What are AI crypto tokens?

Artificial Intelligence (AI) crypto tokens represent the convergence of two of the world’s biggest technological revolutions in the last decade. 

The emergent AI industry introduced a range of innovative new software applications that simulate human intelligence. When given simple instructions, these services can perform complex tasks such as creating bespoke holiday itineraries or generating unique content. 

Examples of these AI-related services include OpenAI’s ChatGPT, Midjourney and Google’s Gemini. 

Several crypto projects have begun tapping into this technology and exploring the potential of combining AI-based services with the benefits of blockchain-based cryptocurrencies. 

The outcome is a unique subsector of decentralized, peer-to-peer services that allow users to share AI-based resources, query data using AI assistance, perform sophisticated functions on-chain, and more.

From a technical standpoint, AI digital currencies aren’t too dissimilar from any other type of token in the crypto market. They rely on a blockchain ledger and a decentralized network of users to operate, just like bitcoin (BTC) and other cryptocurrencies.

These AI crypto coins primarily serve as utility tokens within AI-based platforms, similar to how tokens like ETH or SOL function on their respective blockchains. They typically serve as tokens for facilitating payments and incentivizing or rewarding active users on AI-based platforms. 

Further, holders can use AI tokens to power a wide range of activities on AI-based platforms, including buying or renting AI models, accessing various services, and earning rewards for contributions and engaging with the platform.

AI crypto tokens stand apart from traditional cryptocurrencies by how their projects integrate AI technology or facilitate the sharing of AI-focused resources.

For example, some tokens power marketplaces that connect those who need computational resources (vital for AI functions like image rendering, chatbots, and predictive modeling) with those who have spare computing power to share. 

By leveraging decentralized cryptocurrencies and blockchain technology, these markets are available 24/7, which is a vital part of their operations.

AI crypto tokens serve as a much more versatile payment option to power these types of platforms than traditional fiat currencies.

If a person from Argentina wanted to rent computing power from someone in South Korea, they wouldn’t be able to transact in their local currencies. Even if they could agree on a particular fiat currency, it would likely be expensive and take a long time to transact and exchange in the agreed amount. 

Cryptocurrencies, on the other hand, offer several key benefits: 

• Permissionless – Anyone can send or receive AI crypto token payments without requiring approval from a centralized authority like a bank.

• Fast – Cryptocurrency token payments can be notably faster to process and finalize compared to fiat transfers.

• Cost-effective – Processing transactions can cost fractions of a cent.

• 24/7/365 – Blockchain networks process crypto payments any time of the day and week, unlike traditional financial markets.

• Transparent – All crypto-related activity can be seen in real-time thanks to the use of blockchain technology.

• Fractionalized – Most AI crypto tokens can be divided into thousands of smaller units, which is perfect for micropayments.

• Universal – Cryptocurrencies are not bound to a specific geography like most fiat currencies.

Developers can create AI-based cryptocurrencies using the same methods as other crypto utility or reward tokens.

This often involves minting (issuing) them on an existing Layer 1 blockchain (like Ethereum or Cosmos) platform using a specific token standard (like ERC-20 or ICS).

Token standards act like special code that simplify the creation of native crypto tokens. They ensure seamless compatibility with the broader ecosystem of their underlying blockchain.

For example, tokens launched on top of Solana are automatically compatible with most Solana-based wallets, dApps, and tokens.

AI tokens offer a range of benefits that contribute to the growth and advancement of AI technologies, such as:

• Incentivizing participation – Rewards users for contributing data, computing power, or expertise to AI projects. This creates a decentralized model where participants benefit from contributing to the growth and development of AI technologies.

• Monetizing AI services – Provide a means for paying for AI services, like data analysis, predictive modeling, or personalized recommendations. This facilitates direct transactions between providers and consumers of AI services without the need for centralized intermediaries.

• Governance and decision-making – Projects may offer voting powers via governance tokens, allowing holders to participate in the decision-making processes of AI projects or platforms. Some of these include protocol upgrades, changes to incentive structures, or the allocation of funds for research and development.

• Decentralized AI marketplaces – Facilitate the creation of decentralized marketplaces where AI algorithms, models, computer power and datasets can be bought, sold, or licensed using tokens.

While AI crypto coins operate within their own unique market niche, they are still prone to many of the same risks that other assets in the crypto space are, like fraud, high market volatility, and a lack of clearly defined regulations. 

The excitement surrounding AI technology, however, may bring additional challenges, like AI algorithms, data privacy issues, and unintended consequences of AI decision-making. Integrating AI with blockchain technology introduces additional complexities and potential points of failure, such as interoperability issues or scalability challenges. 

Holding any tokens that fall within this new subsector carries project-based risks, including the potential failure of token projects to deliver on promised goals, execute development roadmaps, or achieve adoption and sustainability. While this issue is not exclusive to AI crypto projects, the relatively short lifespan of these projects means that they have yet to prove their longevity and long-term feasibility in the crypto industry. 

Overhype and speculation can also present heightened risks, like high token price volatility. As one the hottest new trends, AI-based crypto tokens may see increased levels of speculative trading as crypto investors flit between new projects hoping to generate a quick return on their trades. 

As always, prospective buyers should conduct thorough due diligence on any token project before making any form of investment in the crypto industry.

The Graph (GRT)

The Graph (GRT) is an open-sourced software for the collection, processing, and storing of data from various applications to facilitate information retrieval. By analyzing and gathering blockchain data into Subgraphs, The Graph allows any application to quickly query its protocol and receive a response immediately. 

The Graph primarily uses AI to deploy tools for automated decision-making and is used widely in the crypto ecosystem in dapps like Aave, Curve, and Uniswap.

Injective (INJ)

Injective (INJ) is a DEX that offers margin trading, derivatives and forex futures trading across multiple blockchains. Injective uses an order book model similar to that of centralized stock and  crypto exchanges in an effort to match the efficiency of traditional finance with the transparency of decentralized exchanges.

Dapps on the Injective platform use AI algorithms to enhance market efficiency and empower users with smarter decision-making for their DEX transactions.

Fetch.AI (FET)

Fetch.AI (Fet) is an AI platform that uses smart contracts to automate tasks through AI agents who can interact and learn from each other to enhance their capabilities. 

Micro-agents (uAgents) are the heart of Fetch.ai's network and enable users to create digital versions of themselves that can independently handle tasks like booking travel.

Theta Network (THETA)

The Theta Network (THETA) is a blockchain network that acts as a decentralized cloud for AI, media and entertainment. 

Theta’s EdgeCloud platform incentivizes users to share their spare bandwidth and computing resources to improve various AI and video tasks. The platform operates with two native cryptocurrencies: THETA for governance and TFUEL for transactions. 

Render (RNDR)

The Render Network (RNDR) is a platform that connects those who need significant computing power with individuals who have spare GPU capacity. 

Spare GPU power is essential for tasks like training generative AI models and facilitating the creation of videos, NFT collections, video games. In return for lending their computing resources, operators earn RNDR tokens, the network's native currency.  

Filecoin (FIL)

Filecoin (FIL) offers a robust and scalable data storage solution that's essential for the development and deployment of AI projects. 

Every AI creation, from complex models to the data they generate, relies on efficient and secure storage. Filecoin's decentralized approach helps create a bridge between the worlds of data storage and machine learning.

Internet Computer (ICP)

The Internet Computer (ICP) is a blockchain network that aims to improve the efficiency, speed, and decentralization of computation and data storage. Its goal is to prevent certain flaws inherent with the traditional internet, like the dominance of centralized services, security vulnerabilities, and data privacy concerns.

Internet Computer’s decentralized AI (DeAI) model aims to run AI training and inference as smart contracts on the blockchain. This helps enhance transparency and user trust in AI models by enabling verification of data inputs in order to create more decentralized, verifiable, and trustworthy AI applications.

Anyone can purchase AI crypto coins in the same way as other digital assets by:

1. Opening a cryptocurrency exchange account on a platform like Kraken.

2. Completing the onboarding verification process.

3. Funding the new account.

4. Locating the desired AI crypto coin on the exchange and clicking “Buy.” 

Crypto exchanges such as Kraken make it easy for traders to purchase listed AI crypto coins using a range of payment options, fiat currencies and cryptocurrencies. Some platforms may also offer a simplified trading experience where users can quickly buy and sell cryptocurrencies without needing to navigate complicated orderbook systems. 

Check our our buy crypto guide for step by step instructions on how to get started.

Once purchased, holders can choose to move their newly-purchased AI crypto tokens to their own non-custodial crypto wallets.

Note, it’s important to make sure a person’s non-custodial crypto wallet supports the chosen AI crypto coin.

This can often be achieved by searching which crypto wallets support what crypto tokens on Google Chrome or any other web browser.

Now that you’ve learned a bit more about AI tokens, are you ready to take the next step in your crypto journey?

As AI tokens develop and mature within the crypto ecosystem, new possibilities are being discovered that may change the way we interact with both AI and cryptocurrency.

AI tokens are helping to redefine the crypto market today. Kraken lets you buy many of the most cutting-edge AI token available today.