What Is AI-Fi In Crypto And Why You Should Care #CriptoNews

Artificial Intelligence has been reshaping our world at breakneck speed, with ChatGPT hitting 100 million users in just two months and Nvidia hitting revenue of $32.8 billion solely in the third quarter of 2024. AI is no longer a sci-fi concept but a business necessity and an integral part of our economy. Yet despite this explosive growth, participating in the economic layer of AI remains challenging for many. Here’s where AI Finance stands a chance to change the rules of the game. AI-Fi is a new financial framework bridging the AI economy with decentralized finance, that democratizes access to AI-related assets such as GPUs or data, creating new value streams. At the same time, it’s powering DeFi with agents and AI-enhanced applications.

Over the years, the decentralized finance community has built the foundations that made it possible for AI-Fi to emerge. The way DeFi and its primitives – like onchain lending – evolved enabled the industry to have an adaptable infrastructure for all kinds of assets, both crypto-native and not. Tokenization, as a process of bringing off-chain assets onto the blockchain, paved a way for non-crypto assets to boom back in 2023. Tokenized real-world assets, especially money market funds, exemplify how the integration of non-crypto assets has found a product market fit in an onchain economy. The biggest asset manager in the world, BlackRock, has dominated the crypto market at a 22% market share with their tokenized money market fund, BUIDL token, marking yet another milestone for RWA adoption within TradFi. Using DeFi infrastructure for tokenized assets has already made waves, passing over 10 billion TVL. But it’s only the beginning.

Understanding Tokenized AI Economy

The numbers tell a compelling story. With the Global Artificial Intelligence industry revenue expected to be around $1.8 trillion by 2030, the AI economy stands as a strategic sector for tokenization. However, staggering projections often mask significant barriers to entry.

Substantial capital investment and technical expertise are required to participate in the AI market, leaving smaller organizations on the sidelines with a lack of resources for funding further expansion. In addition, the nascent stage of this technology and the lack of global AI markets lead to limited access for various user segments, particularly retail, and hinder the potential revenue growth of AI companies.

This is where blockchain technology and tokenization enter the picture. By bringing AI-related assets onchain, AI-Fi creates liquid markets for previously illiquid or inaccessible resources:

• Computing power: GPU computing can be tokenized and exchanged, allowing compute providers to scale while exposing users to AI cash flows.
• Data and models: Training data and AI models are represented by tokens, creating new revenue streams, with the example of ORA – an AI company that tokenizes AI models using the ERC-7641 standard.
• AI services: APIs and cloud services can leverage smart contracts’ programmability. Tokenization of AI agents monetizes value they’re able to extract.

Financial Rails For AI Value Chain

Blockchain-based tokenization is the key to making assets tradeable, programmable, or composable – features impossible within traditional finance. The blockchain itself should be viewed as financial rails for these new markets, enabling:

• Better liquidity: Assets such as GPU are impossible to divide, making fractionalization an attractive tokenization feature.
• Composable DeFi applications: Tokenized AI assets that are backed with real cash flow make yield-bearing tokens that are easily integrated into DeFi as collateral.
• Secondary trading: Some AI assets require KYC and with programmable verification built into the smart contract, secondary trading can be seamless.

Why AI-Fi Matters For Crypto

Numbers don’t lie. The growth of AI has created an unprecedented opportunity for many to participate in. Estimations show a bullish perspective for various elements of the AI value chain, with the example of data centers where their demand is expected to grow at a CAGR of 12% to 15% between now and 2030. These metrics paint a picture of a sector that will display competitive revenue streams. With that, AI-Fi, as a new framework aims to financialize the AI economy by bringing it onchain for individuals to get exposure to it. And on the other hand, for SMEs and organizations to monetize their datasets and models, or have an alternative way to fundraise capital for expansion. Creating new AI-Fi-oriented markets makes both AI developers and investors participate in the tokenized AI economy. And now that the vision of Agentic Web has already taken root in Web3, the AI-Fi narrative gains even more credibility.

Where Is AI-Fi Heading

AI-Fi is a blend of two powerful technologies, with AI posing as an overpowering industry and blockchain serving as its financial layer. Tokenization makes it possible for real-world yield via high-quality cash flows into the DeFi ecosystem. It also makes monetizing AI services, such as machine learning models transparent and programmable. Even though the AI-Fi paradigm of making the AI economy more accessible is at an early stage, it leverages already established DeFi infrastructure and best RWA tokenization practices, all while addressing the AI sector’s barriers. The vision of Agentic Web is only strenghtening