What Are AI Cryptocurrencies? (Full Beginner's Guide)

04/25/2024, 01:43 PM

What Are AI Cryptocurrencies? (Full Beginner's Guide)

AI cryptocurrencies refer to tokens associated with projects that leverage artificial intelligence (AI) technologies. They range from blockchain-based platforms that integrate AI to improve operational efficiency to initiatives aimed at advancing AI research and development.

Artificial intelligence has been transforming various industries for some time now.

It was only natural to anticipate that AI would eventually start to influence the world of digital currencies.

This mix of AI and blockchain is creating new kinds of digital money called AI cryptocurrencies.

In this easy guide, we'll cover what AI cryptocurrencies are, how they work, and show you some top AI cryptocurrencies out there.

AI and Crypto - What Is The Connection Between the Two?

Imagine a scenario where you have a blockchain-based supply chain system and each transaction on this blockchain is like a “shipment”.

And every one of these transactions gets recorded on the blockchain.

So what will artificial intelligence do here?

Facilitate transactions. Also known as the “pain point” of crypto trading.

Implementing the AI, it will be possible to predict potential delays, assess “product quality” in real-time and suggest the best route for transactions.

AI algorithms can predict the best routes for transaction completion, reducing the time it takes for transactions to be confirmed on the blockchain.

This is especially useful in networks experiencing high volumes of transactions, ensuring that the system remains fast and efficient.

How Do AI Tokens Work?

To understand how AI cryptocurrencies work, let's dive into their most interesting features.

These tokens bring a unique mix of technology and innovation to the blockchain space. Here's a simplified look at what makes them effective:

1. Streamlining Transactions

AI algorithms are like the GPS of the blockchain world as they aim to find the fastest and most efficient routes for transactions. AI tokens streamline transactions by serving as a digital currency within their respective platforms. When you use these tokens, they act like a universal form of payment, allowing you to buy and sell services, access specific AI-driven applications, or even pay for computational resources.

2. Boosting Blockchain Security

Security is a top priority for any blockchain. AI adds an extra layer of defense by analyzing patterns and spotting anything out of the ordinary. This helps to catch potential fraud or security threats early. Since AI systems are constantly learning from new data, they're quicker at adapting to new risks than traditional security setups, making blockchain networks safer against attacks.

3. Managing Protocols

AI can also help with managing the “nuts and bolts” of a blockchain network. It can automate some aspects of governance by analyzing data and trends to make smart decisions. This might include adjusting transaction fees, tweaking block sizes, or even managing consensus rules based on what’s happening within the network.

4. Engaging Users

AI tokens are like the social glue in decentralized AI platforms. They play a big role in keeping users engaged and active in the community. By rewarding participation and encouraging contributions, AI tokens create a sense of involvement, turning users into more than just spectators—they become key players in the ecosystem.

Top 5 AI Cryptocurrencies (by Market Capitalization)

Even though the market capitalization of each cryptocurrency can fluctuate and affect their rankings, these are the top five most popular AI cryptocurrencies commonly found on exchanges:

Internet Computer (ICP)

One of the most popular AI cryptocurrencies on the market is Internet Computer (ICP) and it has the highest market capitalization (at the moment of writing this text).

It is a blockchain platform developed by the DFINITY Foundation with a focus on providing a decentralized, scalable infrastructure for building web-based applications and services.

Although ICP is not explicitly designed for AI, its robust infrastructure can support AI applications.

For example, it can integrate with existing blockchain technologies, allowing for seamless interactions between AI-based applications and other blockchain-based projects.

Near Protocol (NEAR)

NEAR Protocol (NEAR) is a decentralized application platform designed to provide the ideal environment for dApps (decentralized applications) through high speed, low costs, and easy developer and user access.

It's built on a unique blockchain structure aimed at overcoming some of the scalability and usability challenges faced by earlier blockchains like Ethereum.

When it comes to users, NEAR aims to provide straightforward access to dApps with features like human-readable account names instead of cryptographic wallet addresses, making it more accessible to mainstream users.

Bittensor (TAO)

The core idea behind Bittensor is to create a decentralized network where AI models can interact, share data, and improve over time without centralized control.

Nodes in Bittensor's network earn TAO, the native token, by offering valuable services.

These can include supplying data for AI training, providing computational power, or hosting AI models that others can use.

One of the key ambitions of Bittensor is to create a marketplace where AI services can be bought and sold using TAO.

This marketplace would allow developers to monetize their AI models and users to access a variety of AI-driven applications, ranging from natural language processing to complex data analysis tools.

Render (RNDR)

While Render itself is not an actual AI project, its infrastructure is highly relevant to AI applications.

Render (RNDR) operates by connecting artists, developers, and content creators who need GPU computing power for rendering tasks with GPU owners who can provide this power.

For example, it supports complex graphics projects that include virtual reality (VR), augmented reality (AR) and 3D modeling.

The Render Network uses blockchain technology to make top-quality rendering more widely available.

This approach opens up access to rendering resources and could also make it easier for independent developers and small organizations to use AI, especially those who might not have the funds for expensive computational power.

The Graph (GRT)

The Graph (GRT) specializes in indexing and querying data from blockchains, which is crucial for AI applications that require reliable access to large datasets.

By providing a decentralized solution for data retrieval, The Graph supports AI projects that need to access and analyze data across different blockchain networks.

The Graph uses GraphQL, a query language that allows for complex data extraction and transformation.

AI applications typically require data from multiple sources, and The Graph's GraphQL-based structure simplifies the process of combining and analyzing this data.

How To Buy AI Coins?

Buying AI-related cryptocurrencies, or AI coins, involves several steps.

First, you need to choose whether you want to buy it from a centralized or decentralized exchange (also known as DEX). All of the above-mentioned AI cryptocurrencies are available for trading on Bitcoin Store as well.

If you're using a centralized exchange, you'll need to create an account. This process usually requires:

  • Personal Information: Name, email, and sometimes a phone number.
  • Verification: Depending on the exchange, you may need to verify your identity by submitting a photo ID or other documents.

(Decentralized exchanges generally don't require an account but will need a compatible cryptocurrency wallet.)

After that, you will need a cryptocurrency wallet that is essential for storing your coins. That can be either a digital wallet or a hardware wallet like Ledger or Trezor.

Once you’ve set up your wallet, you will need to deposit funds into your account.

Centralized exchanges usually allow deposits via bank transfers, credit/debit cards, or other methods.

You can also deposit other cryptocurrencies, like Bitcoin or Ethereum, and use them to trade for AI coins.

Is It Good To Invest in AI Crypto?

Investing in AI cryptocurrencies can be an intriguing opportunity, but whether it's a good investment, it still depends on various factors such as your risk tolerance, investment goals, and understanding of the market.

Before deciding whether to invest in an AI coin, here are several tips that would be good to follow, especially if you are a crypto beginner:

  • Do your research: Understand the project's purpose, technology, team, and community before investing.
  • Diversify your portfolio: Don't put all your capital into a single AI cryptocurrency. Diversification can reduce risk.
  • Invest what you can afford to lose: Only invest money you can afford to lose, given the inherent risks in the cryptocurrency market.
  • Stay informed: Keep up with news, developments, and market trends to make informed decisions.
  • Use secure wallets: Ensure your AI crypto is stored securely and use 2FA authentication.