How Web3 and AI can work together
Janus Digital | This Week in Web3 | #14
Intro
Gm friends,
Hope you are having a fantastic week.
Given the hype around ChatGPT, we obviously have to cover something AI related…
In this week’s topic, we are explaining how web3 and AI can work together.
Enjoy,
Gustaf Baavhammar and the Janus team
Topic of the week: How Web3 and AI can work together
Let’s get back to the basics: Web3 is trying to change the nature of ownership online – where individuals control their data rather than centralized institutions. On the other hand, artificial intelligence aims to bring logic to data – which consequently makes machines more similar to humans. Below we explain how they can solve problems for each other by working together.
Web3 can help facilitate transactions between AI machines. In today's world, humans interact with AI machines to find solutions to problems. In the future, AI machines may interact with each other, and in order to do so in a permissionless fashion, web3 applications may be needed. For example, this could occur when your smart car is interacting with a charging station and the payment is automatically made through crypto without third-party verification.
AI can help set a decentralized credit score on DeFi platforms. By analysing on-chain data, AI might help to determine a score which predicts your likelihood of repaying a loan as accurately as a credit score can. This would allow protocols to identify users who should not take a loan, whilst remaining decentralized. Hence, it would put an end to over-collateralization, a major issue in the DeFi industry.
Web3 allows for the exchange and verification of AI intellectual property. AI code created is recognised as the intellectual property of the creator. However, without a middleman, IP exchange is not possible. In order to purchase an AI model, you must have a third party verify the ownership and how effective the code is. But then the developers must reveal their code which is a significant risk. By building on a web3 layer, and using zero-knowledge proofs, the creator will be able to verify ownership and the effectiveness of the code without showing the code. (You can read more about zero-knowledge proofs in our old newsletter post)
Web3 News
Prices Fluctuate as the US Fed Interest Rate is Announced. Bitcoin and Ethereum ended last week with minimal changes, which could be considered a positive result compared to the losses seen by other top cryptocurrencies. As of last Saturday morning, Bitcoin had risen by less than 1% over the previous seven days, while Ethereum had fallen by 1.5%. Most of the top 50 coins by market cap had experienced losses over the past week, or had risen by less than 2% if they were in the green. BTC fluctuated between roughly $17,300 and as low as $16,700, while Ethereum jumped between $1,300 and $1,225. Following the release of the US Federal Reserve's interest rate hike decision, which has strengthened the dollar and caused a drop in the BTC price, Bitcoin price predictions have become bearish. The price of Bitcoin reached a high of $18,400 before falling. It is currently trading close to a crucial support level, with a potential rebound if prices rise above $17,550. On Wednesday, the Federal Reserve Board voted to raise interest rates by 0.5 percentage points, a smaller increase than in recent months. After an extraordinary year that included seven consecutive rate hikes as part of an attempt to bring down the highest inflation since the early 1980s, the central bank has decided to change tack and raise rates. The rate hike approved by the Federal Reserve on Wednesday was smaller than the four consecutive three-quarter point hikes approved at previous Fed meetings, but it was still twice as large as the central bank's customary quarter-point increase, and it will likely worsen the financial damage for millions of American businesses and households by increasing the cost of borrowing. Despite breaking through a critical resistance level of around $18,150, Bitcoin is currently trading bearishly. However, following the announcement of the Fed rate hike, Bitcoin fell below the $18,000 mark. This suggests that the selling trend could continue. In other news, on 9 December, the number of active ETH addresses reached 1.4 million for the first time, indicating increased engagement.
Binance Sees Over $3 Billion in Customer Withdrawals in 24 Hours. Binance, the largest cryptocurrency exchange, experienced more than $3 billion in net customer withdrawals in the last 24 hours. This comes amid rumors of issues at the platform. Earlier this week, the exchange saw $1 billion in withdrawals on Monday and Tuesday. Binance currently has around $60 billion worth of assets on its exchange. The recent withdrawals come after some experts criticized Binance's audit by Mazars and claimed that the exchange's bitcoin reserves have a collateralization ratio of 101%.
New FTX CEO: $1 Billion Worth of Assets Have Been Recovered. John Ray III, the CEO of failed crypto exchange FTX, announced that the new leadership team has recovered $1 billion worth of assets. Ray, a bankruptcy expert previously involved in the collapse of Enron, testified before the US House Committee on Financial Services on Tuesday about the collapse of FTX. He said that the team has "secured more than $1 billion of digital assets to protect against the risk of theft or unauthorized transfers" and is working with several crypto research firms, including Chainalysis, BitGo, and Alvarez & Marsal, to trace and secure additional funds. Ray mentioned that there was a complete lack of financial and other record-keeping at FTX, which makes it difficult to trace funds. He also revealed that the exchange used QuickBooks for recordkeeping.
DeFi Protocol Gets Hacked for $6.9 million. DeFi protocol Lodestar Finance lost $6.9m in an exploit that allowed an attacker to manipulate a price oracle on Ethereum's Arbitrum network. In a statement, the team behind Lodestar said that the hack had created "a bad situation" and that "options are limited". They said that the exploit was made possible by the manipulation of a price oracle, which caused an "instantaneous change in the price". This enabled the attacker to "borrow more than they should have been allowed", resulting in a profit for the perpetrator. The team said that their main priority is to recover what they believe can be recovered and to establish communication with the attacker. They said that they will base their recovery plan on the approximately 2,720,000 GLP that is recoverable from the plvGLP contract, adding that further details will be provided as they become available.