Crypto+AI: Encrypted Narrative for the Next Bull Market

Author: Kerman Kohli, founder of DeFi Weekly; translation: Jinse Finance xiaozou

If there's one thing I've learned from my years of crypto experience, it's that this market is largely narrative driven. I break it down from the smallest atomic unit to the larger macroscopic ones as follows:

· Stories people can understand

· Beliefs formed around the story

· Memes that incorporate these beliefs

The smallest atomic unit has to be meaningful and strong, so you can build and build a lot on it. Let's review the historical application of this framework:

2022

· There is a huge revenue market that only banks can profit from;

· If banks are evil, cryptocurrencies will be a better alternative system;

· Cryptocurrencies are a way to earn high interest rates in dollars.

2017

The government is preventing ordinary people from investing in big companies;

· Wealth creation should not be limited to accredited investors;

· ICOs are new IPOs that create wealth.

The form has not changed, only the characteristics, narrative, and characters have changed. Each cycle brings new heroes and villains. Just make sure you don't become the main character. When you draw more attention to yourself, your chances of survival decrease.

Cryptocurrencies have been around for over a decade now, and everyone is wondering: what happens next? You can't use the same narrative over and over because those stories end badly (Terra/Luna/FTX, ICO scam, etc.). That's not to say they're bad! Each cycle brings more talent, resources, and scale to the crypto economy. It’s just that, unless there’s a meme that resonates with the average person and reinforces their belief system, they’re not going to go back to crypto.

One thing that pissed me off a bit in terms of past is that I didn't tie my beliefs to my reputation, which I later regretted. Recently, my point of view has been endorsed by many people, and I think, unlike before, I am going to commit to it. Who knows, I could be wrong! But at least I can look back and know why I was wrong, or what I overlooked.

Not much to say, now I will bring you the bull market narrative from 2024 to 2026.

1. Encryption + AI

Over the past few months, it has amazed me how quickly the world is embracing artificial intelligence, especially the big companies. What this actually means is that most people in the first world use AI, directly or indirectly, in very real ways. I probably don't need to give enough evidence to further explain the relevant events, because you must have Googled them and your Twitter feed is full of them. I have two strong arguments for this, let's look at them one by one.

2. Money on the Internet

Given that we know that the global awareness of people around us has been taken over by artificial intelligence. What do we think will happen next? Right now, you're just integrating AI into your tools.

The next step in this evolutionary process is the rise of AI agents. Use your data on your tools trained by you. AutoGPT, BabyGPT, and countless other projects are already moving in this direction. The technology is still not advanced, but given what we know today and what people want, it's not likely to be advanced yet. AI agents will allow you to start automating large parts of your workflow. The ChatGPT plugin is already a simple version of the agent, you can:

· Express your intent to LLM

· Use it to find the right course of action

· Operate

If you disagree with me, please correct me, but the logical thinking above is relatively reasonable, and the probability of failure is very low. Well, so behind their intentions, what is the most powerful energy that people want to express? Money - Universal Energy Adapter. People's intentions are based on money. If you're still stuck, here are some simple examples:

"Bet $100 that the Los Angeles Lakers will win Saturday's game."

"Find the best articles about the Trump election and pay up to $20 per month for any premium site or program you come across."

"Buy frequently purchased items from my shopping list and have them delivered by Friday night, paying up to $30 for home delivery."

None of these intentions could be realized on the existing banking trajectory. Why? Or start small:

· The person who actually executes the purchase is not you, but an AI agent.

· If an agent buys on your behalf, that means you didn't actually authorize the transaction directly (but your AI).

· If someone else is buying in your name, this means your risk of fraud/chargebacks increases dramatically.

· No one in the stack wants to take this risk because they will get stuck because of it.

The only way around this is to have a checkout process in the chatbot that forces you to enter your credit card in the chat window. Or, one could easily say:

"I didn't buy it! My AI went out of control and bought it for me! I want a refund because I didn't authorize the transaction!"

What will the bank do? Return the money. What would a businessman do? Make sure they don't allow AI-driven transactions to happen anymore because they can't verify who actually authorized the transaction. I'm still wondering as I write this, what's the closest analogy to this?

My answer is: the bear kid used a credit card.

LLM is basically the equivalent of your child using a credit card. The above shows that your child's use of your credit card is already a gray area. Apple invested heavily in the infrastructure for this when the App Store launched. The bottom line in such cases seems to be: the consumer always wins. Merchants end up paying.

It's not a "Stripe" problem, it's a regulatory and banking problem. To prevent this from happening, banks and payment service providers will refuse to use an LLM to transact on your behalf, creating an even clumsier user experience!

So what's the alternative? You probably already know that. That is cryptocurrency. The native currency of the Internet, without intermediate links, can be accessed through API.

Think again, with a credit card, how do you verify that you authorized a transaction? Is it that you can enter the correct number on a plastic sheet to verify the code? What a joke. If you sign the correct call data with your private key, you should be fine. Everything else can be faked. LLM requires cryptographic assurance, especially when it comes to money.

Suddenly, a whole new LLM will appear. Take a guess, which one will have a 10x better user experience for users using cryptocurrency rails vs. traditional banking rails. you guessed right. Code needs guarantees, callbacks and completions. Credit cards don't offer that, cryptocurrencies do.

An entire industry will evolve around AI agents using cryptocurrencies and crypto companies supporting AI agents. Autonomic computing will satisfy each other.

Here's my take on one side, probably the strongest. Let's look at the other side.

3. Internet Identity

It may not be so obvious to some, but the existing system is starting to show cracks. Let's start with this statement: Identity on the Internet as we know it is broken.

· Phishing scams via email are becoming increasingly difficult to detect (even for the experienced and skilled).

Deepfakes are becoming harder to spot from real photos.

· Most forms of digital content that convey the senses (visual/auditory) are difficult to ascertain their authenticity.

· Idea attribution is becoming increasingly difficult in a world of big data models.

All of these problems basically boil down to the following: Proving who you are on the Internet in a foolproof way is really hard. The email address is questionable (phishing), the phone number is not the best way (sim swapping), and soon the audio/video way will be harder as well. If there's a reliable way, here's what we already know:

· A public key representing your identity

Make sure you control the private key of that public identity

Given the cryptography and mathematics underpinning these structures, nothing could be more appropriate. Until the discrete logarithm problem is cracked, but that's a problem for the next decade, quantum computing will shine.

So what's going on here? Essentially, everything becomes "web3ified" in that you can use private and public keys to authenticate across the internet with crypto-native services. As information is passed on, hardware, software, and users will need keys to create a series of provable identifiers. This will be more difficult to achieve as it will originate from the underlying hardware, but the story may continue in that direction. iOS and Android already support PassKeys, so it's not like the big tech companies haven't thought about it. In fact, they are more likely to drive this innovation! The future I envision should be like this:

Your phone has a public key that confirms its identity.

You have your own public key to confirm your identity.

Any app you use while passing photos/videos has its own identity.

Anything on your phone will have a series of public keys that cryptographically authenticate its origin.

There's more I could expand on in this direction, but the path and timing aren't quite clear to me, although I'm sure it's going to be a strong narrative that people can support. Self-sovereign online identity.

4 Conclusion

These views would not have been possible if I hadn't had a lot going on in AI over the past few months. It is a unique new path that opens the way for the possibility of future realities. AI is at an all-time high and cryptocurrencies are at an all-time low. Imagine that over the next 12-18 months, as the cryptocurrency rises and the AI falls, the two intersect on a sine wave. I could be wrong about the timeline, but I'm sure the chain of logic I've described above has stood the test of time for good reason.

We’ve always known that buying coffee with cryptocurrencies is pointless, and that’s true in the real world as well. However, the impact of cryptocurrencies on the internet-native economy has always been evident. Artificial intelligence just makes this more obvious, because AI agents run on the Internet in the first place.

If you believe the above: what do you want to do today to participate in tomorrow's world?