I have consistently talked about the union of AI and cryptocurrency. At the same time, many opined how AI is going to completely alter society.
As for the latter, there is sound reasoning for this. When we look at the basic components of society, we can see the impact that AI is going to have. This will likely cause a collapse in many industries. That said, as we will see, it will set of an economic singularity. Here is where I think cryptocurrency is going to have its impact on the global population.
Much of what we are seeing with AI is a new form of compute. This is the evolution of the old storage capabilities. No longer are we simply dealing with a read-write basis.
If we look at how things have changed over the last 40 years, it is easy to conclude how compute altered everything. The digital era impacted many different facets of socity. Like most technological evolutions, the next generation is only going to be more powerful.
For this reason, let's look at the basis of society and where AI fits in.
Here Is Why AI (And Crypto) Will Change Society
From a societal standpoint, there are 4 basic components that are pillars for the economy. From here, everything else builds on top of it.
The four basic units are:
- energy
- intelligence
- materials
- labor
AI is driving innovation in each area. If we are truly entering an age of abundance, we will see this technology massively increase the output in all areas. This is why many are already starting to formulate the "automated economy" framework.
Ultimately, this will bring into question what money even means. For our purposes, that is a discussion that can take place down the road.
For now, the key point is that all four areas will be heavily impacted by AI. Once the "ChatGPT moment" for robots hits, the vision will be clear to most.
Of course, the labor part of the equation is easy to understand. People will be replaced by robots and computers. That was always the case. The only question is the rate. Will the replacement occur at a pace that exceeds new roles for humans? If that is the case, then massive job loss is something we have to incorporate into our thinking about the future.
Intelligence becomes another easy factor to see how this is changing. While we can debate the exact meaning, something that nobody has a true grasp on, we can see how knowledge (at a minimum) is being altered. This will certainly impact knowledge workers. At the same time, due to the speed that comes from advancing compute, questions in the other areas can be addressed.
That is why energy and materials will be disrupted. AI systems are already being designed to address each of these. Since we are seeing energy as the core driving society, billions are flowing in to come up with solutions. AI systems are already being utilized to make what we have more efficient. Couple this with its implementation into the material sciences, we can see the path where those used for energy generation will shift.
One example is the continual progress of batteries, providing greater output through the use of more efficient materials.
The Tokenization of Everything
We long has discussed the idea of "the tokenization of everything". Many have laid out the idea of real world assets being tokenized.
On the latest earnings call, Brian Armstrong, CEO of Coinbase, predicted that 10% of all global GDP will be crypto by 2030.
Forecasting is tough business but this might be a massive understatement. I say this because the link between AI and crypto. If AI is a new form of compute and crypto captures that, then we only need to look at the compute expansion to forecast where we are going.
Of course, there could be hiccups along the way, with things slowing down.
That said, AI is simply moving too fast. Here is a history of compute along with forecasts made by Ark Invest.
As we can see, since the introduction of the TPU by Google, the historic trendline broke, to the upside. This means that we are not seeing a slowdown but, rather, an acceleration in compute. This is being enhanced by different architectures, improvements in algorithms, and, soon, the explosion in real world data.
WIth speeds like these, what is able to keep up financially. The existing system is filled with gatekeepers, most of whom have to adhere to regulation. Governments are slow to change, requiring hearings, sessions, and debates. If politicians are motivated, then can get something done in 6 months. In the AI world, that is a doubling of the total compute based upon the trends of the last decade.
The advantage to crypto is that it resides exclusively in the digital world. That means the pace of crypto, which exists on networks, keeps pace with all advancements in computing. The totality of crypto's potential is going to mirror the chart above. There are no intermediaries to stop the output. Certainly, we can look at the pace of individual ecosystems and cite how they are lagging. However, if we view things in total, the industry keeps expanding.
It is actually the curve that AI is on. We could focus upon the pace of xAI, Meta, or OpenAI. However, that overlooks the Deepseek and OpenThinker advancements, the former that shook financial markers for a few days.
Technological Deflation
Deflationary periods are difficult. They are marked by slowdowns in output, resulting in the loss of jobs. Economies that are contracting impact the working class more than anyone else.
It is a situation best exemplified by the Great Depression. That was the last major deflationary period of the United States. A more recent example is Japan, which has suffered 3 lost decades.
Things shift when looking at technological deflation. This has an interesting twist to it. While there are likely job losses, we see an increase in output. If we look back over the last 40 years, anything that was disrupted has resulted in an abundance of products or services.
Consider:
- music
- video
- communications
- photographs
- shopping (locations)
- computation
- applications
Each of these had a per unit costs at some point in the past. Over the last few decades, it has declined to a near zero level. If there is a fee, it is a fraction of what it use to cost.
Yet, if we look at the individual areas, there is more in each than we can consume (utilize) in 100K lifetimes. There is no shortage. This is known as abundance.
All of society will be hit with this. Here is where the radical disruption comes from. We are going to see economic output skyrocket due to AI and robotics. Crypto will be a mechanism that captures the value of a signficant portion of that. Simply because the price of something goes down, on a per unit basis, does not mean collective value is declining.
In fact, it is the exact opposite.
This is what crypto does. It captures the collective value and distributes it across a large number of people.