📝 Editor’s Note:

The Crypto x AI sector is an emerging corner of our industry that has wide spanning implications across the tech sector more broadly. While it’s another nebulous category that we’re just beginning to cover in a deeper capacity, the last 18 months have shown exciting projects beginning to emerge leveraging AI in diverse ways – across infrastructure, consumer and DeFi.

Whether it’s decentralizing compute to create a peer-to-peer marketplace that converts machine learning into a tradable product, or leveraging AI to build the first decentralized autonomous artist, there is no shortage of innovation emerging from the natural overlap of blockchain technology and artificial intelligence.

With that, let's explore some of these emerging projects!

Bittensor, Covalent, Botto

• The Bittensor protocol establishes a marketplace that transforms machine learning intelligence into a tradable commodity by decentralizing the process and creating a peer-to-peer market for the assets. Despite volatility, trends don't suggest a clear cooling of AI hype for the project — the market cap of TAO, Bittensor's token, dipped from a peak of around $3.5B in May to a low of about $1.5B in July. Despite the most recent crypto-wide pullback however, TAO's market cap climbed back to around $2.5B by late July. The roller-coaster pattern suggests that while pullbacks are frequent, investor interest in AI-related tokens remains robust.

• Analysis of one of Bittensor’s 32 subnets shows top earners are predominantly validators with huge stakes. Further, the top earner generates under $8,000 in daily revenue off a $350M+ stake. This raises questions about the network's decentralization & its ability to foster an open AI marketplace.

• Bittensor's economic model appears unfavorable for most miners. In the Text Prompting subnet, the average miner earns about $50 per day, regardless of their ranking. Miners in the top 30 positions barely exceed $58 daily. The flat earnings suggests that model performance is not properly rewarded.

• 💦🔬 Tx-Level Alpha: Bittensor has not allocated any tokens to VCs. They state if a VC wants to build a position on Bittensor, they must either purchase tokens on the market or learn how to mine/validate. This is a stark contrast for most AI-related crypto projects. 65% of TAO remains unissued; if Bittensor can achieve its decentralization goals, the protocol potentially presents a more compelling case for investment that its competitors.

• Covalent is a DeFi protocol providing a unified API for onchain data access across multiple blockchains. It offers a range of products, including customizable data solutions, a verifiable AI infrastructure powered by the Ethereum Wayback Machine. The platform has transitioned from CQT to CXT as its native token for staking and governance. Their staking dashboard allows users to manage their stakes, monitor network health, and receive rewards.

• Covalent's token unlock schedule reveals significant developments that stakeholders should note. On Aug. 22, 9.60M tokens will be unlocked, contributing approximately $64.73K to the market cap. Subsequent unlocks in September and October consist of 21.78M and 9.60M tranches of to-be-released tokens.

• Over the past week, the CXT price has dropped significantly, with a 24.2% decrease in a 24 hour span and a 42.6% decrease over the past seven days. This sharp decline is likely due to broad market dynamics.

• 💦🔬 Tx-Level Alpha: Recent activity in the Covalent X Token (CXT) staking community has seen substantial amounts staked by a few key users, indicating strong confidence in the token's future. Notably, on Aug. 7, 2024, a significant transaction was recorded where a user staked $91,350.65 worth of CXT. This large stake not only underscores the user's confidence in the potential returns from staking CXT but also highlights the overall positive sentiment among

• Botto is a decentralized art AI experiment, distributing proceeds from weekly 1/1 art sales to users who train its taste model. Botto’s 1/1 sales peaked at 100 ETH and now average 6 ETH in 2024, with additional revenue from secondary sales, curated collectibles, and collaborations. Botto excels in its revenue distribution model, where the DAO implemented a 50% revenue share, generating over 300 ETH (23% of total revenue) for the community—a blueprint for human-machine collaboration.

• Revenue distribution is linked to training efforts -Voting point usage-, VPs proportional to staked $BOTTO (directly or as Uni-V2 shares). 27% of $BOTTO supply is thus locked, 6% burnt (by old BB&B system), 5.7% frozen as LP shares. Added to protocol-owned holdings, circulating supply is -50%.

• Botto’s future will depend on its cultural impact (Sotheby’s proposed a solo exhibition) and its ability to attract AI training manpower. The project incorporated Farcaster frames and is considering a partial transition to Base, leading to a ~4x growth in address participation (5k to 19k reported)

• 💦🔬 Tx-Level Alpha: Botto is an experiment in decentralized governance of AI, through an economic design that distributes value to those providing input. Users are rewarded for training the AI via votes. To get Voting Points they buy and stake BOTTO, or add BOTTO-ETH to Uniswap and stake the LP shares. To get their rewards, they have to claim them. That's a lot of ETH fees. Botto strives for mainstream cultural relevance, on and off-chain. An L2 ecosystem could open a brand new chapter.