https://www.bitcoinmarketjournal.com/protocols-on-optimism/

Executive summary: Optimism is a leading Layer-2 scaling solution for Ethereum, which uses “optimistic rollups” to make Ethereum faster and cheaper. This has allowed the company to rapidly amass nearly $1 billion in Total Value Locked (TVL).

The network’s native token, OP, has a market cap of over $660 million. If investors are optimistic about Optimism, the OP token is like investing in the “company.” Similarly, the protocols built on top of Optimism are “companies” in their own right, many spanning multiple chains.

This provides interesting opportunities for investors to buy and hold quality tokens for the long term. We’ll cover all these investing opportunities below.

What is Optimism?

Ethereum still dominates decentralized finance (DeFi), accounting for about 60% of total value locked (TVL) in the space. However, even with the transition to a Proof-of-Stake (PoS) consensus mechanism, there is still room for improvement, and that’s what Layer-2 solutions aim to achieve.

Optimism is one of the fastest-growing Layer-2 networks, and its goal is to make Ethereum faster and cheaper, driving DeFi and Web3 adoption. While Polygon and Arbitrum are still larger L2s in terms of TVL, Optimism is showing good revenue growth, particularly against Arbitrum, its closest competitor.

Optimism’s fundamental technology, called “optimistic rollups,” bundles numerous transactions into manageable portions, effectively boosting transaction speed while reducing associated costs. This approach has fostered its growth to nearly $1 billion in TVL.

Let’s break down “optimistic rollups.”

Transactions are executed on Optimism (Layer-2) and subsequently batched and submitted to Ethereum (Layer-1). These batches are the “rollups,” optimizing user experience and safeguarding transactions.

Optimism’s transactions are presumed valid until proven otherwise (an “optimistic” viewpoint), with a challenge period that offers a window for fraud detection. This results in a seven-day withdrawal period from Optimism to Ethereum, ensuring the validity and security of each transaction.

Optimism supports various DeFi wallets, as well as additional projects to be built on top of it. OP’s market cap is over $660 million at the time of writing, while the blockchain hosts over 100 decentralized finance (DeFi) applications, each their own investment opportunity.

Top 10 Protocols on Optimism by Total Value Locked

Uniswap v3

Type of dApp: DEX
BMJ Score: 4.5

Uniswap is the largest DEX by trading volume. The v1 platform was launched in 2018 as an AMM model. Uniswap v3 was launched in 2021 on Ethereum mainnet and later deployed on Optimism and four other chains. It introduces concentrated liquidity and multiple fee tiers, allowing liquidity providers (LPs) to control capital allocation and compensate risk.

The latest version offers up to 4000x capital efficiency compared to v2, leading to higher returns and lower slippage. LPs can optimize asset exposure and simulate fee-earning limit orders. Furthermore, v3’s oracles provide time-weighted average prices (TWAPs) for improved integration. Thanks to its advanced features, Uniswap v3’s Ethereum swaps are slightly cheaper than v2, while Optimism deployment significantly reduces costs.

At the time of writing, v3 accounts for almost 75% of all activity on the Uniswap ecosystem, with almost $3 billion in TVL.

Aave v3

Type of dApp: Lending
BMJ Score: 4.0

Aave is a decentralized, non-custodial lending protocol enabling users to supply, borrow, or liquidate assets. The v3 version of the protocol enhances yield generation, borrowing power, and introduces novel features. The Portal feature facilitates cross-network liquidity flow, allowing approved bridges to transfer assets between Aave v3 markets. The Efficiency Mode optimizes borrowing power for correlated assets, promoting use cases like high-leverage forex trading and efficient yield farming. Isolation Mode permits new assets to be listed as isolated, limiting the collateral to a single asset. Siloed Borrowing allows potentially manipulable oracles (like illiquid Uniswap v3 pairs) to be borrowed separately, minimizing risk to the protocol’s solvency.

At the time of writing, Aave v3’s total value locked (TVL) is $1.4 billion compared to v2’s $4+ billion. In terms of active loans, Aave is more than 400% ahead of its nearest competitor Compound.

Stargate Finance

Type of dApp: Cross-chain
BMJ Score: 3.5

Stargate Finance is a LayerZero-based cross-chain bridge solution, simplifying cross-chain token trading between various blockchains such as Ethereum, Optimism, BNB Chain, Avalanche, Polygon, Arbitrum, and Fantom.

Stargate focuses on stablecoins and leverages LayerZero’s infrastructure to establish liquidity pools with attractive interest rates. Stargate addresses security concerns that are common among bridges. It relies on cross-verification technology between Oracle and LayerZero and uses omni-chain tokens instead of the wrap-token method to ensure a high level of security.

Key features include 1:1 native asset cross-chain swaps, unified liquidity pools, and earning stablecoin rewards through providing liquidity. Users can farm the native STG token and stake it to receive veSTG, Stargate’s governance token. As the leading Layer-0 bridging solution, Stargate enjoys over 20x the daily users as its nearest competitor, giving it significant revenue growth in 2023.

Synthetix

Type of dApp: Synthetic asset protocol
BMJ Score: 3.5

Synthetix is a decentralized finance (DeFi) protocol on Ethereum and Optimism, enabling users to mint and trade synthetic assets that mimic real-world and crypto assets without the need for intermediaries. Through the use of its native token (SNX) as collateral and smart contracts, Synthetix can generate synthetic assets (synths) like sUSD and sBTC, which track the value of the US dollar and bitcoin, respectively.

The protocol relies on decentralized price oracles to ensure accurate tracking and offers exposure to various asset classes, including commodities, fiat currencies, and indexes. Synthetix serves as a backend liquidity provider for user-facing DeFi apps, addressing liquidity and slippage issues common in DEXs. As Ethereum gas fees have increased, Synthetic has seen its revenues increase by more than 50% since the start of 2023.

Curve Finance

Type of dApp: DEX
BMJ Score: 3.0

Curve Finance is a DEX focusing on stablecoin trading. It is currently the largest DEX by TVL, with almost $5 billion worth of crypto locked on Curve at the time of writing. As an AMM similar to Uniswap, Curve facilitates efficient transactions by maintaining low fees and slippage through its liquidity pools.

The platform’s focus on stable assets, including DAI, USDT, USDC, BUSD, and TUSD, differentiates it from other DEXs. The CRV token, the native token of the Curve protocol, incentivizes liquidity provision and encourages user involvement in the governance process. Curve’s substantial liquidity makes it a valuable component of other DeFi apps, such as Yearn Finance and Compound. Utilizing a unique pricing formula, Curve minimizes slippage, even for substantial transactions, offering competitive rates comparable to centralized exchanges.

While Curve has far fewer pools then its closest competitor Uniswap, it also has more than double the TVL. With its focus on stablecoins it is poised for significant growth once the U.S. clarifies its stance on stablecoin regulation.

Beefy

Type of dApp: Yield aggregator
BMJ Score: 2.0

Beefy is a decentralized, multichain yield optimizer that facilitates compound interest earning on crypto holdings. The yield aggregator supports 20 networks, including Optimism.

Through smart contract-based investment strategies, Beefy maximizes rewards from liquidity pools, AMM projects, and other yield farming opportunities. Its main product is Vaults, which allow users to stake multiple crypto tokens that are automatically compounded to increase the initial deposit. Importantly, despite the name of the product, funds are not locked, and users maintain full control.

BIFI, Beefy’s native token, offers holders a share of platform revenue and voting rights on governance issues. Staked BIFI can earn more BIFI or blue-chip tokens like ETH, BNB, and others in BIFI Earnings Pools.

While there are nearly 100 yield aggregators, Beefy is the second largest, eclipsed only by Yearn.finance. Where it really excels is in the chains supported. Where Yearn supports only 4 chans, Beefy supports 20, making it the yield aggregator with the broadest support for chains.

Velodrome Finance

Type of dApp: DEX
BMJ Score: 2.0

Velodrome Finance is a decentralized exchange (DEX) employing the Automatic Market Maker (AMM) model. It is built on the codebase of Solidly and is focused on Optimism, aiming to deliver deep liquidity, low exchange fees, and minimal slippage. Currently, it accounts for about a third of all TVL on Optimism.

Velodrome combines the Vote-Escrow Token (veVELO) and Olympus DAO (3.3) game theory mechanisms, rewarding liquidity providers and veVELO holders with VELO emissions and encouraging long-term holding.

Its unique “bribe” feature enables users to incentivize veVELO holders to vote for their preferred liquidity pools. With up to 500 supported pairs and multiple liquidity pools, Velodrome offers a diverse, low-cost trading platform that benefits traders, veVELO holders, and the broader Optimism ecosystem.

Beethoven X

Type of dApp: DEX
BMJ Score: 1.5

Beethoven X is a community-driven DEX and DeFi platform residing on Optimism and Fantom Opera. It was developed by an anonymous team and represents a fork of the Balancer v2 protocol, one of the largest DEXs.

Beethoven X offers innovative, capital-efficient DeFi solutions for crypto traders and investors. It encompasses programmable liquidity, offering a future-oriented product adaptable to the evolving needs of the industry. Its core infrastructure includes unique features such as Weighted and Boosted Pools as well as Liquidity Bootstrapping Pools (LBPs). The pools comprise up to 8 crypto assets and function as self-balancing index funds.

The platform generates revenue through trading and flash loan fees, part of which is redistributed as BEET rewards to fBEETS holders (representing LP positions). Users can earn rebalancing fees and additional incentives by maintaining the crypto equivalent of an index fund.

dHedge

Type of dApp: Asset management
BMJ Score: 1.5

dHedge is a decentralized asset management platform operating on Ethereum-based blockchains, including Ethereum, Polygon, and Optimism. The non-custodial and censorship-resistant protocol enables users to maintain full ownership of their assets while benefiting from expert management strategies.

By connecting any ERC-20 compatible wallet to the dApp, individuals can deposit, store, and sell trust-minimized vault tokens without lockups. The platform puts a great emphasis on transparency, with all transactions being verifiable on the blockchain. Key features of dHedge include non-custodial fund ownership, decentralization, social interactions between managers and depositors, and verifiable transactions. Users can invest in various strategies based on transparent track records.

Besides using the platform as a way to find potential fund managers, trading in the DHT token can be quite lucrative as it tends to trade in a fairly well defined range.

Sonne Finance

Type of dApp: Lending
BMJ Score: 1.0

Sonne Finance is a decentralized, transparent, and non-custodial lending and borrowing protocol native to the Optimism network. Compatible with the Ethereum Virtual Machine (EVM), it operates similarly to established platforms like Compound Finance and Aave.

Sonne Finance offers high-liquidity money markets with dynamically adjusted incentives for assets such as wETH, USDC, USDT, DAI, OP, and sUSD. The platform aims to be the leading lending solution on Optimism by providing competitive incentives, deep liquidity, and native integration. Additionally, it introduces a unique bribe-reward mechanism in collaboration with Velodrome Finance, benefiting sSONNE stakers with revenue shares and VELO tokens.

Investor Takeaway

Optimism’s Layer-2 scaling solution presents significant growth potential for Ethereum, effectively addressing scalability and cost issues. Its user-friendly interface, compatibility with various DeFi wallets, and support for over 100 DeFi applications position it as a promising investment opportunity.

The native token, OP, has shown consistent stability, with its price ranging from $1.70 to $3.00 for most of this year. By contrast, Arbitrum’s ARB token, after surging at the start of the year, has been dropping steadily for most of 2023. Polygon’s MATIC has seen a similar pattern, doubling to start the year and then returning nearly to its baseline.

The prominent protocols operating on Optimism, including Velodrome Finance, Synthetix, Aave, and Uniswap, are innovative DeFi solutions with large user bases, reinforcing Optimism’s potential for substantial growth.

However, if Ethereum can solve its scalability issues, we do not know if L2s will be needed long-term. Even if they are, we don’t know which L2(s) will capture most of the market. While we believe in Ethereum as an L1, the battle for L2 supremacy is just beginning, and it’s still anyone’s game.

Subscribe to the Bitcoin Market Journal newsletter to get blockchain investment opportunities delivered to your inbox! 

The post The Ultimate Guide to the Top 10 Protocols on Optimism appeared first on Bitcoin Market Journal.

https://www.bitcoinmarketjournal.com/hong-kong-as-a-crypto-hub/

Executive summary: Despite China’s ban on crypto operations, Hong Kong is positioning itself as a regional crypto and Web3 hub, attracting blockchain firms and legalizing retail cryptocurrency trading. With a robust regulatory framework in place, Hong Kong has already received expressions of interest from over 80 companies providing crypto-related services.

Bitcoin (BTC) and Ethereum (ETH) are expected to be the chief beneficiaries, but emerging Web3 services also warrant attention. Investors should monitor the evolving regulatory landscape and follow mainland China’s moves, as loosening crypto restrictions could cause the market to surge.

China’s Evolving Stance on Crypto

During the initial years of bitcoin’s existence, China was one of the most important countries for the crypto industry, as it hosted many companies operating exchange platforms, wallets, and other services. Moreover, China alone accounted for about two-thirds of all bitcoin mining in 2019-2020.

However, the Chinese government subsequently decided bitcoin and other cryptocurrencies pose many risks that outweigh the potential benefits. The result was Chinese authorities gradually cracking down on all retail crypto operations.

In 2017, it started with initial coin offerings (ICOs). The government shut down all ICO platforms and operations when they were at their peak. If a local exchange sold ICO tokens, they had to return the funds to investors.

During that time, China cracked down on many crypto exchanges, but the countrywide ban came in 2021. As bitcoin skyrocketed to fresh records, China banned crypto mining and prohibited all crypto transactions altogether, forcing mining and exchange companies to relocate.

Hong Kong as an Experiment

Even though Hong Kong is officially part of China, it remains somewhat separate due to its status as a special administrative region (SAR). This status gives the city more freedom; thus it might choose not to enforce Beijing’s crypto rules. Due to the proximity to the mainland territory, many crypto companies might relocate to Hong Kong in search of better conditions.

The good news is that Hong Kong plans to become a regional crypto and Web3 hub and even compete with Singapore to attract blockchain firms, especially after Singapore moved to a tough stance on crypto businesses last year. Crucially, Hong Kong has reportedly obtained the nod from Beijing.

At the end of 2022, Hong Kong said during its government-backed fintech week event that it planned to legalize cryptocurrency retail trading and develop a licensing system for crypto exchanges and other blockchain companies.

Some believe that China will closely monitor Hong Kong’s crypto story before returning to the crypto question itself.

Deng Chao, CEO of digital asset manager Hashkey Capital, commented on Hong Kong’s crypto initiative:

“In the future, it may serve as a model for policy formulation in other regions [in China] if it proves successful.”

Strong Regulation Expected

As Hong Kong prepares to become crypto-friendly, it is creating an extensive regulatory framework for digital assets and blockchain operations. In February 2023, the city’s Securities and Futures Commission (SFC) released draft rules enabling investors to trade certain major cryptocurrencies starting June 1, 2023. However, it didn’t mention which coins would be supported.

The financial regulator plans to introduce a new licensing regime to take effect on June 1. The new rules will require all centralized crypto exchanges doing business in Hong Kong to be licensed by the SFC. The regulatory requirements are expected to be similar to those for licensed securities brokers and automated trading venues.

SFC CEO Julia Leung stated:

“In light of the recent turmoil and the collapse of some leading crypto trading platforms around the world, there is clear consensus among regulators globally for regulation in the virtual asset space to ensure investors are adequately protected and key risks are effectively managed.”

Who is Interested?

In February, the city’s Department for Foreign Direct Investment received “expressions of interest” from more than 80 companies offering crypto-related services. The companies, located in mainland China and abroad, include crypto exchanges, blockchain infrastructure firms, blockchain network security firms, crypto wallets and payment operators, and other Web3 companies.

KuCoin, one of the largest crypto exchanges by trading volume, stated last year that it would open an office in Hong Kong. Other major companies planning to expand their presence in the city are Huobi, OKX, and Gate.io.

Interestingly, crypto firms have found an unexpected ally: Chinese state-owned banks. Bloomberg cited people familiar with the matter saying that Chinese banks, including Shanghai Pudong Development Bank (600000:CH), the Bank of Communications Co. (BKFCF:US), and Bank of China Ltd. (3988:HK), have either started providing banking services to crypto companies in Hong Kong or made inquiries with crypto firms.

Institutional investors are also monitoring Hong Kong’s transformation into a potential crypto hub, looking to become early beneficiaries in the competition to win market share.

Which Tokens Might Benefit Most?

Hong Kong is about to shortlist the cryptocurrencies to be accepted for trading starting on June 1. While it hasn’t indicated which digital assets would be accepted, the list will likely include bitcoin (BTC) and Ethereum (ETH), which will probably remain the primary beneficiaries.

Ethereum can be a major winner as Hong Kong has suggested it plans to become a Web3 hub. The majority of decentralized applications (dapps), non-fungible tokens (NFTs), and other Web3 elements rely on Ethereum as their underlying infrastructure.

In terms of currently popular dapps in the Asian region, the decentralized exchange 1inch (INCH) continues to see great interest. In terms of centralized exchanges, leaders include Binance (BNB) and Kucoin (KCS), along with OKX.

Another potential winning blockchain will be Polygon (MATIC). This ties into the popularity of gaming in Asia in general and in China specifically. According to a DappRadar study, Polygon is the favored blockchain for game development, with 30.8% of web studio game developers choosing Polygon. This is important, because Asia has 55% of the total global gamers, representing some 1.7 billion users.

In China gaming is dominated by Tencent (TCEHY:US), and while the company isn’t currently developing blockchain games, it has recently announced a number of partnerships that indicate it may be moving into the blockchain space in response to the news. Tencent will jointly develop a suite of blockchain API services with Web3 infrastructure provider Ankr (ANKR), and is also partnering with several Web3 infrastructure builders, including Avalanche (AVAX), Scroll, a Layer-2 scaling solution for Ethereum; and Sui (SUI), a relatively young Layer-1 blockchain created by ex-Meta employees.

Can Hong Kong Become a Crypto Hub?

Despite the strict regulations anticipated, the Hong Kong crypto hub plan has all prerequisites to become a reality. The city’s initiative is becoming even more relevant today as the US, until recently one of the best jurisdictions for crypto businesses, has been cracking down on crypto operations in reaction to the collapse of FTX.

Coinbase, the largest crypto exchange in the US, is considering relocating due to “regulatory uncertainty.” As we can see, the lack of clear regulation can be a problem. It remains to be seen how restrictive Hong Kong is going to be.

Investor Takeaway

As Hong Kong takes steps to become a crypto and Web3 hub, investors should keep a close eye on the evolving regulatory landscape and the potential impact on the crypto space. It makes sense to monitor the list of approved tokens when it becomes public and the level of support from mainland China. If the latter starts loosening its crypto ban, the market will likely explode.

Bitcoin (BTC) and Ethereum (ETH) are expected to be the major beneficiaries, but emerging Web3 services deserve attention as well.

Over 50,000 crypto investors get our Bitcoin Market Journal newsletter. Click to subscribe and join the tribe. 

The post China Exploring Hong Kong as a Crypto Hub: Investor’s Narrative appeared first on Bitcoin Market Journal.

https://www.bitcoinmarketjournal.com/smart-contracts-and-ai/

Executive Summary: We explore the potential of combining blockchain smart contracts with artificial intelligence. By merging these technologies, various industries will benefit from enhanced security, analytics, auditing, predictive modeling, fraud detection, and cross-chain interoperability.

Key applications include decentralized prediction markets, fraud detection, supply chain management, decentralized autonomous organizations (DAOs), and personalized investment portfolios. Investors can capitalize on this convergence by seeking exposure to innovative AI projects that are showing early user traction.

Blockchain and artificial intelligence (AI) are perhaps the two most disruptive technologies of our time. Can you imagine what they might do together?

Both technologies are a part of what is being called the fourth industrial revolution. While blockchain has been in the spotlight over the past few years, AI has attracted less attention until very recently. The launch of OpenAI’s ChatGPT at the end of 2022 changed everything, with the tool hitting the 5 million user mark in only five days.

Even more important for investors is the forecast for the AI and smart contracts market to grow by 53.4% CAGR through the end of the decade, going from $20.7 billion in 2022 to $414.8 billion in 2029.

This amazing growth can be attributed to the process efficiencies that businesses can secure from AI, and the ability of smart contracts to automatically implement these efficiencies.

Why AI and Smart Contracts go Together

AI can make smart contracts way smarter. Since blockchains operate with data and transactions, they can significantly benefit from AI, a technology that uses data to learn and improve.

Here is how AI could benefit smart contracts:

Security – Smart contracts already provide a high level of security thanks to decentralization. AI can enhance security by identifying potential vulnerabilities and loopholes, contributing to the overall security of smart contracts and reducing the risk of exploitation.

Analytics – AI can be used to build analytics tools that provide insights into smart contract performance, enabling developers and users to make decisions based on data patterns.

Auditing – AI can automatically audit smart contracts to ensure they comply with industry standards and best practices based on the jurisdictions they operate in.

Predictive modeling – AI can navigate historical data to predict smart contract and transaction outcomes, helping parties better understand the potential risks and rewards of a given smart contract. AI can also be used to simulate transactions before they go live.

Dispute resolution – Developers can integrate AI into smart contracts to analyze contract data and suggest fair resolutions in case of conflicts, improving the dispute resolution process and reducing reliance on human intermediaries.

Anomaly detection – AI can monitor contract activity in real-time and identify unusual patterns or red flags, allowing for quick intervention and mitigation of risks.

Cross-chain interoperability – Cross-chain communication is essential for the fragmented blockchain market. AI can facilitate the development of interoperable smart contracts, enabling seamless interactions between different chains and promoting a more cohesive ecosystem.

Current and Future Use Cases

For investors researching real projects using AI and blockchain, here are a few examples of live projects (with their token symbols), as well as potential future applications.

Use Case #1: Decentralized Prediction Markets

Decentralized prediction markets are blockchain-based markets where users trade the outcome of events, which can be related to finance, sports, politics, contests, etc. Some of the largest prediction markets operating in decentralized finance (DeFi) are Augur (REP), Polymarket, and Gnosis (GNO). A total of over $10.6 billion worth of crypto are locked with these three protocols.

Augur

Augur is the OG of prediction markets. Founded in 2014, its tagline is “the world’s most accessible, no-limit betting exchange.” It uses the “Wisdom of Crowds” to ostensibly create an accurate forecasting platform. The platform enables users to create a market for forecasting a specific future event, such as who will win a sporting event, or whether the price of an asset will reach a certain level by a specific time.

Polymarket

Polymarket is an information markets platform. Like other prediction markets, it allows users to speculate on the outcome of various current events. With Polymarket, users are able to build a portfolio of forecasts, profiting if those forecasts are right. Market prices reflect what traders think are the odds of future events, turning trading activity into actionable insights that help people make better decisions. This potentially makes Polymarket a valid source of unbiased and real-time data about future events. Unlike other prediction markets, Polymarket does not have its own token. Instead it uses USDC in its marketplace. With over $5 million TVL it is among the largest prediction marketplaces at the time of this writing.

Gnosis

Gnosis began as a prediction market on Ethereum back in 2015. Since then it has evolved into the Gnosis Chain, an open framework for development, and supports a number of third-party dapp prediction markets like Azuro, Omen, and Reality Card. These platforms allow users to bet on the outcome of sport events, cryptocurrency prices, technology developments and politics, among other categories. Other products developed by Gnosis include Conditional Tokens, a new asset class designed to facilitate the creation of highly liquid prediction markets; the C0W protocol, which is a permissionless trading protocol; and Safe, a decentralized custody protocol and asset management platform.

AI can take prediction markets to another level by enhancing their efficiency, accuracy, and security. AI algorithms can work alongside smart contracts to improve various aspects, including data analysis, decision-making, and dispute resolution.

AI can analyze massive amounts of historical and real-time data, helping users make informed decisions on market outcomes and potentially develop prediction strategies. This opens the door to more accurate predictions by identifying trends and patterns, which can lead to improved market performance.

Besides analytics, AI can be used for automation, as it can streamline the execution of prediction market transactions, ensuring transparent, tamper-proof, and trustless settlements.

Use Case #2: Fraud Detection

The combination of AI and smart contracts can lead to a more efficient fraud detection system that is adaptable to different threats. Enterprises and researchers can train machine learning models to detect suspicious activities and inconsistencies in transaction data. AI systems with the ability to recognize fraud indicators can monitor transactions in real-time to protect user funds.

Based on AI findings, smart contracts can enforce predefined responses to avoid fund losses, such as freezing accounts, alerting the involved parties, or launching follow-up investigations.

Integrating AI and smart contracts in fraud detection systems represent a powerful solution to reduce financial fraud. Combining AI capabilities in pattern recognition and data analysis with the automation potential of smart contracts enables organizations to build a proactive and resilient fraud detection system to protect end users against financial threats.

Use Case #3: Supply Chain Management

In supply chain management, the two technologies can be merged to enhance transparency, efficiency, and traceability of goods. For example, AI can analyze data from multiple sources, such as Internet of Things (IoT) devices, to monitor the movements of goods and anticipate bottlenecks or disruptions.

Elsewhere, smart contracts can automate transactions, payments, and contract agreements between participants, ensuring the smooth flow of goods and data. This technological symbiosis can ensure better collaboration between multiple parties, reduce paperwork and manual intervention, and boost the overall reliability of supply chains.

One company that already uses both technologies for the supply chain is Bext360. It employs AI and blockchain to improve transparency and efficiency in the supply chain systems employed in the coffee, lumber, seafood, and mineral industries. AI evaluates crops and anticipates growth patterns, while blockchain ensures that a product’s supply chain is monitored closely from seed to completed product.

Use Case #4: Decentralized Autonomous Organizations (DAOs)

A decentralized autonomous organization (DAO) is a community-driven enterprise or organization where the decision-making power is in the hands of users and ecosystem members rather than centralized managers. AI can improve DAOs by bringing more efficiency and responsiveness.

AI-powered DAOs could well become the next big thing in governance. The relationship can get its acronym soon: AI DAOs, which will make better governance decisions by eliminating human bias while integrating with other DAOs and projects.

Interestingly, AI and DAOs have a dual relationship, as they can improve each other. Not only can AI automate DAO processes, but decentralized organizations can effectively be used to develop AI infrastructure.

Humans.ai is a relevant example that reflects both scenarios, with an emphasizes on the latter. Its goal is to democratize the AI creation process thanks to DAOs, which enable everyone to create or support AI technologies.

Humans.ai allows anyone to create an AI NFT, which is a type of machine learning model that also acts as a new asset class capable of encapsulating neural networks or a digital genome that can be represented by a person’s voice, face or other biometric data.

Humans.ai uses a unique consensus method it calls “Proof of Human,“ a complex blockchain-based governance, consensus and verification system that ensures that every AI NFT is backed by a human decision.” With this consensus, the blockchain ensures that every NFT issued is under human supervision. This allows anyone to participate in the governance and management of the AI, while ensuring that it remains aligned with human objectives. They call this “ethical AI.”

One of the roles of these AI NFTs is in governance of the network. Because each person can set the rules behind how their AI NFT responds to requests, in time these NFTs will be able to autonomously govern decisions.

Use Case #5: Personalized Investment Portfolios

The merger of AI and smart contracts has a lot of potential applications in finance. For investors, a great example would be personalized investment portfolios.

AI and smart contracts can transform the way investment portfolios are created and managed, resulting in efficient and personalized strategies tailored to individual risk profiles.

AI can be used to analyze large amounts of financial data, such as market trends, asset correlations, and investment approaches, optimizing the creation of personalized strategies. With machine algorithms and predictive models, AI can discover investment opportunities, assess the risks related to them, simulate outcomes, and determine the most balanced allocation based on an investor’s unique goal and investment horizon.

On the other hand, smart contracts can automate the execution of these personalized investment strategies, especially when the portfolios are focused on digital assets.

For example, investors can pick digital assets with the help of tools like Token Metrics, which uses AI to analyze crypto trends for personal investment purposes. The technology tracks the performance of over 6,000 crypto and NFT projects and extracts relevant insights.

We also wonder how a combination of AI and smart contracts might improve the performance of our elegantly simple, and already successful Blockchain Believers portfolio.

Investor Takeaway

The intersection of smart contracts and AI offers a plethora of opportunities for investors. To begin with, investors can take advantage of this growing synergy by investing in projects poised to lead the AI and blockchain integration trend.

They can also diversify investments across projects that demonstrate successful proof of concept, showcasing the potential of AI and smart contract collaboration in various sectors, such as finance, logistics, governance, and security.

By embracing the convergence of AI and smart contracts, investors can position themselves at the forefront of a technological revolution, benefiting from being early adopters in this rapidly evolving landscape.

Lastly, investors should keep an eye on regulatory developments surrounding AI and smart contracts, as they can impact the growth and adoption pace of related projects and technologies.

Subscribe to Bitcoin Market Journal to stay on top of the latest technology trends for crypto investors.

The post The Intersection of Smart Contracts and AI appeared first on Bitcoin Market Journal.