Unleashing Web3 & AI: The Next Digital Revolution

The digital landscape is on the cusp of a transformative era with the advent of Web3 and Artificial Intelligence (AI) technologies

11 min readSep 10, 2024

Ray Wu serves a Managing Partner of Alumni Ventures’ AI & Robotics Fund and Blockchain & Fintech Fund. Ray is a seasoned venture capitalist with over 20 years of investing experience across a wide range of industries and geographies. Before joining Alumni Ventures, Ray was a partner and adviser at several global venture funds focusing on AI, Web3, FinTech and SaaS investment opportunities across the U.S. and Asia Pacific. Earlier, he spent more than 10 years in the corporate venture space: He was the managing director of HP’s new business ventures, responsible for startup technology evaluation, new business incubation, VC relationships, and minority investments, and earlier at Cisco Systems, holding several senior positions leading investment, M&A, internal incubation, and global consulting. Previously, Ray was a managing partner of a leading Internet consulting firm working with Fortune 1000 companies across North America. He earned a dual MBA degree from the University of California, Berkeley and Columbia University.

The digital landscape is on the cusp of a transformative era with the advent of Web3 and Artificial Intelligence (AI) technologies. These innovations are not only redefining the possibilities within the digital domain but are also setting the stage for a future where technology aligns more closely with human values and autonomy. In this article, we define the technologies, explore key features, examine the impact of Bitcoin ETFs and halving, and spotlight startups in the space.

Blockchain & Fintech Fund 5 Open Now

Alumni Ventures’ Blockchain & Fintech Fund offers accredited investors a portfolio of ~15–20 startups delivering cutting-edge AI and blockchain infrastructure and services for banking, insurance, supply chains, healthtech, retail, and more.

Investor who join by our First Close (10/31/2024) or Second Close (11/30/2024) will earn management fee reductions. The fund’s Final Close is December 31, 2024, and the fund minimum is $25K.

Learn More »

Basic Definitions

Web3 represents the next phase in the evolution of the internet. Unlike Web2, which is dominated by centralized platforms and services, Web3 embodies the principles of decentralization, blockchain technology, and cryptographic security. This new iteration of the web aims to return control and ownership of data back to users, fostering an environment where transactions, interactions, and information exchange are conducted without the need for intermediary authorities.

Web3 is built on the foundation of blockchain, enabling transparent, secure, and immutable transactions. This technology not only supports cryptocurrencies like Bitcoin and Ethereum but also facilitates the creation of decentralized applications (dApps) that operate on peer-to-peer networks, offering a wide range of services without the central oversight.

AI brings a new set of advancements to the table. AI encompasses a broad spectrum of technologies, including Large Language Models (LLM), machine learning (ML), natural language processing (NLP), and computer vision. It’s the driving force behind systems that can perform tasks requiring human-like intelligence, such as understanding spoken language, recognizing images, making decisions, and learning from data.

AI’s impact is vast, stretching across industries from healthcare, where it assists in diagnosing diseases, to finance, where it powers algorithmic trading. In the context of Web3, AI has the potential to further enhance the capabilities of decentralized networks. It offers solutions for distributed security, data integrity and privacy-preserving computation that are smarter, more efficient, and highly adaptive to the needs of users.

The fusion of Web3 and AI is particularly compelling. Together, they are paving the way for a digital infrastructure that is not only decentralized and resistant to censorship but also intelligent and capable of autonomous decision-making. This synergy could lead to the development of new platforms and services that are more secure, private, and tailored to individual users’ needs. We stand on the brink of a tech revolution heralding a new era of the internet that prioritizes empowerment, security, and efficiency.

Key Features Of The Web3 and AI Ecosystem

Building an infrastructure that combines AI and Web3 involves integrating advanced AI capabilities with the decentralized, blockchain-based principles of Web3. This fusion aims to leverage the strengths of both domains: AI’s ability to process and analyze data at scale, and Web3’s emphasis on decentralization, transparency, and user sovereignty.

Here are some core features essential to such an infrastructure:

Decentralized Data Storage and Management

Blockchain for Data Integrity: Utilize blockchain technology to ensure data integrity, traceability, and security. This is crucial for maintaining trustworthy datasets for AI models and applications.
Decentralized Storage Solutions: Implement decentralized storage solutions (e.g., IPFS) to distribute data across a network, enhancing privacy and resistance to censorship.

Decentralized AI Model Training and Deployment

Decentralized Compute: Leverage decentralized computing resources for training AI models, offering a scalable and potentially more cost-effective alternative to centralized cloud services.
On-chain and Off-chain AI Models: Develop mechanisms for deploying AI models on-chain for transparency and verifiability or off-chain for performance and scalability, with blockchain serving as a coordination layer.

Privacy-Preserving Technologies

Zero-knowledge (ZK) Proofs: Implement zero-knowledge proofs to enable verification of data or transactions without exposing the underlying data, crucial for privacy in AI applications.
Secure Multi-party Computation (MPC): Facilitate secure multi-party computation to allow different parties to jointly compute a function over their inputs while keeping those inputs private.

Tokenization and Incentive Mechanisms

Smart Contracts for AI Services: These contracts can automate transactions and interactions, including accessing datasets, using AI models, and compensating contributors.
Tokenization of Assets and Services: Tokenizing datasets, AI models, and computational resources can facilitate their exchange, incentivize contributions, and reward ecosystem participants.

Interoperability and Standards

Cross-chain Interoperability: This ensures compatibility and seamless interaction between different blockchain platforms to leverage diverse ecosystems and technologies.
Standards for AI and Blockchain Integration: Standards and protocols for integrating AI with blockchain ensure consistency, compatibility, and efficiency across the ecosystem.

User Sovereignty and Data Governance

Decentralized Identity: Implementing decentralized identity solutions gives users control over their identity and data — which is crucial for personalization and privacy in AI applications.
Data Governance Models: Establish transparent and participatory data governance models, enabling users to have a say in how their data is used and shared in AI applications.

These features represent a broad framework for developing AI and Web3 infrastructure. The actual implementation can vary based on specific goals, use cases, and tech advancements. The integration of AI with Web3 is still an evolving field, with ongoing R&D efforts aimed at addressing technical challenges, ethical considerations, and regulatory compliance.

Implication of Bitcoin ETFs And Halving

The introduction of a Bitcoin ETF (Exchange-Traded Fund) early in 2024 represents a significant milestone in the mainstream acceptance of digital assets. It potentially enhances liquidity and offers institutional and retail investors a more regulated investment avenue. This development could lead to increased adoption of Bitcoin and other cryptocurrencies, further integrating digital assets into the global financial system.

Concurrently, the Bitcoin halving event occurs approximately every four years and has historically been a catalyst for price volatility and market interest. The halving reduces the reward for mining new blocks by half, effectively limiting the supply of new Bitcoins and potentially driving up the price if demand remains strong. The most recent bitcoin halving took place on April 19, 2024.

The implications of these developments extend beyond the cryptocurrency markets and could significantly impact AI and Web3 infrastructure development. Increased investment and interest in digital assets could spur innovation and investment in the underlying blockchain technologies that power these ecosystems. For AI and Web3, this means more resources and opportunities to develop decentralized applications, enhance data privacy and security measures, and explore new use cases for AI within the blockchain space. In addition, the financial incentive provided by a rising cryptocurrency market could attract more developers and companies to the Web3 and AI sectors, accelerating the growth and sophistication of these technologies.

Ultimately, the convergence of growing digital asset markets with AI and Web3 infrastructure development may lead to a more decentralized, efficient, and user-sovereign digital future.

Promising Web3 AI Infrastructure Startups

Alumni Ventures has been actively investing in Web3 AI infrastructure companies for several years. There are a number of innovative portfolio companies leading the charge towards integrating AI with Web3 technologies, reflecting these goals:

Democratization of AI
Enhancement of data and AI infrastructure
Establishment of a modular AI chain for GenAI applications
Creation of a decentralized AI network
Evolution of Web3 data and AI infrastructure

Here are some of the innovative Web3 companies that Alumni Ventures has invested in:

0G.ai emphasizes performance and cost efficiency in the GenAI era, aiming for a unified, interoperable Web3 infrastructure. It introduces a modular AI chain with a scalable, programmable data availability layer for AI decentralized applications. Its platform promises significant performance improvements and cost reductions, enabling developers to create advanced on-chain Web3 applications with real-time, trusted data. With a focus on interoperability and customizability, 0G.ai is building a seamless Web3 infrastructure, connecting decentralized networks into a unified ecosystem and empowering users with frictionless, secure, and efficient AI solutions.
Theoriq focuses on democratizing access to modern AI, championing a future where the benefits of AI technology are universally accessible. This is supported by robust governance and security measures that are driven by the community. As the innovators behind the AI Agent Protocol, Theoriq is developing a Web3-enabled execution and utilization layer for AI Agents. This is in essence a decentralized version of OpenAI’s GPTs Store. Theoriq envisions AI Agents as pivotal in reshaping the workforce, doubling productivity across sectors. These agents, powered by Large Language Models (LLMs), excel in handling complex tasks, demonstrating advanced problem-solving and decision-making skills. The AI Agent Protocol by Theoriq is a key driver in establishing a Web3-based ecosystem for AI Agents. It offers a platform that is accessible, secure, and fair for both creators and users of AI Agents. The economic structure of the protocol, which emphasizes micropayments and account abstraction, promotes a more flexible. efficient way to pay for AI services. This marks a shift from centralized cloud storage to a blockchain-based access model, enhancing the integration, portability, and composability of AI Agents and services.
Sahara AI is revolutionizing human-AI collaboration by building a decentralized AI network that democratizes fair and universal access to global knowledge capital. Through its suite of trustless, permissionless, and privacy-preserving AI applications, Sahara empowers individuals and businesses to leverage, scale, and monetize their knowledge capital. Sahara’s AI network provides an alternative to a centralized data service with an incentive model that rewards and encourages participation at all levels.
Spice AI provides an AI and data infrastructure tailored for Web3 data, emphasizing decentralized data management and AI-driven application development. Its approach to integrating time-series data with machine learning underscores the potential for privacy-preserving and incentive-based applications. Since the waitlisted launch last year, projects like Yakoa, EigenLayer, and Entendre Finance have leveraged Spice AI’s enterprise-grade platform to create high-performance, readily available data and AI-driven applications. Developers have access to petabyte-scale cloud data and AI infrastructure. Community members can create, fork, and share datasets, and access data in real-time to power data-driven applications, monitoring, and analytics. Datasets can be fed directly into Spice.ai hosted ML training and inferencing for real-time decision-making applications.
Autonomys integrates Web3 and blockchain technologies into its Autonomous Identity infrastructure to ensure a decentralized, secure, and transparent framework for humans and AI. This integration allows for immutable records of AI’s identities and actions, facilitating trust and accountability in digital interactions. By leveraging blockchain, Autonomys ensures that AI operations are verifiable and compliant with predefined rules, enhancing the security and reliability of autonomous agents in the Web3 ecosystem.

Collectively, these companies contribute to a future where AI technology is not only more accessible but also integrated into a decentralized, secure, and equitable digital economy, paving the way for innovative applications across sectors.

Learn More About AI & Web3

The integration of AI with Web3 technologies signifies a revolutionary shift. Modular AI chains are enabling interoperability and efficiency in generative AI applications, leading to scalable and cost-effective solutions. Decentralized AI knowledge networks are promoting collaborative data collection and monetization while prioritizing privacy, security, and fair rewards. Initiatives emphasizing user sovereignty and data governance are enhancing trust and accountability in AI interactions. These changes not only advance technology but reimagine internet infrastructure with a focus on decentralization, security, and user empowerment.

For investors, this presents a unique opportunity to shape a future where technology aligns more closely with human values and autonomy.

Alumni Ventures offers accredited individuals access to professional-grade venture capital, a key asset class missing from the portfolios of many sophisticated investors. Since 2014, AV has raised $1.3+ billion from 10,000+ investors and backed 1,300+ unique portfolio companies. AV is a top 20 venture firm in North America according to CB Insights, as well as the #1 most active venture firm in the U.S., and #3 most active in the world, according to PitchBook’s 2022 and 2023 rankings. AV has won awards from Inc. Magazine, Fast Company, Benzinga, and the US FinTech Awards.

This communication is from Alumni Ventures, a for-profit venture capital company that is not affiliated with or endorsed by any school. It is not personalized advice, and AV only provides advice to its client funds. This communication is neither an offer to sell, nor a solicitation of an offer to purchase, any security. Such offers are made only pursuant to the formal offering documents for the fund(s) concerned, and describe significant risks and other material information that should be carefully considered before investing. Venture capital investing involves substantial risk, including risk of loss of all capital invested. For additional information, please see here.

This communication includes forward-looking statements, generally consisting of any statement pertaining to any issue other than historical fact, including without limitation predictions, financial projections, the anticipated results of the execution of any plan or strategy, the expectation or belief of the speaker, or other events or circumstances to exist in the future. Forward-looking statements are not representations of actual fact, depend on certain assumptions that may not be realized, and are not guaranteed to occur. Any forward-looking statements included in this communication speak only as of the date of the communication. AV and its affiliates disclaim any obligation to update, amend, or alter such forward-looking statements, whether due to subsequent events, new information, or otherwise.