Top VCs discuss Crypto+AI investment methodology: Which teams to watch
Abstract: Cycles and narratives have always been the core topics of the global crypto market. In the past, the industry has relied more on the Bitcoin halving as a reference to perceive cycles, while also exploring the major narrative trends. However, after the approval of Bitcoin and Ethereum spot ETFs, the crypto market has become highly coupled with the global financial market, and the variables affecting the trend of the crypto market are increasing. Against the backdrop of soaring chaos, it is crucial to perceive the cyclicality more clearly and uncover the future narrative trends. As innovative narrative hunters, investment institutions have always been relatively at the forefront. In view of this, OKX has specially planned the "Crypto Evolution" column, inviting mainstream crypto investment institutions around the world to systematically output their insights on the current market's cyclicality, the new narrative direction, and the popular sub-sectors, in the hope of inspiring you. The following is the content of the third issue, where OKX Ventures, Polychain, and Delphi Digital discuss the topic of "The Convergence of AI and Crypto".
About OKX Ventures
OKX Ventures is the investment arm of the leading crypto asset trading platform and Web3 technology company OKX, with an initial capital commitment of $100 million. It focuses on exploring the best blockchain projects globally, supporting frontier blockchain technology innovations, promoting the healthy development of the global blockchain industry, and investing in long-term structural value. By committing to entrepreneurs who support the development of the blockchain industry, OKX Ventures helps establish innovative companies and brings global resources and historical experience to blockchain projects.
About Polychain Capital
Polychain Capital is an investment firm dedicated to investing in blockchain technology and decentralized finance. Since its inception in 2016, it has been focused on supporting transformative projects that leverage blockchain to disrupt traditional industries and create innovative financial systems. Leveraging its deep understanding of the crypto space, Polychain Capital supports visionary entrepreneurs and cutting-edge technology, driving the growth and adoption of decentralized networks and protocols.
About Delphi Digital
Delphi Digital is a research-driven firm dedicated to fostering understanding and development of the rapidly growing digital asset market. Delphi Digital supports the ecosystem through four business lines: Delphi Research, Delphi Ventures, Delphi Creative, and Delphi Labs.
When Crypto Meets AI
OKX Ventures
The development of AI technology is currently highly dependent on the push of tech giants, such as OpenAI, Google, and Nvidia. Nvidia controls the "power" of the entire AI era, while OpenAI and Google hold the core data and technical solutions. This centralized, highly dependent state on tech giants will limit the industry's innovation and development. The decentralized, permissionless nature of Crypto can break the shackles of the tech giants and to some extent promote technological innovation, bringing new prosperity to the industry. Currently, the more common scenarios include computing power, data, models, and applications.
Computing Power
Distributed/decentralized computing power markets like io.net and Prodia, utilizing global idle computing power, can break the monopoly of tech giants' computing power. We are very much looking forward to seeing what kind of chemical reaction will occur when the total distributed computing power supply exceeds the centralized computing power supply at some point in the future. In addition, due to the scarcity and high returns of AI computing power assets, there have also emerged computing power RWA projects like Compute Labs, which tokenize computing power assets and develop related derivatives to create an AI-Fi ecosystem.
Unlocking the Potential of GPUs: 5 Leading Decentralized Computing ...
Crypto's economic model can effectively incentivize user participation in the AI data field. For example, various DeFin projects can use token economic models to incentivize users to participate in data contribution, data labeling, or data verification, providing data sources for AI model training; Space and Time combines on-chain and off-chain data through proof of SQL, creating a verifiable computing layer for the integration of AI and blockchain; 0g.ai has built a scalable data availability layer and storage system. In addition, Crypto's privacy protection features can better realize the secure privacy of user data, such as Flock.io and Privasea.ai, which emphasize the importance of user data privacy protection during model training.
Models
An open model market has the potential to break the monopoly of tech giants' models. Users can not only provide computing resources to support the training and inference of AI models but also provide data or models, interacting directly through network protocols. In addition, distributed model training is currently a challenge, and we are particularly looking forward to seeing breakthroughs in distributed model training technology, hoping to see startup teams fill this blank space in the near future.
Unlocking the Potential of GPUs: 5 Leading Decentralized Computing ...
At the application level, the integration of AI and Crypto can better realize creator-driven content generation, where users can independently build customized virtual characters and chatbots, such as Myshell. Users can upload data to train models and build their own AI Smart Agents, while also allowing data providers and model trainers to benefit from the platform's development, forming a positive data flywheel.
Polychain
The AI field is transitioning from closed-source models to more complex open-source solutions. While this change democratizes access to AI capabilities, it also brings new challenges, particularly in terms of value capture for model creators. The financialization of open-source models is an innovative area where Crypto and AI intersect, as blockchain technology, with its open-source, ownership, and verifiability, lays the foundation for value accrual. Ora's Initial Model Offering (IMO) demonstrates how tokens can represent AI models, allowing token holders to share in the model's profits. This not only incentivizes open-source development but also ensures fair compensation for creators and contributors.
Decentralized Computing Power ...
A promising direction is the emergence of AI agents and executable task systems. They can serve as extensions of individuals, automatically executing complex tasks, from personalized assistants to advanced automation in decentralized finance. But their realization depends on data privacy protection, verifiable computing systems, and seamless integration of infrastructure. While Crypto and AI integration projects are still in the early stages, they have made progress through rapid iterative experimentation. Although best practices have not yet been established, the potential of cryptography in solving AI challenges is becoming increasingly apparent. In the future, we will see more refined applications that combine the advantages of Crypto and AI. This convergence will not only bring more transparent and accountable systems but also significantly improve the usability and functionality of AI and blockchain technology. As exploration continues, this field will see exciting developments.
Unraveling the Investment Methodology of Crypto+AI
OKX Ventures
We can discuss this issue from the current development trends of the track.
Deploy Your AI/ML Model to the Cloud Using Open Source Software ...
Over the past year, a large number of Crypto & AI projects have emerged in the market, mostly concentrated in the infrastructure field, with fewer applications and mostly based on repackaging, lacking innovation and low in technical content, with a large component of hype and riding on concepts.
Leveraging Open Source Data for AI and ML: Challenges and ...
From speculation to demand
The market will shift from speculation-driven to demand-driven, with the focus shifting from speculating on potential value to actual usage and adoption. It is not enough for entrepreneurs to attract investors solely through narratives, as the market is now more cautious and conservative towards pure narrative-driven projects. In the future, projects with real market demand and business revenue will become a necessary condition for investors to buy in, which is also a basic logic in our layout of the Crypto & AI track.
Based on the above development trends, we have abstracted the corresponding investment logic, with three core points:
The Prospect of A Promising Track: Decentralized Computing Power ...
1. Market demand-oriented
Many AI startup teams only discover that the market is not buying their products after launching them, as users have no real demand for their products. The root cause is that they did not conduct sufficient market demand research at the beginning of their startups, and failed to be market-oriented or mistakenly identified unverified pseudo-demand. Therefore, when exploring the Crypto & AI track, we pay particular attention to meeting market demand. First, we assess the overall direction of the project, which Crypto & AI track it belongs to, the market size, the future development potential, as well as the competition.
2. Cannot be pure narrative
The most criticized aspect of the Crypto & AI field is the predominance of narratives without actual applications. We cannot fully agree with this view, but the market is no longer willing to buy into pure narratives, so real business scenarios and business models are particularly important.
3. The team needs to have an AI background
The AI boom has quickly ignited the enthusiasm of the Web2 market and VCs, and this trend has naturally blown over to the crypto world, with many crypto startup teams starting to ride the AI hype, packaging their projects. This has led to a large number of Crypto & AI projects on the market, but due to the lack of AI technical background in the teams, these projects are mostly shell products without market competitiveness, and they are quickly eliminated by the market.
