The largest U.S. cryptocurrency exchange is warning about the artificial intelligence (AI) narrative in the digital asset sector.
In a new report titled “Crypto’s AI Mirage,” Coinbase analyst David Han says that with the excitement surrounding the AI industry, many AI-focused altcoins are likely in an unsustainable hype cycle.
“Our opposing view is that the value potential of many AI tokens may be overstated as a result of widespread interest in the AI industry, and that many AI tokens may lack sustainable demand-side drivers in the short and medium term.”
AI-focused altcoins can be “decentralized” on blockchains, but Han argues that decentralization alone is not enough to compete with existing AI solutions in traditionally centralized industries from both a business and regulatory perspective.
Han points out that centralized projects also have the advantage of typically having a faster, leaner development process.
“The role of cryptocurrencies in AI does not exist in a vacuum. All decentralized platforms compete with existing centralized alternatives and must be analyzed in the context of broader business and regulatory requirements. Therefore, replacing centralized providers purely for the sake of ‘decentralization’ is
In our view, this is not enough to drive meaningful adoption. Generative AI models have been around for several years and already maintain a certain level of decentralization due to market competition and open source software.
A recurring theme throughout the report was the acknowledgment that while cryptography-based solutions are often technically feasible, a tremendous amount of work is still needed to reach functional parity with more centralized platforms. During the period of connection. In practice, centralized development is often faster than decentralized development due to consensus mechanisms, which can cause problems in rapidly evolving fields such as AI.”
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