When Uber took the taxi industry by storm, its first step was to incentivise early adopters. It offered discounts to attract both drivers and passengers, getting the world on board with ride-sharing tech that’s more innovative and convenient than traditional taxis.
Likewise, the gold rush for Web3 crypto rewards is driving the initial uptake of decentralised AI. It’s key in the battle to win public opinion and fight for sovereignty over our data as “black box” centralised AI dominates the market.
Big tech monopolies have tons of resources at their disposal – Sam Altman says OpenAI is sitting on more than 1 million GPUs. But centralised AI carries a risk of data abuse, and users have no say or ownership.
Privacy-preserving AI is possible, and it’s landed. However, unlike big tech, with DeAI there’s no single corporation with deep pockets and a huge data centre. But there’s no need – because tapping into a global network of expertise, idle computing power and diverse data is actually vastly more convenient, efficient and innovative.
This blog explores how on-chain crypto tokens fuel DeAI ecosystems and how blockchain makes them so effective.
What exactly are crypto tokens in DeAI?
Crypto tokens in DeAI were born out of the match made in heaven between AI and blockchain. Crypto incentives in DeAI are not the same as cryptocurrencies, although both rely on blockchain. Cryptocurrencies are like digital money. Even Starbucks used to accept it as payment. They are native to their own independent blockchain, such as ETH on Ethereum.
Usually, crypto tokens are built on an existing blockchain – for example, FLock’s native token $FLOCK is on Base, an Ethereum Layer-2 blockchain. It's a utility token designed specifically to be used within an ecosystem or dApp – it cannot buy frappuccinos in the real world.
Crucially, DeAI crypto incentives do have liquidity on a global market. For example, a contributor who earns $FLOCK can then go and sell it on cryptocurrency exchanges. Other tokens include TAO (Bittensor), OCEAN (Ocean Protocol) and AGIX (SingularityNET).
Crypto incentives ensure a steady stream of high-quality contributions and ward off bad behaviour – and blockchain provides the underlying foundation upon which these on-chain tokens live.
How blockchain makes crypto incentives so effective
With traditional AI, the pressure to innovate competitively and deploy quickly clashes with the need for caution. It is plagued by its “black box” problem of opaque decision-making, privacy issues and faltering public trust.
There’s an alternative to trusting an opaque system to manage rewards. The reason blockchain is called “trustless” is because it doesn't require trust – it’s secured by code instead.
Usually associated with cryptocurrencies like Bitcoin, AI has given blockchain a new lease of life. It promises the security, immutability and transparency that AI lacks, and creates a automated system that distributes the incentives fairly.
Blockchain transparently records everything on-chain and cannot be altered. Contributors can be confident that the tokens they earn are permanently recorded, and cannot be taken away. Smart contracts automatically distribute tokens once their work has been verified by the network. This is fairer and less prone to corruption because it’s managed by code, not a human.
Incentives drive sustainable contributions of data, compute & more
The collective, decentralised pool of resources and expertise makes DeAI a force to be reckoned with. On-chain crypto rewards are the lifeblood, incentivising a stream of high-quality contributions. These includes: data, computing power, model and algorithm innovation, governance, inference and validation.
Tapping into a global network of idle computing power is vastly more efficient than building a massive data centre. Individuals with spare GPU or CPU power on their computers can rent it out to the network. Their devices become nodes that perform the heavy lifting of AI tasks. For example, Akash lets users buy and sell computing resources – its token AKT is used to govern, secure the blockchain and incentivise participants.
Instead of a single team of researchers and engineers, anyone can contribute to the development of AI models. When a model is used by others in these ecosystems, its creators can earn a portion of the revenue. For example, on FLock’s AI Arena, users can participate as a a trainer; a validator to verify the contributions of others; or they can stake tokens on behalf of other participants and earn rewards in return.
AI models are only as good as the data they are trained on. In big tech, a company like Meta collects vast amounts of user data. In DeAI, individuals or organisations can contribute their own data for rewards in a privacy-preserving way, and it’s often more diverse and less biased.
Many tokens also give users a part in on-chain governance, giving them the right to vote on how the project evolves. This is a world away from traditional AI, where all decisions are made internally by the team of executives.
Incentive mechanisms enforce the rules
In a decentralised system, there’s no central authority to enforce the rules. That’s the big challenge of a blockchain-based system: it requires active participation and cooperation to be secure and sustainable. In a dynamic, open environment, human behaviour is unpredictable.
Incentive mechanisms are essential for regulating that behaviour. A token economy ensures that it’s fair, secure and productive, with the ecosystem operating autonomously.
Blockchain consensus mechanisms include proof-of-work (PoW) and proof-of-stake (PoS). In PoS, participants, called validators, lock up (or “stake”) their crypto assets as collateral to validate new transactions and create new blocks. In PoW, miners competitively solve the puzzles to create a new block and are rewarded with new cryptocurrency and transaction fees, encourages participants to contribute their computational power to the network’s integrity and security.
Crypto tokens can also deter bad behaviour through mechanisms such as “slashing”. If a participant is identified as acting against the system’s rules, their tokens are taken away and rewarded to the honest participants. Slashing protects the system from threats by disincentivising malicious actors and reinforces a culture of trust and cooperation among participants.
FLock wrote an academic paper about peer-to-peer voting and reward-and-slash mechanisms, powered by on-chain smart contracts, to detect malicious behaviours.
More about FLock tokenomics
To make open-source projects more viable, FLock incentivises early adopters with protocol emissions, then shares model revenue with model builders.
$gmFLOCK, a non-transferable utility token, is the core innovation of FLock’s tokenomics. Participants in the FLock’s AI Arena, such as training nodes and validators, are required to contribute computing or storage resources to complete model training and validation in order to receive rewards.
Read our docs to learn more about how FLock tokenomics powers our ecosystem. For future updates, follow FLock on X.
