freedom can be a good thing, it also allows bad actors to benefit.
For example, hackers will often demand ransom in bitcoin or another crypto, because it is untraceable.
Within that same point, the deregulated nature of crypto also makes it unsafe. If your account is hacked, and you lose your crypto portfolio, there is very little that can be done to get your money back.
There’s also the fact that a lot of dubious entities got involved in crypto “pump and dumps”. The goal of this is to artificially inflate the value of a speculative asset by getting excitement around the product, and then selling off your stake once it reaches its peak value.
People would also approach celebrities for endorsements, offering them money to post about a crypto project to their social media followers in order to drum up excitement.
A number of these issues is what created a cause for buyer hesitancy, beyond the already mentioned environmental concerns, which meant that crypto would likely have reached a point of stagnation within its markets even if the crash did not happen.
Not Everything Made by AI is Gold
Critics of the AI wave have a critical point. Not all AI products are created equal. During this time, a lot of charlatans will try to use AI as a selling point for a bogus product.
People will try to take advantage of the public's excitement and lack of understanding to try and get money. That’s why it is critical that before you invest in an AI project, you make sure you understand AI and its limitations.
It’s always important to remember, if something sounds too good to be true, then it probably is.
Is the Artificial Intelligence Gold Rush the Next Crypto Bubble? Here's What You Need to Know!
Before the announcement by the US Federal Reserve, crypto was at an all-time high but began to suffer massively. Since then, the wider public has lost interest in cryptocurrencies and has begun to look towards Artificial Intelligence as the new exciting wave within tech.
AI's focus on ethics and the fact that established businesses are championing it, help to make it more stable than crypto.
Additionally, crypto's problems such as being tied to illicit trade, unsafe, and having a lot of dubious entities involved, has created a cause for buyer hesitancy beyond its bubble popping.
This does not mean that all crypto projects are bad, in fact most that have managed to survive the crypto collapse have done so because they provide some inherent value.
Nor is every AI project worth spending time and money on. As always, it's important to make sure you are aware of the pitfalls and promise of a project before you invest.
But ultimately, it is unlikely that AI will see a dramatic bubble pop in the same way crypto has, for many reasons including the ones we’ve listed above.